Ukraine war hype, China demand drop, GOFO mysteries… these are the short term noise inputs on the gold sector.
US Treasury bond yield spreads, gold vs. commodities (i.e. the ‘real’ price of gold), gold vs. the stock market… these are some of the fundamental considerations that actually matter and they have taken a hit since January.
It is easy to say ‘I am bullish in the big picture’ (measured in years) but it is not so easy to actively manage in the smaller pictures (measured in days, weeks and months) with all of the above noise inputs and more bombarding the poor individual player.
We use shorter term charts to manage the shorter time frames. Daily charts have most recently indicated a bearish set up as bear flags formed across the precious metals complex (with the exception of silver, which never got going to begin with) last week. Weekly charts continue to indicate that an extended and oh so grinding bottom may be forming, but that includes the potential for ups and downs, also known as volatility.
There is also a lot of noise lately in the stock market. The US stock bull celebrated its 5th birthday last month. The last 2 cycles (the manic phase of the secular bull ended 2000 and the cyclical bull ended 2007) were each approximately 5 years long. Today let’s retreat to the calm of the long term monthly charts and get a snapshot of the big picture.
The S&P 500 has a measured target of around 2190 that we have had open as a possibility since the big breakout occurred in early 2013. A measured target is just that, a measurement; simple math. It is not a directive and therefore 2190 is not hype, it is just a possibility.
Big picture (2014) I remain bullish for a coming turn. But technicals and fundamentals must be aligned. All we can do is continue the journey without imposing our will on events. They’ll play out as they will and we need to adapt to that, not the other way around.
Gold Stocks Technical Bottom Line
- I am so bullish I can taste it, but the time may not yet be right. The big market pivot will take its time unfolding. This corrective leg, which had looked so normal as a post-Ukraine reaction, is taking on short-term technical problems.
- I am going to tell you what I see every step of the way and trust you not to over react and simply stay within your discipline.
- A bear flag breakdown on HUI, if it happens, would project to around 211 in my opinion.
- Unfortunately, it would also open the possibility of a bottom re-test below 200.
- We are not going to sponsor this sector or wear it like a badge. We are going to capitalize upon it whether that is on Monday or some later date.
- The fundamentals, which must go along with the technicals, must come in line to complete a bullish view. They were savaged after January.
- In my opinion, the sector also has the ability to rip higher out of nowhere in anticipation of fundamental improvement, technicals be damned. So be forewarned on that. But NFTRH is in large part, a technical service.
You can review NFTRH here.
An article at a popular gold website is talking about gold and Ukraine in the same sentence, let alone the same article. That’s not a positive. Surely people don’t fall for that one anymore, right? As for this technical buying, what is that? Chart is going up so they buy? This is pap, to be tuned out.
“The escalation of the Russia-Ukraine conflict prompted the safe-haven bid, while the improving chart picture for gold caused the technical buying and short covering.”
The other thing gold bugs should not have wanted to see was tepid volume and a failure to get back up into the bear flag on the GDX chart below. HUI, GDXJ and GLDX also sport these flags. On the plus side, MACD’s are triggered. Unfortunately, that takes a back seat to price action and volume.
On Monday the chart below was included in a post called HUI Gold Bugs Index Symmetry, before it had a chance to start making this week’s candle. Excerpted from the post:
“There can be a final drop this week but ultimately (going strictly by technicals, the fundamentals are another matter to be managed along side) if symmetry holds it would be a positive week for the miners.”
Well, I am not going to pretend I had a good week. It was an aggravating week at best. But at least Huey hung on and did indeed have a (barely) positive week after dropping early in the week (right off the bat on Monday, as it turned out) as speculated upon.
If symmetry holds, a new up leg would generate off of this right side shoulder. But even if that happens, according to a more detailed game plan in NFTRH, gold stocks would not necessarily be out of the woods just yet. So if we are lucky enough to go bullish, do me a favor, eh? Keep your balance and don’t listen to the cheer leading that will be sure to crop up.
Have a good weekend.
There is a growing presence out there talking about a potential Inverted Head & Shoulders (IH&S) on the HUI, which NFTRH has had going since mid-late last year. Below is a simple view of it, with last week’s ‘Week 2 down’ making perfect sense (symmetrically speaking) with ‘Weeks 1 & 2 up’.
Just continuing to do what I feel needs to be done in a market like this. The Semi’s would lead a bull charge, while Tech, Biotech and Small Caps would lead the bear. Throw in some indicators like BKX-SPX and especially the Equity Put/Call ratio (making a hidden bear signal that I for one found pretty compelling) and we lean bearish.
As for the precious metals? Well, when we were noting a bearish CoT structure and Ukraine hype, the ‘community’ was noting breakouts and bullish objectives. Nagging details like the CoT? Cue the crickets…
That’s all under the bridge now. It’s what’s directly ahead that is important. NFTRH 284 looks ahead to coming signals, and it’s out now.
Gold continues to look like it wants to test support at around 1270. A rise above 1300 could put that prospect in the rear view mirror, however.
Data came in weaker this morning with a home sales drop of 3.3% in February. The ‘all one market’ market is cheering to banish the evil spirits released by Janet Yellen last week. Those would be the rising short term interest rate spirits and they are key to our fundamentals.
 Adding an alternative view of HUI
The good news is HUI remains on the plan for a potential Inverted Head & Shoulders bottom.