First let’s update the charts we showed yesterday, with the short-term support parameters.
SPX is below the tolerance point, but this is in-day. The headline indexes are getting the biggest hit.
Yet the Momentum players are recovering. Again, this is in-day, starting with BTK.
[edit; NDX chart inadvertently omitted from emailed version of the update] NDX is above the tolerance line.
SOX has recovered above its tolerance line in-day.
Stock Market Bottom Line
The market is troubled by everything from China to Fed rate hike jitters, if we are to believe the press. In reality, it was over bought and sentiment was too bullish. Today is normal.
I for one continue to respect the parameters shown above and have neither shorted nor sold much of anything held (some of which are now green, curiously enough). All pending the parameters and momentum leaders. I would like the market to direct me as to long or short (or especially, cash) positioning.
Gold Stocks
With regard to the technicals we have been on a ‘bounce’ theme. But we are also watching to see if more fundamentals come in line. We have covered Gold vs. Oil frequently. Now let’s look at a couple others and then review a few charts of individual miners.
We have seen this movie before, but gold vs. S&P 500 (GLD-SPY) is bouncing now. That’s a start.
Yesterday we noted that it was interesting that Gold was rising vs. Commodities, because that is the number 1 macro fundamental consideration and it is a counter cyclical indicator. So far so good.
Gold vs. Base Metals is bouncing but has not broken the downtrend.
Finally, Gold vs. Silver is the one indicator that is constructive when it is declining. It continues to look wobbly, at best.
As noted previously, in the gold rising vs. oil environment I am personally not interested in the Royalty companies because the beaten down miners would stand to gain more. There are other considerations to mining cost structures, from FOREX to other materials, labor, etc. But if gold can continue to firm against the stock market, other ratios would probably follow.
Four Young Miners
RIOM is shaping up into an interesting pattern. It targets 3 if it gets (and holds) above current resistance.
KGI.TO is locked below the 200 day moving average. It could be a double bottom. A break above 4 targets 4.75.
TGD is another potential double bottomer. The objective would be 1.30 if it gets above 1.10.
LSG has not gone much of anywhere and has no discernible pattern. This stock may have some relative valuation issues it is working off, but is one of our quality* smaller miners nonetheless.
Bottom Line
Gold stocks remain on a bounce, but if/as the bounce continues the theme is to focus on mining companies of relative quality because in the biggest picture investment theme, they would leverage a price of gold that would rise vs. many assets, including miner cost inputs (energy, materials, human resources).
Gold-Oil is becoming outstanding. Gold-Commodities is constructive. Other ratios are improving but still technically in downtrends. Stay tuned.
* Of course, the usual disclaimer is that I am not a fundamental stock analyst. The information from which I form my opinions is from other sources.
