Sentimentrader did a study of previous occasions when gold optimism fell like it did on Tuesday over the span of less than 10 days.
Above you can see the results. As you can see two of the examples were in 2020 and they failed to produce negative results like most of the other historicals. I chalk that up to a bull market playing under new bull market rules. I’d apply the same thing to this week’s correction. But regardless, Sentimentrader offers this bottom line.
My bottom line is that we have technical support in gold in the 1800-1833 area and the metal is completely intact, technically. What’s more, if the correction does continue (PMs are trying to bounce again this morning) it will be a healthy thing to shake out the unhealthy holders that panicked aboard earlier this year.
As for the miners, here is a view of the miners now being the most contrary bullish segment of the market, outside of volatility, which we all know as been outlawed by the Fed. This is a skittish short-term reading, but it is a positive in the here and now.
The sentiment readings jump around and I am going to continue to operate by the technicals. Gold has support at 1800-1833 and is in a nice bull market. The miners have hit HUI 375 and the next target is around 500. Our supports have been noted per this daily chart. HUI has just barely touched the initial support area and frankly I’d like to see a test of the SMA 50 in the 300-306 range.
As long as the macro remains favorable we will plan to negate our old A-B-C bear market rally theme and view ‘C’ as a logical area to take a break, which it has already done to a decent degree.
As for silver, it is dealing with resistance at around 26, which it smashed above and dropped below. The sector will obviously want these less colorful bugs on board as well. Silver sentiment needed to be addressed as well and it is being addressed.
Silver entered a bull market by taking out the 2016 high of 21.23. It, in my opinion, has the potential to test that level if this precious metals correction does indeed have more to go. The impulsiveness of this opening leg (launch) may make that a fairly remote possibility, but it’s silver after all…