As posted at NFTRH.com…
Gold stocks’ technical rubber meets the fundamental road
You may have noticed that I have written relatively little publicly about the gold sector over the last few years (we have covered it consistently in NFTRH to keep subscribers aware of the bear’s status, and protected against it). Is that strange for a writer who was probably known first and foremost as a ‘gold guy’? Not at all! It’s just that it is not desirable to get bogged down obsessing on a sector in a bear market when there are other fish to fry on the global macro landscape. But the process of finding and confirming a bottom in the gold sector is now front and center as more of the fundamentals that actually matter come into place. To those fundamentals, we need to marry the technicals.
We have consistently worked a theme that sees a comparison to the 1999-2001 bottoming phase in the gold sector. That was a time when stock markets topped out, an economic counter cycle took hold and gold began out performing most other items. Within this, we have also been considering the possibility of a final washout within the sector, whereby prices decline despite continually improving fundamentals. This condition was in play in Q4 2008, which was the last great buying opportunity.
Continue reading Gold Stock Sector: Rubber, Meet Road
As posted at NFTRH.com…
To review our stance, which is years along now, the gold sector is not going anywhere until it becomes widely accepted that developed stock markets, including and especially those in the US, are in bear cycles. We have also drawn analogies to the Q4 2008 event that took place in what felt like a nanosecond compared to today’s long, drawn out process. For this reason, a better ‘comp’ has been the 1999 to 2001 time frame. That was a process as well.
Regardless, gold boosters viewing inflation as the reason to buy the sector are still out there pitching, but even they have retooled their pitches for a deflationary world. It is now and always has been a global economic contraction environment (assuming it eventually coerces policy makers into inflationary actions) that would be the primary driver of the next gold bull market. Say, whatever happened to all the stories about China demand, a China/India love trade, supply/demand capers on the COMEX and ‘US jobs to spur inflation driving big, smart institutional money into gold’ anyway?
Continue reading US Stock Market and the Gold Sector
As posted at NFTRH.com…
Precious Metals: A Positive Big Picture View of Risk vs. Reward
While routinely following the precious metals as one of many sectors in NFTRH, we have mostly left it alone with respect to public writing over the last few years. That is because it is in a bear market and since I am not a slick short-term trader, I have felt it is best to mostly just let it play out to the bear’s will without overly active involvement.
But several indicators have us on alert that 2016 is going to be the year that the bear ends in gold and gold stocks. So why not publicly discuss the shiny rock a bit more in anticipation? I am still 100% in line with the value aspect of a monetary metal that is historically sought after in times of doubt about
the Monetary Politburo’s (Central Bankers’) ability to manipulate the global macro backdrop as desired and to positive effect over the long-term.
A bear market exists to clean out the excess from a previous bull market and though some gold bugs have a hard time admitting it to this day, the sector needed to be cleaned out. It was readily obvious in 2011 when first silver and commodities blew off and blew out, and then gold got driven too high, too fast on Euro Crisis fears and masses of monetary refugees did the “Knee Jerk” into the metal that was supposedly going to save them from the evils of Central Banking gone wrong. Ref our warning: To the Newly Minted Gold Bugs…
“This article will not discuss the obvious contrarian signals that are implied by the public’s entry into the realm of gold, as the barbarous relic is now ‘channel busting’ up, but shows no signs of waning momentum. We will just warn that at some point, momentum always slows and the market in question, always corrects; at some point. For reference, see silver earlier this year.”
Continue reading Precious Metals: Positive Risk vs. Reward
The build up in gold and especially silver’s CoT commercial net short positions (and corresponding over bullishness by large and small specs) was troubling. So too was a meeting of interest rate manipulators last week (never goes well for Team Honest Money). Combine the two and the anticipated correction hit the gold sector.
A problem I have had is that it usually takes weeks to unwind a terrible CoT situation. Since my tin foil hat is in the shop for repairs I cannot chase around those that may or may not be manipulating gold and silver. I play it straight. But it sure did seem like a convenient buildup into the FOMC’s word play and tough guy act and sure enough, we had post-FOMC pukage in the metals and miners.
Now however, GDX has dropped to NFTRH’s target zone (14 to 14.50) in quick time. The only way CoT is going to have proved (come Friday) to have unwound the bearish alignment that quickly is if indeed gold and silver were purposefully gooned up in what we might call a focused and coordinated operation. i.e. wax on, wax right the hell off again.
Whatever, for now I covered my silver and gold miner shorts very profitably but am in no hurry to get bullish and add to my small group of ‘relative quality’ miners until I get a better read on the CoT situation. May even short again. Who knows? I am going to let the market tell me, not the other way around.
I understand that the miners can (and should) lead gold in a bullish phase. Here is the daily view of GDX-GLD looking pretty good.
