Gold, silver and the miners are and have been in consolidation/correction. US stocks are and have been bullish but at high risk. Here’s the current technical situation using daily charts.
Precious Metals
Starting with HUI, here is the chart from NFTRH 624, as it was marked up then. Huey popped above the SMA 50, dropped below it, popped above it (so typical of this pogo stick market) and today with the precious metals negative in pre-market (USD is bouncing and broad markets are pulling back) it could again dunk below the SMA 50.
HUI is still in the resistance area we painted and this is why I say a stock or index needs to not only take a moving average to change status, but it also has to do work to hold it. That work appears still in progress. Until Huey takes out resistance the lower targets are still technically in play although the market’s recent activity had me in doubt about whether they would be registered. The best targets for a no-brainer buy in my opinion being the SMA 200, which is rising toward 280 and the 38% Fib retrace level and maybe less likely, the 50% Fib around 260, which marries up with the top of the February-April crash pattern.
Gold (live as of 8:02 ET in pre-market) broke consolidation, found resistance at the SMA 50 and fell back below the EMA 20. It remains in lock down. I do like the look of RSI, but not much else on this chart unless it holds here and breaks this congestion to the upside. Our original correction targets were the low 1800s or at an extreme the rising SMA 200 (1754).
Silver is in an orderly bear flag. It too has a constructive looking RSI and not much else that is pleasing to the eye. The red resistance lines are long-term, going back to the thick resistance zone from 2011. They are formidable. As with gold, silver has not broken down from the flag but if it does the rising SMA 200 (19.65) or lateral support in the 18.80s would be the target. While not shown here, that support below 19 is very thick and strong. We had originally anticipated a test of the 2016 high of 21.23 but silver did not even do that before beginning to build this flag.
US Stock Market
SPX stopped short of a higher high after adding a couple new gaps to its gappy picture. Short-term support is shaded. While vulnerable to a normal and routine test of the SMA 50, on the bigger view SPX is also vulnerable to about a million gaps much lower. That’s the risk that this still bull trending market carries.
NDX has a gap at 11728 and short-term support as shown with the SMA 50 rising toward it. It’s an intact, up trending and bullish picture with a lot of risk of its own on the bigger picture with all those gaps and fading momentum.
SOX has been leading lately. Short-term support is noted but it does not look very strong and there are fairly recent gaps below it. It would be a good idea to watch this leader for clues about the broader market’s direction. Major support is where the SMA 200 is rising to meet the February high.
Bottom Line
Speaking personally, my goal is and has been to hold on to profits made earlier in 2020. The rally over the last month has added to profits, a bonus. As begun yesterday, I am going back into a stricter risk management mode (after mostly mis-timing my short positions). That means cash. I love cash and I’ll love it even more when real buying opportunities present.
The precious metals are along for the ride in the anti-dollar trades. They are nothing special no matter what the pom pom waving cheering squads demand. However, if the right things happen on the macro and if things go as they usually do when the macro comes under duress, the sector would again be unique. If we can combine that uniqueness with an obvious technical buy area a table may well be pounded.
But first things first, the stock market is a patience and perspective play. I am not predicting a renewed correction in the all one anti-USD market, but it is weazing and starting to lean that way. The first thing is cash, the second thing is the strength that cash provides and the third thing, at a point of lower risk, is to use that cash and strength in order to capitalize.
I continued yesterday’s profit taking by selling a couple things in pre-market this morning. I am trying not to be reactionary, but I’ll be watching the parameters above for signs as to whether or not to increase my intolerance and thereby, risk management. It’s been a good run lately. I want to keep it that way.
