Today we have exhibit A as to why it was probably a good idea for risk averse players to wait out the FOMC before reading too much into things. There was a reason there were no updates during the recent upsurge. All that needed to be stated had already been stated, leading into the FOMC noise and more info creates a mental whipsaw.
Gold stock players would benefit by not being solely focused on the gold stock sector because again, it is just a stock sector. The revulsion apparently continues in the sell down amid extreme negative sentiment and the bottom that comes from this should be an important one. But if the weekly chart fails (2nd one below), then HUI is left in a technical no man’s land.
Two gaps have been filled off of the post-FOMC failure (2 hr chart).
Here is the bigger picture (weekly) ‘parameters’ chart. It has not failed but more patience will be needed in either confirming or negating this area as a potential bottom zone.
The sector apparently will be ready to reverse when it is ready to reverse. Period. FOMC is docile and out of the way now until March. Bottom callers are calling and perceptions are flying. Meanwhile, for whatever reason, the strong Euro still seems to be an antagonistic drag on the precious metals.
As stated, I feel no need to over manage with the former important support level of 420 gone. This after the even more important 460 ‘neckline’ support level was broken. The advice remains to be in position to think like a predator, not a victim and for heavens’ sake, to tune out the us against them rhetoric of the gold generals. At least as far as the stocks go.
‘Bottom’ Line (literally)
A bottom will come and that would be the opportunity. The bottom may be being made now or it could come from lower levels, which we would of course track. A question is, did the last two days of relative bullish activity reset over bearish sentiment to a degree sufficient to propel a new leg down? The weekly chart will tell, by HUI’s ability or lack thereof to hold the summer lows. Here is another weekly chart showing the 385 level.
Gold stocks are just stocks. Don’t personalize them and just maybe success will be found. The pain some sector players have been experiencing is probably due to unrealistic expectations or a damn the torpedoes mentality. But if one is going to have that mentality one must not be worrying about short term direction or where a bottom will come from. Personally, I respect the torpedoes and worry plenty when parameters are broken.
The reality is that this stock index has snapped parameters like twigs for months now. It is sitting right at a potential bottom zone, but risk should be managed in the event it gives way.
Meanwhile, I plan to continue to bide time by trading/hedging other areas of the markets while waiting for the precious metals sector to do its thing.
Many in the gold sector are selling something; an ideology if nothing else. But sometimes, it is much more. There is a big pressure to keep the big bull face on. I write what I write as a totally independent market player with no affiliations other than with EWI (Prechter), Ino.com (general market) and BullionVault (which nobody seems to use, so it is more valuable to me for the commentary content that biiwii.com publishes :-)).
Point is, I am only selling you my views. Right or wrong, but definitely independent and trying to get this right. Big picture I am a huge gold bull. The gold stocks are a preferred speculation, especially now, considering the contrarian opportunity that seems to be setting up. But I will continue not to be driven by anything other than trying to illustrate what I think and why. All too often I think many gold bug players fall under the sway of the always bullish mentality that is bred into the sector, much of it in service to agenda.