Yesterday, within two hours I received mail from three subscribers expressing concern and/or frustration about the lack of performance in the gold miners vs. the stock market and even vs. gold and silver as the metals recovered from the morning’s knee jerk dump and the miners just continued to suck wind.
I want to reiterate one point because it is important. If directed to do so by the market, NFTRH will abandon the short-term bullish gold miner stance, no ifs ands or buts. There is a world of potential out there, whether from the bull or the bear side (ref. several NFTRH non precious metals positions) and this newsletter will not go down with any single ideological ship. A buying opportunity in the gold stocks would simply have to come from lower levels.
That said, I see no reason to abandon the plan that sees this as a long, agonizing bottoming process.
To keep the daily chart clean I have not shown resistance (roughly 460) and support (420). Break 460 and HUI is in business. Lose 420 and it is out of business, at least with respect to this momentum divergence and daily uptrend indicating that a bottom is being put in right now.
Thus far, HUI made a low in May, a secondary low in July and is now working on a potential third higher low. On the upside it made a high in June and a higher high in September. If HUI holds a third higher low here, the plan would be for it to get through 460 on the way to a potential higher high above 530. This is why the recent lows just below 420 are important. A failure of 420 brings on the white knuckled experience of ‘hoping’ that the July low at 385 holds.
Please take some time to consider the weekly chart. HUI is working on a higher low at the green dotted line. A failure at that line brings on the potential for a trip to the shaded support zone near the bottom tine of an Andrews Fork I have drawn in. Think that can’t happen? It can, easily; and still the bull market would be intact with a higher low to 2008.
It is vitally important that people take what they believe and put it in a box. This applies to people who would be upset by market activity that flies in the face of their beliefs. In other words, if the action in the gold stocks is upsetting, then either don’t hold them or trade them. Gold stocks are certainly not gold after all.
Whatever you do, try not to become spiritually or morally invested in any asset class. At least do not do so if interim events on the way to the promised land have the potential to negatively affect your life. I think there is a long tradition among gold “community” writers of keeping their flocks vested and bullish. Words come down from the pulpit of truth, they make sense and the people go with it.
I honestly believe that the NFTRH subscriber base is overwhelmingly of a different sophistication and character (it must be, otherwise I’d have way more subscribers! :-)), but we are all human and the markets can be a grind. With media and policy makers so interwoven as they are now with the markets, working them over routinely and thoroughly with every sound bite, what chance does the most significant sector (due to gold’s role as money outside the official system) have of not being worked double time? This is all about money now (e.g. currency wars).
I have core fundamental beliefs as well. I think gold’s price would be higher than it currently is if it were not so globally strategic and hence, manipulated in various ways by different interests (including big buyers). But then, I think gold’s value would be out the window if every knee jerked momo on the planet owned it. That would be time to sell.
I realize that there is a lot of information out there and much of it builds a profound case for gold and by extension, a bullish case for the gold stocks. But look at the weekly chart again. It does not care about any of this. All it may decide to care about is making a higher low to the 2008 low, and in the process maybe scaring as many people out as it can before the next bull leg.
I remain positive on HUI’s potential to put in a third low that is higher than the previous two (May and July). But if HUI loses the green dotted line and then takes out the July low then a higher low scenario would shift to a much bigger picture one. HUI hit 150 in 2008, which was higher than the low of 35 in 2000; and a decline to 325 or 350 would be another higher low in an ongoing secular bull market. 35 > 150 > 350?
I’d personally have no plans to be holding these stocks for a ride down to 350. Obviously I believe the odds are in favor of lows being put in now or I would not be holding positions. But the market has told me when I have been on the wrong course before and if it does so again, I will get right… in quick time.
Folks, don’t personalize it. Realize that a nice wall of worry could be getting erected right now through this grinding potential bottoming process. But also realize that there is an alternative scenario in play. There always is.