Because these are 3 things I am watching with my limited physical and mental capacities this week, let’s update SPX, Russell 2000 and HUI.
SPX is still in the short-term downtrend channel. I have noted technical analysts (good ones like John Murphy and Ross Clark, not the riff raff) calling the market on a new leg up after successfully testing the SMA 50. All well and good, but I’d like to see the channel break before getting so enthusiastic. SPX was always going to at least temporarily hold the SMA 50 after all. It was just too obvious.
RUT is below its SMA 50 and in a downtrend channel. All it has to do is break above these and then 1390 and it’s back off to the races. But the thing thing is, it has not done that yet.
NDX and SOX have been bullish and are completely unbroken. If this correction is to resume, we’d need to see them crack and the indexes above hold below their channel lines.
As for HUI, this is the contrary play that would move to the forefront if markets weaken in an extended and substantial way. If US and global markets remain strong, gold stocks are to be avoided or at least not prioritized. HUI (daily) is doing at the SMA 50 (blue) what it did at the SMA 200 (red) back in February. A false pop above and then a failure. Right now support is the (green) neckline to a bearish pattern and resistance is the SMA 50 (202.80).
Taking a monthly view, if current support (195) gives way a drop to or even through 181, which is the monthly Bollinger Band mid-point looks doable. That is key support to keep a bigger picture bull case in play. Realize that HUI could also drop further than 181 but would need to close a given month (April?) at or above 181 to keep the parameter intact. I still like the monthly view and think it retains the ability to fool a lot of people with a bullish resolution.
But the bottom line continues to be that the stock market and gold sector are opposed. If stocks remain bullish, the gold sector goes in waiting for a day when the stock market cracks. Don’t listen to those pumping inflation/reflation as a reason to buy gold stocks. If the reflation works to economic gain, the gold sector is an also-ran at best. If however, the economy starts to fail the gold sector would become primary. We’ll bring out that analysis, including the ‘Macrocosm’ theme (of gold sector fundamentals) as needed going forward. The China/India “Love Trade” guy is still out there transfixing gold bugs with reasons to be bullish. There will be little reason to be bullish unless the markets start to fail, confidence declines and risk goes ‘off’.