This morning it looks like some predictable turbulence is hitting the precious metals.
The daily chart did what we wanted it to do yesterday and broke the EMA’s 10 and 20 to the upside. This left a gap and brought the 60 min. chart to over bought status, short of the initial target of 290.
We would want to see the daily EMA 10 hold as support (263) and this goes well with the 260/261 support view on the 60 min. chart.
So HUI is over bought on the very short term. The last time it broke above the daily EMA’s 10 and 20 was at the end of December, as it promptly failed into a terrible bear leg. Now here we are again, but with a bleak sentiment backdrop (contrarian bullish) and a series of rolling capitulations that led to a big in-day reversal a couple weeks ago.
If HUI is going to keep a trade-able rally (at the least) going, it needs to hold 260, worst case. This time I am expecting it to do so simply because of all the bullish sentiment dynamics in play. But the chart will guide.
I am still at 73% cash (after backing out current short positions against the S&P 500 and Russell 2000). I would intend to put more cash to work if support holds at 260 or higher… or continue the seemingly endless regimen of risk management if need be. The chart will decide. But as of now, it is over bought and some gaps getting filled would not be a bad thing in and of itself.