And it had better look pretty good because the long-term (HUI-Gold) looks pretty horrific.
So maybe the miners are done with their correction and ready to lead the still struggling metals. Then again, maybe not. All I can tell you is that if the rally resumes (we have HUI 150’s open) this will have been the quickest smack down and recovery in recent memory. It would also be a ripple in the bear market’s character. It’s interesting to say the least.
The title does not include a (?) after it and that is for a reason. The gold sector’s fundamentals, both sector-specific and macro, are improving and this was not the case during the last exciting upturn in the sector circa summer 2014.
Back then, everything from Russia’s move into Ukraine to the Ebola scare were imagined to be sound drivers of the gold price. This stuff proved, as expected, to be wrong when the whole complex made new lows in November of 2014 (prior to this year’s ultimate lows).
What is driving gold and the gold sector this year? The things that we have been saying for years now would be needed.
Continue reading Gold Stocks: Different This Time
Well, was the bearish engulfing candle a one day wonder? Was it too perfect with respect to its predecessor in August? Did every genius who can look at a chart see it and act upon it? Well, this genius took a loss on his hedge but also took more miner profits to stay balanced. That is because the US dollar is at a decision point and the stuff that has bounced while it has dropped to that decision point should take their cues shortly.
All of this in the context that Huey has an eventual higher target that you might just be able to make out by the declining red line there.
NFTRH subscribers were apprised of the growing risk of a negative reaction in the gold stocks on Friday and again this weekend. This was done first in an update and then in the regular report. The recommended courses of action were ‘take at least partial profits’, hedge or at least ‘do not chase’. Personally, I chose (b) and hedged. Today I took some profits while still holding the hedge (DUST) in consideration of this chart’s Bearish Engulfing (BE) candle.
Frankly, I am now net short while still holding my top miners. Per the earlier post, NGD was sold as it has already reported earnings, pleased the market and was an obvious profit taking candidate. But the picture is not as simple as gold bears might want to believe.
The cottage industry in gold bearishness is happy to see Mr. Bearish Engulfing although I have watched certain of them try to short this rally all the way up. Maybe this time they’ll get a big score? Well, a daily BE is a short-term thing with its effects basically valid for 1-3 days. What is more bearish is the CoT data and SLV’s sentiment profile, each of which were discussed in #364.
However… (nope, we’re not done with the discussion because there are lots of things in motion now) there is a bullish fundamental underpinning in play for later this month. This was discussed as well in the weekend report.
Man, none of this is easy and the bears who think charts are the only consideration (as fundamentals slowly improve over time) or the perma-bulls who just set and forget their viewpoints (and bias) paying little attention to charts, CoT and sentiment are unwilling to do this complicated and frankly sometimes annoying work.
That’s fine. We are going to nail this thing because we do the work. That will not include any ‘we called the bottom!’ b/s because this is a bear market and when it is either technically over or 100% in line fundamentally, we will make a call. It will be late because it will have already been called about 10,000 times elsewhere over the last 3 years.
Back on the here and now, a reaction of some sort was likely. But there are targets higher for this rally that could come about in late October or early November. Let’s see how it shakes out and avoid automatic thinking.
Do you see this stock? It is one I have traded and/or had on radar since it absorbed Metallica Resources, which I held many years ago. Do you see the chart? It is semi-hysterical and I took profits at the SMA 200 while it was still green this morning. Do you know what I would have been doing if not for sound guidance on LatAm and Mexico based miners? I’d have been looking in from the outside.
The sound guidance came courtesy of Otto at IKN. He is 100% responsible for my having bought this thing at much lower levels when he saw value in it. It’s a sector populated by a lot of people who think they can analyze gold stocks and a very few of them who actually can analyze gold stocks. He’s not always right (who among us is?), but I always have a level of trust with him that he has done the work required to give me a leg up on what to consider in this volatile space populated by a lot of scams and a few real gems.
Having IKN on my side is an invaluable asset for NFTRH, when this sector is in season. Otto has no idea I am making this post. But it is the least I can do when I owe somebody a debt of gratitude for a trade well done.
We have been successfully managing an ‘in motion’ market since the August festivities kicked off. It is October and Money Managers (NAAIM), Newsletter Writers (Investors Intelligence) are thoroughly spooked and Small Speculators are thoroughly short the market. It’s a perfect contrarian setup.
Meanwhile, over in Goldbugsville there is a lot going on as well. NFTRH 363 is 30 pages of commentary and in depth analysis on all of this and also gets its geek on (with the aid of FloatingPath.com‘s awesome graphical breakdowns) and gets inside the September Payrolls report in order to flesh out the dynamics in a flagging economy.
NFTRH 363, a very helpful market management report if I do say so myself… out now.