I added to the existing position in GDX this morning because while yesterday’s hard drop did not fill the gap at 18.50 it brought the price down to the SMA 50 and short-term lateral support. I will look to add more of this and/or individual miners if the macro and sector fundamentals continue to improve. You never know when the machines are going to lead the greater world of Casino patrons to the sector. Yesterday they knee-jerked the bad GG earnings and euphoric market bounce. Who knows, maybe one day they’ll start looking forward as we are.
Here is HUI daily from our weekly reports. It is untouched by me since last presented other than to turn a green RSI red. Huey never quite filled the 2nd gap (our targets have been gap 1 at 150 (filled), gap 2 at 160 (not quite) and strong resistance that meets the down sloping SMA 200 around 170. It’s a lot of overhead. But if the economy bubbles up more soft readings and stocks resume or continue weakening a buyer of this struggle would be doing so in line with fundamentals.
HUI weekly is also untouched and provides more reference. I suppose they could throw the sector baby out with the bathwater (as they did in Q4 2008) to test either the recent low in the 130s or even the 2016 lows. But here let’s remember that gold stocks are already a value by some important measures.
The monthly chart shows us that the pullback came from massive long-term resistance and probably always was going to happen. GG just lit the match. Other established miners reported good results but the market was jonesing to pull back. Let’s not personalize it.
The bottom line as I see it is that we are being steered by the fundamentals first and technicals second. A resistance area like the one above is almost always going to hold on the first attempt. We can use charts to gauge potential pullback support areas and upside resistance areas. But if we do not plug in the funda it is all just casino gambling. I believe the funda are improving markedly. If the economy continues to soften and regular stocks continue to disappoint the market on earnings we will increase our conviction incrementally with each step. If there is a miracle kick save for the risk ‘on’ world it’s back to Palookaville. But that is obviously not what is being indicated on the macro right now.