In the previous update I did not mark up the charts because I did not have time. In this update they are not marked up because stockcharts.com is on the fritz when I try to save my work. They’ve eaten it 3 times now and so forward we go, sans markups (and not in the finest mood).
While nominal HUI remains normal to a routine pullback, the HUI/Gold ratio went a little abnormal today. From the last update…
“HUI/Gold (GLD) ratio needs to hold here or it will violate the December low, as per the previous update. It’s fine at or above and an indication of a more pronounced correction if it takes that out (it could drop to the SMA 200 and still retain the uptrend).”
I think it would be best to prepare for a drop to the up-trending SMA 200 in this indicator. This is the gold sector after all, and it does not move gently and it often moves harder than you’d expect, in both directions. This is not a prediction about the SMA 200, but it is a possibility now that we are no longer in comfort mode with after cracking the SMA 50 and the December low.
Nominal HUI is still on plan. From the last update…
“First, nominal HUI would ideally hold here at the daily EMA 20. But better support is from 220 to 225, which is the SMA 50 up to lateral support (I’ve not drawn anything on these charts). Below 220 would make things less comfortable than a nice, neat hold of the SMA 50.”
HUI is at 226.90 and the EMA 20 is gone, but we were expecting 220 to 225. That needs to hold or it would get less comfortable. Both moving averages are trending up but that might be little comfort to those too exposed if things get dramatic.
What could cause such drama? Well, it is already on display. US-Iran going to the back burner and US-China making nice on trade. All the while the bull mania (high risk vs. reward though it is) in stocks regenerates after these latest negative micro-twitches in sentiment… exactly as we anticipated.
So to the degree that the gold sector got caught in a risk ‘off’ sentiment knee jerk, it could be pressured in the risk ‘on’ sentiment rebound. This is why I am trying to stay as balanced and patient as possible. I picked up a couple items today, but am in no rush to play gold bug hero yet. They are still running the bugs in the ritual that crops up every now and then. The sector has needed a cleaning.
If HUI holds its normal zone of 220-225 then fine, we’ll re-bull. But it has not even tested it yet.