NFTRH Interim Update 12.19.12

Precious Metals Notes

The daily chart of HUI remains bearish, as it has been by definition since the bullish parameter (a would-be hold of the red neckline support at around 460) failed. Bearish simply means it is in a downtrend below important resistance with no sign of a bottom.  We all know this.  It could change tomorrow, but as of now…

We can think about contrarian opportunities but the fact is there are myriad gold bugs praying for a bottom now.  That is dangerous, because a bottom may not just conveniently present itself to let them off the hook.  In other words, a capitulation could be out ahead of any bottom.  Hence, we follow parameters each step of the way.


The parameter to new short-term downside activity would be a decline below the early December low (red arrow).  Huey is almost there.

Many readers have their own fundamental research or subscribe to fundamental stock research services, and thus may have reasons for tuning the short-term technicals out and holding.  We all have different orientations.  I just follow the indexes and the above remains in a daily downtrend.  The concern is that the recent abatement in downside momentum could build energy for more downside.

You might think I am part of a wall of worry but in fact I am very under exposed and am probably going to be more so if this creeps any lower.  I just want you to see what I see and form your own conclusions and interpretations.  Caution has kept the analysis in relatively good stead thus far and I may be caught being cautious when the big turn comes, but that’s show biz.  Until I see more signs (to go with the HUI-Gold ratio, which still looks good for a bottom) in nominal HUI, gold and silver the view is not particularly good.

Bottom Line

There are some pretty confusing things in play on a global scale with respect to gold and the correction can last longer than we might find convenient.  That is an implication of gold’s drop below 1689 yesterday.  Silver appears to have double topped in relation to gold, gold is declining in euros, gold is declining vs. S&P 500.  None of these are particularly good signs for gold stocks either.  I want to see how the CoT looks on Friday and see if we can’t get another positive indicator to go with the lonely HUI-Gold ratio.  Also, let’s get a look at sector sentiment this weekend.

Are they calling for the Gold Generals’ heads yet?  Has a certain TA guru who writes in dynamic terms come out and called bear yet?

When unsure or confused as I am now, I must state as much to you and manage risk accordingly if more parameters get busted.  That is what I am going to continue to do, ever more strictly if needed. We have had HUI 420 on down to below 400 on radar and the red arrow above is the gatekeeper to those possibilities.  Gold stock bulls already positioned want to see that hold.  I want to see it hold too, because I want to buy and be positive on a sector that makes sense to me fundamentally.

HUI’s direct mission is to not make a lower low at the red arrow and then get above 450.

There has been a general lack of respect for risk management by precious metals players throughout this correction.  We should at least continue to be mentally prepared not to be like those players.

General Notes

2012 is closing out as one big pain in the butt.  Let’s not sugar coat it.  We need to be able to gauge 2013 and its themes from a place of balance and perspective and that is just what NFTRH is going to do.

Right now I own some things like T bond TIPS, Global Income, Japanese market, a couple big tech stocks, emerging markets and a few other odds and ends.  I am not sure if these will be major themes or just a quick trade.  Probably the latter for most of them.  What I do know is that the world is changing right this minute and it is shifting beneath precious metals players’ feet.

Has the secular bull ended.  I seriously doubt it.  In fact, I can envision the upside that comes out of this corrective phase as possibly being the most powerful of the bull market.  But again, patience and coming from a place of strength is the best way to make it work on our terms.

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