The stock market is taking the bounce right at its do-or-die point, which was to maintain the December lows. Gold is taking the counter to that trade and getting clobbered.
I noticed this morning that the world’s most prominent newsletter writer wrote a total Armageddon piece on Tuesday in response to the hard market drop to that point. He had previously been talking ‘melt up’ along with a chorus of reformed perma bears.
He issued “instructions to my subscribers” to hold no stocks and only a small amount of cash and gold. It is natural that the market is rallying and gold is in the mirror, getting hammered.
But with that comes the process of either confirming or negating our short term plans for a bottom (of at least trade-able intensity) in the precious metals. Beginning with the 2 hour chart of HUI…
HUI is fine above the moving average and the noted support zone. These are parameters for short term traders. As a potentially long term trader, I do not want to see this support violated either, because I have no interest in drawing my accounts down for a test of lower levels. Taken stand alone, HUI is still within a grinding bottoming formation. All of those red and green arrows show whipsaws below and above the MA 50.
The situation in silver is what has had us sitting up at attention to begin with. SLV is now going to test its lows from December and we are asked to believe that this will be the final parameter. Well guess what? It is.
SLV is on a full bear signal and this support zone is a must hold or it is going to test the June low of 17.75. Daily chart…
What keeps the analysis in the game? The silver miners (along w/ gold and HUI).
SIL tested support again and is in positive divergence to the price of silver. If SIL along with HUI can maintain their support parameters I am willing to give SLV/Silver the benefit of the doubt that it is going to successfully test its support and hold.
Bottom Line
The stock market is doing what we felt it would do and bouncing from a support level that you, I and every other chart jockey on the planet knew it would probably try to bounce from. ‘Risk on’ is trying to regain its composure.
As noted in NFTRH, bears have seen this movie before and the market is not broken. Not only that, it has hysterical luminary newsletter writers sounding bearish alarms. That could end up being bullish as improbable as it sounds. Don’t forget that our leash on the broad US market extends out to mid-year, potentially.
Precious metals, which have been getting the ‘risk off’ bid are now testing support parameters. Current analysis may hold or it may be negated. But in the absence of said negation, it will continue on as is, in bull mode (with silver notably excepted and needing to find a bottom). My plan is to a) do nothing and hold positions as long as things don’t degrade past the above noted parameters or b) lighten up significantly if not totally if things begin to fall apart.
As of 12:15 Eastern, the day after FOMC, they have not fallen apart.
