We have been noting that India stands out as an investment destination in a mainly bearish global picture and due to the daily chart pullback on INDY, I thought I’d take a closer look. This ‘+’ update is sent to the entire list because of its relevance to ongoing information in weekly reports.
A very simple update (it ended up being a little less simple, as usual) for a very simple situation. We have noted that an anti-USD ‘inflation trade’ bounce has been in progress. This has featured rising stocks, commodities and yes gold bugs, precious metals. It’s Bob Hoye’s “all one market” syndrome and it is predicated on perceptions of a dovish Fed, a weak US dollar and the momentum of speculators.
We have been following the IHI Medical Device ETF for a long while now, as it acted as a bullish guide for the bearish broader markets. It was originally highlighted due to the bullish IHI chart and due to the sector’s tendency, per my experience in Medical Device/Equipment manufacturing, to maintain steady business during periods of economic weakness.
I want to preface by repeating that we are all different investors and traders with different means, methods and objectives. NFTRH is not a service that tries to instruct about what is best for others because I do not know the detailed situations of others. So the mode is to interpret the markets as best as possible from a fundamental and technical view, and also show what I, a lowly individual market participant, am doing with my own funds per my own unique situation.
We looked at the precious metals miner ETFs on Tuesday and the status there has not changed. They are still below the EMA 12 & 20 but trying to hold the 50 day moving averages, which means they are still in short-term downtrends and intermediate up trends. For my part, I added a couple items on downside activity (explorer/developer PG.TO just above its MA 200 & royalty/streamer SLW at its MA 50s) but also still hold the DUST and JDST hedges, as noted in the NFTRH 397. This hedging, which sometimes proves unsatisfying could last hours or days. As noted in the previous update, the struggle to hold the MA 50s will decide whether it will have been a quick correction or something deeper.
A technical update using daily charts for those micro managing the daily moves and shorter-term trends. Fundamentally, I like that the stock market and crude oil have reversed downward today, but one in-day reversal there does not change recent fundamental discussion just yet. But it is reflective of what would need to be happening on a sustained basis for me to get aggressively bullish the gold sector.
GDX has hit the first level of support we had defined as the 50 day moving averages. This after the breakdown from the daily bear flags we noted a couple days ago. The next support, should the correction go deeper, is the 50% Fib retrace, gap fill and lateral support cluster at 19-20. These are the straight up daily technicals with no fundamental discussion clouding the issue.
In not rising strongly after the FOMC minutes time bomb, the precious metals mining ETFs now have the potential to be building bear flags with their upward biases. This includes diminishing volume (GDXJ and SIL as well), which supports the bear flag scenario.
Yesterday it was noted that the reversal upward would be a good step in the right direction but that a weekly close in that state was needed to ‘confirm’ (to the degree that anything in a financial market can be ‘confirmed’ ahead of time) a reversal to bullish.
The thing that is not trustworthy if you are a deflationist or (anti-inflationist) is that the ‘inflation trade’ is getting kicked down by the ultimate jawbone, the FOMC minutes. Often inflammatory events in markets have a short shelf life. As such, the Silver-Gold ratio does not need to get hammered much lower, based on this event anyway.
Using the ETFs for a real time view…
SLV is filling a gap near 15.50 and tagging the SMA 50. That’s the 1st potential support. Better support is 14.40 (SMA 200) to 14.75 (trend line).
Here we play the short-term technical game again despite the gold sector running against its own fundamentals (i.e. as the ‘inflation trade’, including mining cost input oil, continues higher). At some point this will matter.
But on the other side of the coin are price, momentum and technicals. A Monday open can be a tricky thing, but as of this moment GDX is in a posture to break the most recent consolidation.
Yesterday’s hard reversal of Tuesday’s bullish move was an unpleasant development for the bulls but this morning, plucky as ever, they are back at it trying to bull the market again (SPX +13.50, NDX +27.50, Dow +87).
Recall that we were using the EMA 20s (orange dotted line on SPX and blue lines on NDX and Dow) as a key for the short-term. On Tuesday SPX and Dow popped above the EMA 20 but the NDX stopped right at it. NDX is a leader.
Klondex is one that I have considered a quality miner to this point, but it is getting hit on its quarterly loss of .01/share today. Here is a roundup of the results and outlook. Please do your DD if interested.
As for the technicals for those interested, it is pretty cut and dry, with lateral support, the 50 day moving averages and a channel line coming into play in the 3.00 to 3.20 area.