Folks, I felt we needed a more extensive Precious Metals segment than usual in NFTRH 436 because I got some correspondences on Friday that made me think that would be a good idea. Today, after being away from the market again over the last 2 hours, I returned to find some big time price damage right to the HUI 195-200 targeted support zone (it closed at 195.88) along with a couple more emails questioning the situation. So I thought an update would be in order, even though nothing has changed other than the violence of one day’s reversal from up to down.
Not that I knew today was going to be bad, but I put a request right in NFTRH 436 for people to email me if anything was unclear or if they had any particular questions. I’d wish those questions would come before, rather than after dynamic price activity. I got a couple of questions about #436, but none of them were precious metals related. I also realize that there is a lot of bullish information out there on the internet and I did not exactly pound the table and yell “Huey’s gonna crash! Get out!!!”, but as you know that is never my style. All I can do is talk about probabilities and risk levels.
This is a supporting argument for the regimen of steady profit taking before hand so you’re in balance at all times. You never want to feel victimized by a market.
Moving on, and truth be told, I was starting to wonder whether I had done the right thing in shorting silver (ZSL) along with the miners (NUGT) as the sector went up this morning. But as the day wore on I thought to myself ‘self, don’t buy it… they are trying to pump the sector but the short-term trend is still down’. I was using the EMAs 10 and 20 (purple & orange dotted lines) per this HUI chart as a guide on that. The same applied for GDX and GDXJ. As you can see, HUI did not get above those down-turning moving averages.
So now, per the chart we have been using in the weekly report, the index is hammered right down to the support line, sooner rather than later. As noted already, the reason this support is key is because it is also the neckline to a bearish pattern. Lose this and an H&S like pattern comes back into play.
While I can all but guarantee that sentiment is getting over bearish now, price is its own animal in the short-term. So 195 continues to be the key because as noted in #436, I would not plan to take a downward journey below this support level.
As it stood, I took the rest of the profit on SSRI during the morning bounce (to the EMAs 10 & 20) and also used that opportunity to pare down to an absolute minimum, which is more than covered by the gold miner and silver short positions.
A final note, as I also tried to point out, the gold sector’s fundamentals are NOT even nearly intact. People raving about inflation are barking up the wrong tree in my opinion.
A subscriber asked me to speak to why the sector could get hammered so badly with even quality items like SAND and BTG getting hammered. And the only answer I have is that it’s an exhilarating sector on the upside and a terrifying one on the downside. Sandstorm is still Sandstorm and B2 is still B2. But equity in these corporations got pulled out today.
Now, I am sure the gold “community” is going to start cranking the excuses machine but for the sake of mental health, it is best not to believe them. One day, when the fundamentals align and the sector is being smashed the opportunity will be there. But as I also took pains to discuss, that will not be (in my opinion, anyway) until the broad macro breaks down. Too many people micro manage this sector in a vacuum even when the time is not yet right to invest. That’s because that is their vocation. The good ones were warning of correction potential and the bad ones were promoting and pumping.
I sense that I am rambling now, perhaps to a relative few in the subscriber base. So I’ll clip it here, but I again invite you to ask if you are unclear on any of the analysis going forward. The market is getting interesting and the goal is to be able to take advantage of the dynamics in play (whether they go to NFTRH’s currently favored plans or not), not to be victims of them.
The gold sector never was out of the woods because it never exceeded the November highs. Now it is at very important support. That is in line with what we have been tracking. The bigger view sees a high risk in the broader financial markets and that remains where my main interest is. If it cracks, then we’d look to the gold sector because only then will its real fundamentals start coming in line.