While gold stock macro fundamentals remain a work in progress (in need of a reversal back to bearish in stocks and a continuation of gold’s recent moves vs. commodities) gold stocks (HUI) have been on a most labored attempt to bounce with risk ‘on’ markets.
Frankly, I still think Huey wants to tap the SMA 50 and/or one of the resistance levels above it, but it sure has not been a show of strength. The difference between what we review and what the Goldbug-o-Sphere tends to believe is that it is due to a clearly not yet favorable macro as opposed to any kind of conspiracy. Yes, all markets are manipulated in some way, shape or form, but more often when gold stocks fail to bull it is for valid reasons.
The daily chart of HUI is still normal to an ongoing bounce but MACD never went positive and RSI turned back down after ticking positive.
The hawking Fed is still in play and that is not gold (or miner) positive as long as the risk ‘on’ world is in ‘relief’ mode. Even then, when the broad rally ends there is the potential for gold stocks to get caught up in a bearish backdrop. Here is the view vs. stocks and commodities.
Other Considerations
Real yields have been bouncing lately after pulling back notably but not yet actionably. Weak real yields would help gold’s fundamentals. Like it or not, the Fed is perceived by the market as fully in control and that is not macro positive for gold, especially when combined with the above ratios vs. stocks.
The seasonal is getting negative again for silver. So that aspect is flattening out now after preceding the recent bounce in silver/PMs. The Bullish Percent index (BPGDM) is still very oversold and contrary positive for the miners. CoT for gold and silver are still tailwinds.
Overall, it’s the same picture as it has been with macro fundamentals in progress but in rotating to Gold/Commodities from Gold/Stocks, it’s been tough to nail down a conclusively positive backdrop.
I’ve got time. I don’t care how long it takes, the turn we are looking for is going to be worth it when the darn thing finally gets here. Meanwhile, I am trying not to make any tragically wrong moves while continuing to poke around the sector (and the market) here and there while keeping high cash.
The bounce going on now is not technically over unless HUI takes out its previous low from early August. But generally, bounce or no bounce, it is not yet time. That time will not come until some time after the markets fall apart again, assuming they do as expected.
Staring at HUI’s and GDX’s charts, I’m resolving myself to the distinct possibility, rapidly verging on likelihood, that this decline from the May high will express itself eventually in five waves. The August bounce looks more and more like a corrective wave 4 up, with wave 5 down commencing starting today.
The good news? (1) “Wave 3 is always the longest wave,” and wave 3 down is behind us, in the rear-view mirror. Congrats if you missed the worst of it. (2) The bottom of wave 5 down will present the mother-load of epic buying opportunities. Buy the wave 5 low and forget about selling the miners for many many years. Nice to have something to look forward to, yes?
Good stuff, Mr. P.
Can you imagine if we get a clear capitulation/low and stocks and commodities are tanking too? Gold mining is unique. That backdrop would set it up as the go-to play.
I want to see that macro combined with a technical low.
Gary, re. Trade Log & Notes — please continue to include that section, even though your warning in the 8-17-22 bulletin is well taken.
For me, the section provides insight into what can and cannot be achieved in individual stocks/ETFs/whatever by someone of your experience.
I have been reading the section for several weeks now and have learned a lot, without having followed any of your moves. I am waiting for a trend that allows positions to be held on a time-scale of months rather than days, as I do not have the time or the constitution for short-term trading.
I am looking for the next pivot and trend as well. This summer, while moderately profitable, has been fairly annoying for me because I try not to day trade.
Example: I made myself take a significant profit on TWST so I could more resolutely hold DVAX, a stock I’ll consider being an ‘investor’ in. Then DVAX got impaled. It’s summer trading and that plus an unresolved macro = daily/weekly mayhem I guess.