While team Gold Bug is probably out there sleuthing the usual reasons for the ‘b/s correction’ (it’s not b/s) or spinning the end of the world (buy gold!) coming any minute now, two disciplines need to be followed by would-be gold stock bulls.
One is the intact technicals, which need to see GDX (and HUI) hold the March low of 26.58. As yet the correction is normal, technically, as it is well above the targeted higher low. I actually felt a little apprehension the other day when I shorted the miners (via DUST). That is because I worry that some people see things in the Trade Log and act on them, just because I did (that darn page is the most visited on the website).
So truthfully, I wanted to see the miners fail so that I would not have led anyone astray but also and especially because the best target is lower. After today we are obviously still targeting the gap below 28.
But let’s also be aware that with fundamentals like Gold/SPX, real 10yr yields negative, and with market stress indicators heretofore very sedate (speculation has been still ‘on’) it is not out of the question that GDX/HUI could lose the March lows. It has not been a positive fundamental backdrop for the miners since May.
If the March lows get taken out, regardless of what the broad market is doing, it would be a ‘no ifs, ands or buts’ bearish signal (unless a one or two day bear trap). It would mean proceed to be a gold/miner bull at your own risk on the near-term.
The macro is moving slower than I had originally imagined (back in Q4, 2022) and that includes getting to an obvious post-bubble environment and economic contraction. The slower movement toward a real gold miner bull move could also be in play if that March low is taken out. Remember, there is GDX 22.72 gap lurking as well.
Bottom line is that I don’t like to raise alarms and am not particularly raising one now. But if the fundamentals continue to crack and the main stock market does not crack, we’d go back to the drawing board, time wise. The time for a real bull will be and has been, after the broad risk on relief rally cracks for real.
I don’t like that so many gold bugs seem to have it ingrained in their heads that gold has some ordained right to be bullish (if only ‘they’, the powers that be, would let it). The fundamentals are damaged now and that’s just the way it is. A bubble-like speculation atmosphere will tend to do that. But the Fed is actually working for a bullish gold sector view because they are trying to crack the risk ‘on’ markets.
Patience. We should manage the market we have, not the one we ideally would have. And in July, the market we have is taking place during what is usually a volatile month, not just for gold stocks, but the whole enchilada. Buying opportunities will arise from this sooner or later.
Alternatively when the broad rally tops for real, good shorting opportunities should come about. I am going to keep an eye out for more charts breaking bad and am starting to see some sectors go suspect. Whether that’s for a correction within the bear market rally (all that can be read into it at this time) or the end of said rally remains to be seen. The only reason the only sector I am short is the gold sector is because that is the sector I did not want to sell out of, pending the March low and/or fundamental improvement. Lose those and I may just ride the short, and look elsewhere for short opportunities as well.
At this time I am going to assume the miners will hold and have the likes of that bullish Dow (DIA) pattern in mind as well. So cash + patience = a position for now.
