See important edit below!
Gold Sector
I made a public post yesterday after the market closed that updated the HUI chart we used as a guide for support areas on any pullback reaction. In that post it was noted that HUI hit the first support area but not the preferred support area. Also…
“But if this is a real bull move, it may not settle far enough to allow a nice, neat ding of support #2 on this try. That is what markets transitioning from bear to bull do, they taunt you.”
We had 140, 130 and 120 as nice, clean support levels. While it appears (from pre-market) my favored pullback point is not to be we did get 16 points off of HUI and several miners took good hits. I added NGD, which had been an object of my affection and also bought back LSG. As noted in the post, I reduced hedging from full to minor as well (and will probably take the loss on that today). Here is the chart, updating the situation.
The greater point is that this is acting like a bull market. During bear market pullbacks HUI would not only come down to the most solid support level, it would routinely crash it, ending bounces right then and there.
This thing is acting like a bull market and that is only firmed by our sector and macro fundamentals, which are good and getting better every week. So, on that note…
Stock Market
Gold and especially the gold sector’s fundamentals are about to kick into a higher gear. What’s more, big money managers are going to see this and react to what is working. HUI is breaking above intermediate and long-term resistance vs. SPX. Today, if the futures are good, will only improve the picture.
SPX is going to tank the critical (but flimsy) support we have noted, if the futures hold into the open and through the day/week.
[edit] Here is the futures view, with SPX not actually broken down. My apologies for jumping the gun. SPX is at the parameter and while it looks very bad, this could be max angst in pre-market. Watch for a reversal and bounce or a breakdown right at this point. The rest of the analysis in this update generally holds, but would only be furthered by a breakdown in the S&P 500, Dow, etc. If markets do reverse and bounce, it could temporarily moderate the gold sector view to some degree.
Here is the Dow at support…
The 30-5 yield spread was one of the guides.
The broad market is and has been a mess.
If the futures hold up and the breakdown is real, downside targets equivalent to SPX 1500-1560 are now in effect.
Bottom Line
As with the gold sector, I don’t tell people what to do with their money. I tell people what is happening and what seems likely. The stock market has gone from momentum loss, to short-term bearish to intermediate bearish to bear cycle/market, assuming there is no big stick save today or tomorrow.
I was wrong to call 130 as the favored HUI pullback level. But that’s what this game is, parameters and probability interpretation. 140 was also support and it is probably going to hold and in that, we get a sign that a bull market is beginning, when considering fundamentals as well.
The gold sector is entering its new cycle, and the stock market is confirming its bear cycle, again if futures hold up. Below is some perspective on why there is plenty of time to position if a new bull market is beginning (NFTRH is not a day trading service). HUI took years and 100’s of points to work its way down to what are bombed out levels, and we protected against that every step of the way. That was hard work. It will be much more fun going back up if we are on a new bull.
Here is the monthly (log) chart to quiet the noise. It also notes that the next resistance level, if the 150’s are taken out, is around 200. A key is breaking the mid Bollinger level that has repelled every bear market bounce previously (orange arrows).
