Why are gold stocks “getting hit” today as the stock market cheers some vaccine and economic reopening hype? You know why. They were due for a decent correction. If you hear any gold bug talking about them getting whacked by mysterious forces at play against the poor gold sector you should consider running away from that stuff. This chart is signaling today as it did twice before in recent years. A pullback was needed and it’s healthy. There is also key support to be tested (not a bad thing) and in some cases, gaps to be filled.
An excess developed in 2016 to lead a 2 year grind downward that fixed the excess. That was logical because the big 2016 rally came amid rapidly declining fundamentals. An excess cropped up again last year as HUI again outpaced its most vital macro market indicator, the Gold/SPX ratio. We’ve been noting lately that Gold vs. Stock Markets is THE most important indicator to the gold miner case these days. NFTRH 604 also noted the following with respect to this chart. Don’t personalize it dear bug people.
While the Gold/SPX ratio is elevated and bullish (but in consolidation) HUI has once again gotten ahead of it. If a reaction is going to come, it could come into play to relieve this excess. To review, 2016 was dangerous because the stock market firmed and the economic cycle resumed. Today’s signal is probably more like 2019 than 2016.
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