NFTRH Update; Gold, Silver & HUI

With the precious metals strong in pre-market, it is helpful to take a current snapshot of the daily technical situation for perspective.

hui

HUI has room to exhibit strength (5-7 points worth) today while still remaining technically vulnerable.  That is because the price is below the 50 day moving averages and in what could be a bear flag formation in the making.  Adding to this case, a look at the GDX and GDXJ ETFs shows that the potential flag is being constructed on declining volume.

HUI has made 3 lower highs and 1 lower low since August.  A bullish case needs to see it get above the 50 day averages then the October high around 250.  I have seen analysis calling the MACD trigger and the break of the former downtrend line a ‘buy signal’.  But as you know, I manage conservatively and in my opinion the pressure is on the bulls to prove their case, not the bears.  If the 50 day averages and then HUI 250 are exceeded, let’s go bull.  If not, please respect the downside possibilities.

gold

For reference, here is the situation in gold.  Any bullish activity below 1350 is just noise.  The first bullish step is to retake that level and the confirming step is to break the top trend line and the 200 day averages above 1400.

silver

Silver is similar, with 23 being an important mark to overcome.

au.cci

Any talk of buying opportunities in the precious metals must go along with a fundamental backdrop that is constructive or else all buyers would be doing is grasping at straws.  I continue to believe that the inflation argument is not the way to go and indeed gold’s recent performance vs. broad commodities (esp. crude oil) is a reason to be on alert for buying opportunities within the sector.  If gold were declining vs. commodities the analysis would be fundamentally bearish, with respect to the gold mining sector at least.

The top panel shows gold in a middle ground above the MA 50’s, in ratio to the CCI commodity index.  The lower panel shows just how bad the CCI has been, dropping to just above our critical ‘500’ parameter (ref: long term charts reviewed each week in NFTRH).

It is important to be focused now.  A lot of people who were made to look very right during the big inflationary phase that extinguished in early 2011 have not adapted their thinking to the complex times now unfolding.  We are in my opinion not in an ‘inflation’ play, even though the Fed is inflating.  More and more it looks like we are awaiting the failure of said inflation; i.e. the inflection point noted in NFTRH 263.

Manage risk first and be ready to speculate second.  We’ll update short term events as needed through the process.

Bottom Line

HUI needs to clear the 50 day MA’s and then 250 to make a real bull signal.  Gold needs to clear 1350 to begin to be bullish.  Silver 23.  These could happen at any time.  But the reality is that they have not so there are no bull signals, by NFTRH’s methods at least.