A nice bounce for the precious metals sectors today. Key word is “bounce”, as we have been noting. This is setting up a selling opportunity for those who traded the prospect of the bounce, a hedging opportunity for those who would do so and a ‘do nothing’ opportunity for those patiently awaiting the correction process to play out. What it is not is an opportunity to chase a bounce that we already thought was coming. That opportunity has passed.
Back to our daily chart of HUI, we see the index hitting the converged 50 day averages today (silver is doing the same and gold is close). The SMA 50 is one of our potential bounce limiters. The next is resistance beginning at around 230. After that there is a thick congestion zone from 230 to 250. Above 250 would signal that the corrective process to be over.
For my part, I only sold one item (one of my two positions in KLG.TO/KGILF) because I was over weight that stock. I may sell a couple more things or I may also just hold on because I bought these items well, on the hard down in October and the sector’s fundamentals are slowly improving with the broad market’s recent troubles.
Regardless, the chart above updates the general gold miner parameters for people to apply to their own situations. The status remains daily downtrend, in the first major correction to the bull cycle that began at the start of 2016. As of now it can only be called a “bounce”. We are not going to change that because of some improving funda and an exciting bounce. If/when it morphs to an end of the correction, technically, and/or major fundamental improvements slam into place, we’ll note it.
There is a lot of crap coming in news-wise over the next week or two (FOMC/election). While I am not sure how much of it actually matters fundamentally, we know all too well about emotional markets. So, moving on to the US stock market…
SPX is playing to the script and tagging a lower low (to October’s quick spike down) today. I am seeing TA out there that draws a thin support area per the shaded level below. This analysis states that if this support is lost the SPX will then go tradeably bearish. Well, it has been tradeably bearish since it broke below the SMA 50. If you call a further drop to 2000 tradeable, fine. But the index is already almost half way there from the high. My plan is to cover my short before SPX makes a lower low to June because I don’t think it is going to make a lower low to June any time soon; at least not without a large interim bounce.