NFTRH; HUI Downside Target and Some Words on the Market’s Sentiment Profile

With the knowledge that these things never go exactly to plan, HUI hit a low of 180.84 today, which is at our target zone of 180 +/-.  I pulled a Fib retrace on HUI and a drop to the 62% Fib could bring on a dip under 170.  But that is all ‘would this, could that’ type language amid what looks like a capitulation phase revving up.  The general downside target is being reached today and as such, I added a couple of larger items (SLW and BTG) after selling some riffraff (written affectionately about the more speculative miners) for small profits and hefty tax losses earlier in the week, as noted in an update.

But as noted during the go-go bull phase earlier in the year, I will not be able to be the kind of bull I was in Q4 2008 (i.e. the kind of bull who’s buying when everyone is puking in their mouths) until we get the first major correction.  Hello major correction.

Some anecdotal things I’ve seen just today are Stan Druckenmiller selling his gold and touting economic growth amid his politically biased world view.  Another is a gentleman at a website that tries to predict the moves in gold (the words “gold” and “predict” are in the title) who was very open to big upside not 4 days ago is today talking about 25% additional downside potential.

NFTRH was born in Q4 2008, a time when the miners were crashing.  I bought at HUI 250 and then again at HUI 150.  I was concerned about losing my money and I was concerned about what the service’s initial subscribers would think about me if I was wrong.  Well, I was wrong to buy at 250 but thankfully right about buying the bottom at 150.  Then in hindsight 250 was right too.

Point is, I am a bottom feeder and as such, my job is to buy days like today.  So I bought a little.  But I am also a macro fundamental guy and that is mixed right now as far as being positive for the gold sector.  The Druckenmiller crap doesn’t bother me.  It actually makes me want to be bullish.  After all, the gold bug “community” was holding he and other luminaries up as if to say ‘see, Druck’s long gold and you should be too!’ back in the summer… at the exact time we needed to be cautious.  Tune out Druck, tune out linear thinking gold bugs and tune out Trump mania.

Despite what may or may not be forward fundamental changes, I don’t buy the big Trump hysteria beyond its emotional knee jerk phase.  I even shorted the Small Caps today (it’s a little scary, but somebody’s got to try it I guess).  This is against and not offsetting of long positions.  I’ll not be bearish the market until a solid group of indicators says so.  But the same market participants that feared Trump not a week ago are buying him up now.  It is illogical but then again, it is the market.

But the point is that I expect this to wear off and if it does, it makes buying the gold sector easier from a contrarian perspective.  As it stands, I added a couple of items just because we are at the target area that was coldly plotted months ago but comes with the emotional upset that always comes with primary corrections.  One wonders if the bull hysterics going the other way are a capitulation in the making as well.

Bottom Line

I am buying a little of the gold sector, which is in a primary correction and in a logical target zone.  The macro fundamentals – unlike in Q4 2008 – are incomplete.  Hence, I am not the committed buyer I was then.

The stock market is very bullish, and if that remains the case (we may well have completed the major support test) then the gold sector will be an also ran, at best.  But I smell a potential rat here, and want to test it out from a contrarian standpoint because HUI is at target and I don’t trust that everyone who was afraid and bearish the US stock market last week when Clinton’s email scandal erupted again is suddenly now a bullish genius.