From yesterday’s update:
“As for gold, it is ready for a correction (with silver even more so) when viewing the CoT data, sentiment backdrops and over bought status and technical resistance. It is -26.40 in pre-market as of this writing. That does not break it down from a potential daily consolidation pattern, which could still resolve to the upside.”
Here is the chart we used yesterday, updated. The price stayed neatly within the Triangle. Indeed, yesterday it was a “potential” Triangle, and today with the hit to the lower line, it is a Triangle and it has a bullish look to it. These are usually considered continuation (in this case bullish) patterns, but once in a while break the wrong way. So the bottom line is we have a bullish pattern that remained intact on yesterday’s downside.
Gold vs. stock markets (Au-SPX shown, but other markets are similar) continues to consolidate its bullish break above the moving averages and trend change. This consolidation has been needed, technically.
As for gold stocks, here is the 60 min. GDX chart we used last week. After another test of the EMA 50 it is still pretty much intact at the lower fork line. But it is that moving average that is important, as it has proved to be support 4 times now. Forks are more of a visual gimmick than serious TA tool. GDX also found support yesterday at the EMA 20.
We had projected the highest gap to fill and kept open the potential that there could be another surge to new highs. So far, Thing 1 has happened but Thing 2 has not. So it is rubber-meets-road time for GDX.
The way I am going about this is to take profits on miners on which I do not want to give that profit back and hold the apples of my eye, which are really now only two (now that LSG has been bought out), Premier Gold and Klondex (among a couple others), which each made their bear market lows in 2013. Barring a diminishing of the view that a bull market has become much more likely, I can hold these because they have out performed for so long and ultimately never disappointed me along the way.
Even when the sector surges, there are always individual items pulling back (like BTG presently and NGD previously) for those who have their fundamental research on individual miners, and flash 1-day sector pullbacks on the sector itself. In my opinion, GDX is just fine as a vehicle. I checked its components and am satisfied that it is a good representative of the better senior miners and royalty companies. I don’t tend to use GDXJ because I want to pick my own juniors. There is definitely room for discretion in that space.
Now, after all this talk we still need to consider that the CoT has become bearish, the PDAC hype machine cranks up next week (changes often occur either just before or just after PDAC) and the negative reactions will come. So really, nothing has changed. People need to understand whether they are traders or investors, and whether they truly believe a new bull market is being birthed. I think it is, but as shown on the long-term 1999-2001 ‘comps’, there are alternatives to consider as well.
As for silver, its daily pattern is much more suspect than the one for gold, and silver is still not favored on a relative basis. An ‘inflation trade’ is still not indicated, technically.
Yet here is crude oil, breaking up from a downtrend channel on the daily chart. There is some excitement in the media, but lets see how it does at the EMA and SMA 50, which is really the decider on the still-intact downtrend.