NFTRH 752 began with some discussion about gold
Email Response to a Subscriber About Gold’s Technical Situation
To address what may be on a lot of peoples’ minds after what has been a stellar rally in gold, I’d like to reproduce my response to a subscriber’s inquiry. Specifically, she was asking my opinion of another TA’s view that gold is losing momentum and is in more of an ending to a mature uptrend than the beginning of a new surge. My response:
Well, he’s a TA and he’s seeing TA things. It’s why I have my ‘men who stare at charts’ shtick. There is no way that gold (or many other markets, IMO) should be managed purely by TA. So no, I don’t necessarily agree.
That said, gold is getting overbought and a correction can come at any time. But as long as the macro indicators remain firm (for example, as long as gold does not get hammered while stocks and commodities rally strongly it’s [a would-be correction] a buying opportunity).
Gold is banging blue sky resistance for the third time now. That is meaningful. It does not need to break through this time, but it sure could. But again, I am burdened by the macro as opposed to only looking at charts. As long as a big relief trade does not break out (possible), gold relative to the rest of the macro is in good shape. If the happy stuff breaks out I’d probably increase happy stuff positions and just have patience with gold.
The vulnerability in the gold market is in the elements that have driven the metal nominally and in relation to the cyclical, risk ‘on’ and inflation sensitive stuff. A spark of relief and casino patrons will go right back to normal “happy days are here again (and so is greed and FOMO!)” thinking. That could rhyme with our less favored broad rally upside scenario of a test of the highs (ref. SPX).
Friday’s public article gives a clear view of the fundamentals for gold (and especially the gold mining industry) still intact. As long as that remains the case in those and other macro indicators I am thinking like an investor. That does not mean I will not trade (sell, buy, manage risk, etc.) but it does mean that we are on the big picture view with an eventual target for gold at 3000+ and HUI at 500 (conservatively, IMO).
But nothing goes straight up and the corrections will come. This is not a gold or gold stock pump house. It is a market service with its only goal to try to be as close to correct about macro situation as possible. NFTRH is bullish on gold not because it is supposed to be, not for the harebrained reasons so often touted by perma-promoters, not because I want the world to fall apart, and not because of religious or political views. The current view is bullish because the macro fundamentals and technicals say so.
Speaking of technicals, well…
TA is one tool among several to be used in managing the situation. The article linked above gives a checkup on the still intact macro. Meanwhile, blue sky for gold (2090) will probably not come easy. Here is the weekly chart showing the metal moderately overbought to the degree that ended the last two rallies. It could easily correct from this point. Indeed, it probably will get some volatility.
Gold dropped hard enough on Monday to test support. But it was not a correction. Meanwhile, the trend of the last 5 months is up.
#752 then analyzed the weekly chart technicals of gold, took an in depth look at the interesting Commitments of Traders (CoT) structures for gold and especially silver, and charted the gold miners in detail using HUI (weekly) and GDX (daily) charts before moving on to the rest of the macro shootin’ match. There are other markets out there, after all. Although a Gold Bug’s world view may be likened to a New Yorker’s world view in the eyes of Saul Steinberg.
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This Post Has 3 Comments
Looks like we might go for a double bottom in the dollar and a blow off top in pm’s and the rest. And yes,TA is definitely more art than science. However, every discipline is from a certain level onward more art than science. Even science itself. One can study a lot of books, know all theories in your field, but in order to prove or formulate a big conjecture, one needs intuition. That is perhaps the only meaningful thing that humans have over machines. Of course we have emotions, which machines don’t, but there no original feelings; everything that can be felt, has already been felt countless times throughout history. One day, when there are only a few thousand humans left, living in accommodations like protected species, the machines will remember us most for that intuition, and marvel at the efficiency of gut feeling.
I think you are being humorous at the end there, eh Bart? Brilliantly said, anyway. As for the art of the different disciplines, I think the key is in combining them to refine probabilities. TA + macro + sentiment + policy, I guess. It’s when a TA talks about her indications in overly important tones or a fundy talks about his findings as if they are not subject to wide time frame swings (and revision) that I tune out.
You are right, Gary, and that makes you one of the best analysts out there. But I also think you have great intuition besides methodology. A good trader knows the rules, a great trader knows when to break them. And sorry I was rambling about the AI stuff, but it is IMO the greatest development of our time. Also in trading we see its presence. They are so fast and often make it impossible to scalp the markets. Fake outs used to be an exception, but have become very common. Professional investors/machines can see exactly where the stop losses are, and sometimes they hunt them down. A stop loss hunt freezes the selling for a moment. And then they start buying until its back above support, and – voila -the pendulum has swung. And there is nothing more bullish than a false break out.
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