Update; Precious Metals

HUI has declined to 215 and made a marginal lower low from the start of the bear flag in the 216’s.  We had been anticipating 210 as the critical support to a bottoming scenario.  So, given the proclivity of this sector to test limits, let’s keep that alive.

Given a still intact big picture view NFTRH is not looking to capitalize on precious metals negativity beyond short term trades and I covered my short positions against GDXJ.  There is enough negativity now at the gold websites and sentiment is likely in tatters.  A couple weeks ago the Hulbert HGNSI (gold newsletter sentiment) was heading lower but not yet extreme as we noted at the time.  Today, it might be good and bearish (contrarian bullish).

gdxj

GDXJ could measure much lower if this is a neckline to a larger pattern but I personally find it difficult to feel too bearish now that everybody is on the job with a bearish view.  The bear flag broke down as expected and now I move on from the bear trades, at least for now.  There are other services shorting these ETFs with gusto and to them I say ‘have at it’.

Helping the bull case for a day at least are yield spreads, which reversed upward yesterday and of course the weekly charts of HUI we have been following, which indicate that there is a chance that all this bearishness is just necessary noise within a bottoming process.  To the first point we’ll add today’s yield spread, which is up again and thus for another morning at least, a positive for gold.

10.2.yields

Also, silver is at a trend line when viewed by weekly chart.  Can silver break down?  Sure.  Has it?  No, not on the bigger picture view.  Here we recall the Silver to CCI comp we reviewed in NFTRH 287.

silver

The upshot is that I do not want to be short the precious metals and I do want to let them breathe and see what develops here.  It seems that more cut and dry positions can be taken either long or short the broad markets without having to work the precious metals too hard.

I do not focus on the precious metals because I enjoy it.  I do so because I expect gold to once again be valued as a haven from the monetary chicanery that has propped global markets.  That is my bias, my dogma.  It will not be allowed to interfere with what is actually happening technically and macro fundamentally.  But as long as I hold that view of gold, it will surely be kept track of.

Bottom Line

Everybody it seems is now bearish.  In the gold sector that is a positive just as over bullish sentiment (ref: 2011 and the ill-fated QE3 bottom in 2012) is a negative.  The CoT structures may have more work to do and as noted the HUI can drop to 210 or so before it starts violating a still intact bigger picture bottoming potential.

In short, this update is the product of a market watcher starting to feel moderately bullish feelings and is nothing other than a note about what I see at the moment and also to note that short positions were let go yesterday due to these feelings.  Gold and silver are down in pre-market.  Let’s see what develops today and the rest of this week.