NFTRH; Precious Parameters & Thoughts

I know that some like the thrills of any rally in the gold sector, regardless of whether it is with the trend or not.  Just to review, this one is not with the trend.  I had been projecting a bounce before the hawkish-tinged Fed put an end to that.  That shows the difficulties in talking about bounces within downtrends; the market tends to resist.  But it was due to come sooner or later, and now it has come during the Santa seasonal period.  Let’s update the situation.

Using the chart that I used in a rather irritable public post yesterday (debunking some hype), we note that GDX has broken out of the wedge-like object.  We should also note that it is under no obligation to go much higher from this wedge breakout perspective, at least.

What is important is the area around the 50 day averages and the upper downtrend channel line.  It is certainly possible that could break as well, and it would be constructive.  But being the dour gold bug with no pompoms I’ll also note that the trend will not definitively change to up until GDX takes out the SMA 200 and makes a higher high to November.  Short of that, it remains in a series of lower lows and lower highs.  That folks, is a downtrend.  As I’ve been noting, play it if you will, but respect the trend.


As for gold (GLD), it is bouncing to around the EMA 20, where there is some minor resistance.  The reason I take gold (and the miners) somewhat seriously is because they are part of the risk ‘off’ trade, which includes Treasury bonds, on which I am also long (I’m always long physical gold as you probably know, and am holding gold miner, BTG and gold royalty, SAND).  Aside from this, I’ve shorted the Financials in line with the declining yields view.  If Santa does not get here quickly and stay well into January, and the stock market corrects sooner rather than later, gold could rise to the equivalent of GLD’s 50 day averages where there is also significant lateral resistance from the April and June lows.  That is nothing like a prediction or even a favored outcome, but it is a scenario.


Likewise, silver (SLV) could fill the post-FOMC gap, but thus far it has done little.  I would really start to pay attention to silver if it were to get above the equivalent of SLV’s 50 day averages and 16.25 area.


Bottom Line

It is a downtrend in all items.  It is also a robust bounce in the miners.  This was not unexpected although I for one did not distinguish myself in calling the bounce accurately.  As we smooth out into normal trading in January I will be more than happy to note when ‘Memorex’ becomes ‘real’ or a bounce becomes something more than that.

The risk ‘on’ trades will likely have a lot to say about the gold sector’s fate in the near-term.  If there is no Santa and no January effect for broad markets, this bounce could become real.  I am actually positioned risk ‘off’ with a current bullish view of long-term Treasury bonds.  But if Trumpmania, part 2 is instigated in January then gold will likely be sent back to the hell it came from (note a post from earlier today bringing our old 960 target back into view).

I look forward to increasing the focus on this and other markets as we get through New Years.  Speaking of which, have a great one and I’ll see you Sunday with NFTRH 428.