NFTRH Interim Update 8.13.13, Precious Metals

The HUI-Gold ratio is above the 50 day averages.  It would be nice to see the 50’s hold as support on any pullback that may crop up.  But we should remember that bottoming like topping, is a process and that the precious metals are volatile, to put it mildly.

hgr

Daily HUI has done good work toward defining what is happening now as a bottoming process in preparation for a significant rally.  That shakeout last week actually firmed the technical state of the entire complex by not breaking it, but rather providing bullish fuel.  Statements were made.

hui

Resistance levels are shown above as is the support zone that we want to see hold on any pullback.  At this point I would expect pullbacks – while possibly violent – to be relatively brief, especially since the index is not over bought by any measure.

A lot of traders jumped aboard over the last couple of days and they may need to be digested.  But it feels like big money may be entering in anticipation of a big risk vs. reward trade, as reviewed by the monthly chart in NFTRH 251.

hui.wk

The weekly chart above tells us about our objectives as HUI continues to hammer out a potential bottoming pattern.  Beyond any very short term shakeout attempts, the next target is at or just above 280, which would be a neckline to the still imaginary pattern.

The pattern itself would measure to the mid 350’s or in essence, the big resistance zone that is the neckline to the previous and massive topping pattern.  We will continue to leave for another day the question about how high HUI can ultimately go, as we are simply trying to manage the start of the rally now.  But as long as the macro falls into place (resumption of the big picture rise in gold’s ‘real’ price vs. commodities and stocks – this is important) the analysis will be open to the best implications of the monthly chart from #251, which are new all time highs for the HUI on day over the next year or two.

gold

So now conventional market players have a decision to make, because gold got above the 50 day averages.  But very clear resistance exists at 1350.  It would be normal for a reaction there.  1300 remains support and testing of the 50 day averages (1312 & 1326) would be normal.  At any such time as gold decides to break above (and hold above) 1350, it is on its way.

silver

Here are support and resistance zones on silver, which made a strong leadership move as it sheared through the 50 day averages.  Silver looks like a buy on a pullback to support.  Beyond the congestion above, silver is looking at the mid-high 20’s as its next, although maybe not ultimate objective.

sgr

As for silver as the sector leader, I would like to see the trend line break hold on any pullbacks for the Silver-Gold ratio.

Bottom Line

Things look good to go in the precious metals complex.  Sharp, brief pullbacks would be normal, with the 50 day moving averages (+/-) now generally an important support (and risk management) level to that line of thinking.  The fact that the precious metals did not break down last week when they had a perfectly good opportunity to do so (for what would have seemed the 1000th time) is a change of character.