With things in the media like a market strategist declaring he wouldn’t buy gold with his worst enemy’s money (CNBC) and SoGen declaring gold is finished as a safe haven investment (MarketWatch) I am given doubt about our nice neat downside technical targets. The targets are there mind you, but technical analysis can go right out the window with one shift in the markets as we all know.
Maybe the charts will be satisfied, but with the macro sentiment backdrop in play now, I think a drop could be very short-lived.
The thick sentiment perceptions being built now (pro stocks, anti gold) should have contrarian investors hearing alarm bells – in a good way. Anyway, the downside targets (low 1100’s in gold and 100, 130 on up to 150+ in the HUI) are what they are and they are valid measurements. But I want to play a little game of ‘what if?’ with respect to a bullish setup.
First is HUI, which is dutifully forming the ‘Head’ of our potential Inverted H&S. It has dropped far enough to qualify as a Head and ‘what if’ that is a Falling Wedge, which is often a bullish pattern?
Go back in time with me to 2012 when the ‘W’ bottom was forming during the run up to QE’s announcement. We had a target of around 550 to 560 measured off that ‘W’. Huey eventually got to 529, conked out and was then fitted for a pine box. So that very measurable target fell short by around 30 points. FWIW.
Again, on balance the technicals in the precious metals argue for caution but what I am now seeing and hearing in the market milieu nearly every day is counter to that. It seems that the higher the stock market goes, the dumber the headlines, and the dumber the investor sponsorship.
With gold clearly ‘risk off’ now, what does that mean? Is its investor base getting smarter, firmer? These are just questions to consider. Caution has kept us safe for a year now and to me caution is always in style. But when appropriate, so is trying to catch big macro swings in the markets. Hence, I don’t want to be asleep at the switch in the event that my targets prove too bearish.
Anyway, I thought I’d put up a few charts of stocks I have decided to hold through the process to this point. I am under water a little on them and the buy points still look to be a bit lower, but none of them look like ‘end of the world’ lower.
These are not recommendations but rather, examples of what people might look for in the charts of their own favored items, including non-precious metals ‘tax loss’ season candidates, which is why I originally bought Pharma company OMED, after all.
KDX.TO (KLNDF) never broke its uptrend and in fact has through all this noise simply built another bull flag thus far. The add zone is noted and KDX is just about there.
MDW is in a Wedge and can drop to the mid-.60’s or so, where there is support.
AAU could have one more hard dump in it. At least that is what this chart says. There is strong long term support at the noted level.
Bottom Line
The precious metals sector’s technical situation is ugly. There is no disputing that. A hard and frightening decline remains my preferred situation. But the sentiment situation is coming along nicely for a contrarian viewpoint. Hence, gold sector players should be ready now and start planning buy targets in the event things do not become quite so drastic. This is not a call to action but rather, a call to perspective.
