NFTRH+; HUI, Gold & Silver [w/ edit]

Let’s micromanage the metals now that they got cracked. But first let’s think about the miners. Yesterday we noted that HUI had not broken to a lower low in relation to SPX. The day closed that way, although there is literally no lower the ratio can go without breaking down.

As for the HUI/Gold ratio, it had a big outside day, meaning that the wild swings exceeded the highs and closed below the lows of the previous week. HUI/Gold is still at a higher low to early May and that needs to hold. With gold and silver futures positive HUI probably needs to have a solid up day to maintain status.

Let’s go back to the busy HUI chart we used originally to project the rally that halted at clear resistance, consolidated and then dropped like a stone. Look here, unlike gold, which fell back into its handle (channel), Huey only stabbed the top of its handle. It is also oversold by RSI.

This is the kind of smack down that gets gold bugs thinking the worst about their nemeses as the Fed, at Treasury, at JP Morgan, etc. FOMC week, you gotta love it. If HUI holds here we can write off the violence as a harsh adjustment of inflation expectations that whacked everything perceived as having to do with inflation. Funny thing is, gold stocks do not and have not benefited from the inflation that has been working toward positive economic ends over the better part of the last year. But never let reality stand in the way of a scattering gold bug.

HUI is technically compromised (below the moving averages) but intact at the channel top and lateral support. It needs to hold here or it could get very ugly. But given how oversold it is I don’t believe there is much more downside energy, in the short-term at least.

Here is the chart from yesterday’s formal update on gold and the macro. After that update gold continued to drop and tested the first support level at 1766. Here I want to make a point that due to the extreme way events unfolded yesterday morning I neglected to call out the support levels in writing (just on the charts). I feel that the update made it sound like the target “to or just below 1600” was THE target. That is not the case. It is A target, if things follow through to worst case. There is a viable support at 1750-1766. [edit] more viable support is at the 1680 +/- area.

But the proof in the pudding for gold will be to break out of the channel again and re-take the moving averages. That would likely paint the FOMC week correction as a one and done. Short of that, today’s predictable bounce does not get gold out of jail yet.

Silver logically held the SMA 200, which coincides with a lateral support area, and bounced. It remains intact. It is important to hold the SMA 200 but there is more support at the 24.75 area and it only breaks down if it takes out the March low below 24.

Both metals are oversold by RSI.