Let’s keep it simple. As noted in a public post yesterday, the pompom brigade was out in full force right at the short-term top for the gold stock sector. This observation is obviously not a formal tool, but my years of experience with the sector got an internal warning light flashing. That warning comes when gold writers get over enthusiastic and very visible, in unison.
So here we are today, with a deserved pullback in play. It is thus far normal and not looking like something to worry about. That is because HUI has made two higher highs and one higher low off the December bottom. Conveniently, it is testing the former resistance zone (now support) around 195 and as long as the pullback holds a higher low, it is technically normal. I’d like to see 194 hold on a daily close. That is where the (orange dotted) EMA 20 and (black) SMA 200 converge, along with lateral support. Of note, there is a gap down at 189 and the SMA 50 (just sayin’, forewarned is forearmed).
Since I am still not compelled by the fundamentals I am not a strong gold bug. If support gives way I will leave that to those who micro manage the sector in a vacuum. My interest is because we seem to be on a latter stage bull mania on the broad markets and this is the sector in the mirror to all of that. So let’s see how things unfold, near-term. If HUI is able to hold the support area, a reasonable target is a test of the September high near 220.
Industrial Metals Miners
I wanted to take some profits on the Industrial Metals miners but just could not justify it, yet anyway, because every time I looked at the daily overbought charts of RIO, TECK and FM.TO I made a point to also look at the still constructive weekly and monthly charts, which point higher with pattern targeting. This continues to be the commodity space where I find the best looking longer-term charts, but it did need a consolidation/pullback in the short-term.
Here is the monthly Metals & Mining ETF, along with a few miners. There is nothing bearish going on here and in light of the upward trend in inflationary signals (for example, L/T interest rates are still rising, TIP/IEF is at a new cycle high and even TIP/TLT is breaking upward) I just cannot justify taking profits on these items yet (and given interest rates, may also take back a position in the banks), as long as those signals are in play and the technicals are intact. You of course can and should do as you will. We’ll keep a consistent update on the process and I’ll add this chart to NFTRH reports.
The way I am looking at things, 2018 came out of the gate too hot. Profits came too quickly and I have tried to take a decent amount of them from a broad market standpoint. I’ll take more if needed, but as of now it looks like a normal pullback in the gold miners and a breather in the Industrial metals miners.
The rising long-term interest rates situation is of course one aspect of the 3 Amigos macro theme. That theme is inflationary until limits are registered. SPX rose vs. Gold today and is still up trending, long-term yields continue upward and the yield curve continues to trend down. So it appears that little has changed and insofar as the gold miners get bid in January, it’s part of the inflation trade and thus, not part of the preferred fundamental case. That could come after the party concludes.