Here are the updated versions of the charts originally included with a wider ranging market update (8/14) showing downside support levels, and later in an update showing them hitting downside supports (8/17).
Since the original update gold tanked the 1st support level, dinged the lower one, reversed and bounced back to the former support zone, which is now pretty formidable resistance; especially at its upper boundary to 1220 or so.
Silver took a swan dive right to significant support, dinged it and reversed. Upside resistance starts coming into play around 15 with thick resistance beginning in the 15.60s.
HUI halted its waterfall just above the minor support from the top of the 2015 bounce. If the current bounce keeps going for a bit, resistance will enter the picture beginning at 150 and extending up to 160. This is not time for me to take out my pom poms and cheer lead. For HUI to escape the bear’s grip the bounce needs to clear 160, more resistance at 170 (not drawn in) and ultimately make a higher high in the 180s at a minimum.
But the most important aspect to calling a bounce something better would be the fundamentals, and they continue to be missing in action. In light of the still bullish stock market, I am not adding gold stock positions on up days. I may do some selling or hedging on the bounce if the macro funda don’t turn. Either way, positioning remains relatively light until we get more than an inkling on a would be shift in the macro from risk ‘on’ to ‘off.
Although this monthly chart of SPX/Gold (our macro Amigo #1) continues to indicate high risk for stock bulls, the issue is that if it heads for the upper gap from 2005 it would sure seem bullish out there for stock bulls… or it would sure seem bearish out there for gold bulls (depending on what drives the ratio) for a period of time. This monthly chart seems like it could get its work done in a flash, but often they move at a sloth-like pace in relation to what we see visually.
The gold sector is on an oversold bounce from logical support levels.
The macro and sector fundamentals are not yet in line.
It seems wise to respect that the “2016 bottom test” support is there for a reason and a final flush scenario would easily include a re-test.
I think we are in late stages of something, but our mental projections can move a lot faster than the mammoth known as the market. So let’s have some patience and let the situation evolve and in the case of the gold sector, with the above parameters in mind.
We’ll update as needed going forward.