alice

NFTRH; Update on Gold Stocks

I’ve been watching the HUI/Gold ratio this week as it refused to break down amid the recent bearish price activity and is now looking constructive. Here is the GDX/GLD version for an in-day view. The ratio had every excuse to break down as the miners and gold dropped and silver got hammered. Instead we are left with slightly up turned moving averages with the ratio above both of them. Like I said, it’s constructive although we might want to keep the pompoms under wraps.

gdx/gld ratio

Here is the daily chart of HUI that we used to plot 220 and the correction down from it. If we should not be surprised that an overbought index turned down at the 220 target, why on earth would we be surprised for it to hold the support area we plotted (195-200)? Answer: we wouldn’t.

hui

Now, this could be a way station before lower prices or it may be a buying opportunity. All I know is that I am holding positions (with some rebalancing this week in an effort to improve the quality of holdings) per the original plan, which was ‘take some profits on the rally, hedge the downturn and un-hedge at support. Simple. I am also not near the levels I’d hold for a confirmed bull market. The February high remains the obstacle for an intermediate bull view and the 2016 high activates a bull market confirmation.

Here is the weekly view showing Huey grappling to hold above the Triangle’s nose and the EMA 55.

hui weekly chart

Additional Notes

The HUI/Gold ratio’s big picture monthly chart still makes me feel very bullish. I am sorry, I am a chart guy and when I see pretty things in charts I get all geeked out. The bottoming pattern in HUI/Gold is still there and it is still fine looking. Easy on the eye, you might say.

The macro fundamentals have been taken apart again with speculation going on everywhere. That is a key consideration. But the nominal daily technicals would lead the big picture macro funda anyway. So with a view of a mega bullish stock market that is at significant risk, I carry a view along side it that the counter-cyclical miners can go bullish at any time (assuming they don’t get wood shedded first in an impulsive market washout).

I guess you could say that this update tells you nothing new from recent analysis. But I do like to see the miners having held firm in relation to gold. Now let’s see if the firmness continues and leads to something.