Now, I don’t want to make grand statements, raise undo alarms or any other such thing. Personally, I am still evaluating whether or not gold stocks are exiting their correction. I am tentatively holding the DUST hedges and seeing a lot of nice charts in the miners. So that is the caveat to the following.
Part of my job is to present to you what I see if I think what I see is important. I think the Gold/SPX ratio is important. In the last update on the subject on October 9th we noted:
Should it [Gold/SPX] break down, it’s not the end of the world. It would likely mean a longer correction for the gold stock sector (thinking the SMA 200 on HUI in the 275-280 area) as the blue shaded fear gap on this chart yawns and says ‘fill me’.
Again, I see a lot of pretty good looking gold stock charts and so HUI 275-280 is no sure thing in my opinion, even if this ratio breaks down and fills the gap. The bubble-like momentum in the stock market is driving the bus and it could simply mean continued under-performance by the miners vs. the broads (and especially Tech and Semi, which are firmly taking back leadership).
It could simply mean it’s time for the bulls to frolic and rejoice for a while. Long-term gold bugs will recall plenty of these phases during the last bull market.
Today per this chart that was live as of 11:51 US Eastern time, Gold/SPX has ticked a lower low to the September low, opening up the possibility that the February gap may fill.