I sensed people were getting antsy in wanting to buy gold stocks for fear of prices running away. That is why we had a couple updates noting the over bought level and recommending not to chase. Pending Yellen (always a wild card), it looks like a pullback has begun, almost as if on cue.
If that is so, here are the pullback parameters for those who want to get bullish. A test of the SMA 200 would be the most likely pullback zone. That would take 25 points off of Huey and punish the momentum players, cleaning the sector out a bit. A hold of that level would also keep things on their new bullish trend.
A loss of that level would bring on 120, which is not an area I would be interested in riding down to. A gap fills at 130 and it was a momo-driven hype gap. Best to get it out of there. The 2 lower gaps were ‘breakaway’ style (not necessarily needing to be filled any time soon), as they changed the short-term trend above the 50 day moving averages. The 200 day MA is a bigger trend change marker and I want it to hold, period.
Support 1: Lower probability that this limits a corrective move.
Support 2: Higher probability, as it fills a gap, tests the MA 200 and takes 25 points off of Huey, cleaning the sector.
Support 3: Also doable, but a drop that far would put a trend change in question.
The sector got too frothy and a healthy pullback is needed. If Yellen does not say or enact something untoward (i.e. gold-negative)* it would be normal and preferable for HUI to pull back to 130 so that calmer players may position instead of those desperately buying the vertical spike. She could also say something that puts gold and the miners back on the upward pump, but I think that is a lower probability.
I have a difficult schedule this week, so there will likely be no updating during market hours. But it is probably better to do these in the calm of pre or post market anyway.
* I went on a mental exercise about what the Fed might or might not do in a public post this morning.