Precious Metals – HUI
Tedium, thy name is Huey. The parameter is clear; hold the lower line of the potential bear flag. If this happens, the first target remains 300. If not, stick a fork in it.
Gold & Silver
Nothing really new here. Gold dropped on FOMC day supposedly due to some China deceleration noise and recovered a bit. Silver tested support at 23. The big resistance remains 1524 and 26.10 respectively. The metals continue to target those levels if the rebound continues. There, I for one would consider establishing short positions just because these technical levels are so important. If the metals turn down sooner, they will target 1250 and sub-20 respectively.
More negative economic data (ADP jobs) came in, the economy is decelerating ever so gently, the Fed is on auto-pump and the market levitates. Yesterday however, the Russell 2000 (small caps) got hammered by 2.45%. The SOX (Semiconductor canaries in the coal mine) was again turned at resistance (445) and the Transports got bonked by 2.32%. With the Fed behind us for a bit, can we finally get an over bought correction on the stock market? I poked it short again with no undue hopes for success. One of these days Alice!
We are working our way through earnings season and the Fed is either going to increase stimulus, decrease stimulus or leave it as is. They are buffoons and one day the market will prove this to be so, as it refuses to do what they wish. With economic data decelerating, earnings season waning and the traditionally weak early summer period dead ahead, the market should at least soften and eventually take a ‘healthy’ correction to the 200 day moving averages.
Using the S&P 500 as the model, 1350 to 1450 remains the target for a ‘healthy’ down move. Violating 1350 and making a lower low to the November low would be unhealthy – as in bull ending unhealthy. There is little reason to manage anything other than a healthy correction for now.
Back on the Precious Metals
I receive some materials from a friend that imply the gold generals are still lathering each other up and sticking to their guns amid growing mutinous impulses by the “community”. The big names continue to celebrate each other as luminaries who have been right for 13 years and will be right again one day. The physical demand vs. paper price destruction is the basis of the self-validation.
I totally agree with their idea of holding gold and not getting shaken out. What is not mentioned nearly as much these days however, is the consistent “do not let them have your SHARES” that was a big mantra by the generals. I believe it was “gold and gold shares”. Now it is “do not let them have your gold”, because the gold shares have imploded.
In some gold corners, non “community” writers like your’s truly are shunned because we do not bow down at the alter and promote the company line. I have been disgusted for a long while at how the generals celebrate each other as if they are the seers that have guided the flock and the rest of us are too stupid to think for ourselves.
On a positive note, when the precious metals are ready for a comeback one day, there will have been a lot of debunking of conventional thinking and guru worship that will have taken place. The gold sector is chock full of con artists, pitch men and promoters. I am not saying that this guy or that one are con men, just the sector as a whole is and always has been infested with dangerous players; whether they actually see themselves that way or not.
Looking through the noise of the moment, the markets are so interesting right now in a way we can feel blessed to be participating. After all, if it were easy anyone could do it. The built-in distortions sponsored by out of control policy making add a challenge. But it will all come together eventually for people who are willing to stay disciplined, do the work and think for themselves.
I realize this screed is repetitive of a theme I have been on for years, but to me it always bears repeating because I too get swayed by the righteousness of the honest money argument. Financial market-wise, it is who I am. But that is why technical tools are even more important than they might be for people with no particular conviction about the concept of money and where it comes from.
There is no excuse for putting people in harm’s way with dogma. I think the dangers and great opportunities promoted by the big names are mostly real. But the idea is to seek way stations as needed (remain intact) to be prepared for opportunity (capitalize).