For me a picture is always worth a lot of words and this one of HUI tells the story of a little would-be bottoming pattern still in effect at what I suppose could be called minor visual support; but let’s recall that 260 also corresponds with a 62% Fib retrace of the entire bull market. So it is notable.
The rest is self-explanatory. If this parameter (260) holds the next objective is resistance and the gap around 300. If it fails, the next support is in the low 200’s. A loss of 260 is not indicated by an in-day squiggle into the 250’s like we had this morning (259.74). But on a closing basis, a loss of 260 by more than a teeny would not be a positive.
HUI is over sold to such a degree that a rebound – from whatever level it generates – is likely to be powerful, like a slingshot stretched to the max. We have covered the gold stock sector in enough detail that I think we are pretty well tuned on its characteristics and parameters.
Gold and silver have gotten some downside follow through off of unattractive short term technicals but are hanging tough, with the favorable sentiment and CoT data in their back pockets. Silver’s chart says 17-20 is open, but I am not willing to bet on it at this time with the positive CoT backdrop. Maybe after a rebound to 25 or 26? We’ll see.
The post previous to this one shows a warning from junk bonds and while the trend remains up, there are enough warnings like this one and the Yen’s reversal that paint high risk into the US stock market. It has gotten a bid by being painted as ‘Fortress America’ amid the turmoil in much of the world, but it is losing sponsorship around the world and leadership from different asset classes (Nikkei, junk bonds, etc.). The character of this market seems to be slowly changing toward our projected bearish summer view.
Bottom Line
Like a moth to a light I continue to probe the precious metals stock sector (quality only!) but keep risk management rules at hand. Bear positions on the US markets were sold for profits and then reestablished on the bounce. In the time it took me to write this update the Dow has gone from +110 to +18. Had I been market watching I might have added short.
But that is what I choose to do. Most people should have cash and a patient value seeker’s orientation as the markets grind toward change. Whether you are on the strong dollar or death of the dollar side of the boat, I think we can all agree that having cash (in whatever the native currency) is a great tool toward our ends.
