We have been talking about the EMA 20 on the gold stock ETFs and HUI as the first level of support. Here is the view of HUI holding that area (orange dotted line) so far.
A quick look at GDX as a general guide to the gold stock sector. The pre-market indication is that GDX will fill the gap up from last week. After that…
Referencing one of our main themes for the last half a year, the case for the gold sector is supported by the case for economic deceleration. It is not supported by inflation, as in the recent bounce in inflation expectations as the US dollar declined.
The gold sector often rises with inflation expectations as silver out performs gold and so do commodities. But the gold sector’s fundamentals are fed by counter-cyclical activity and today’s payrolls report was right in line with that. In the ‘pullback’ update on Wednesday we also noted that the ‘gold ratio’ macro indicators remained positive as well…
The precious metals were due to pull back and here is a pullback. Please review this morning’s post for a look at how the macro market is setting up for the gold sector’s next bullish phase. Remember that we launched fundamentally based on gold’s out performance of nearly everything else, as indicated by the weak silver-gold ratio. But the rally matures as silver vs. gold matures.
HUI has, barring a spectacular reversal, cleared the most recent target of 211 and with unrelenting strength. I have added RSI to the weekly chart we have used to plot the bull market signals of 211 (door opener), 251 and 261 (confirmers). RSI is getting over bought. The implication is that when a correction comes it is going to be an extended affair unlike the sideways to down consolidation and small bull flag pullbacks to date.
Another company with which I had (indirect) dealings in the old days. I became aware of FLIR (Homepage) when my company made optical components (for a optical subcontractor) for night vision goggles that FLIR supplied to the military back in the early 1990’s. FLIR is an infrared and thermal imaging systems supplier to a diversified end user base, by industry and by global region. As always when spotlighting an individual company, your personal due diligence is recommended.
Ref. the previous post on BSX (a former NFTRH+ highight) and the recent breakout we have noted in the Medical Device ETF, IHI. Medtronic (MDT) is a competitor to Boston Scientific over part of its product line (stents). Please feel free to do funda research on the company if interested. As to the chart…
With reference to the previous posts about about weak economic data, the fundamentals for gold are getting a boost in this data. Durable Goods, Machine Tools and Consumer Confidence have all decelerated. The risk of the Fed being sensitive to inflation may have been reduced here in favor of not wanting to tank the markets.
A look at how a few markets are setting up pre-FOMC.
The charts are what they are, but we are dependent upon what the Fed may or may not put out there on Wednesday. I would put the odds of a rate hike at just this side of zero. But they are free to leave forward looking wording as is or do a little tweaking from the currently ultra dovish stance toward at least opening a discussion for rate hike expectations for June.
As you know I do not micro manage individual stock positions because I am not a fundamental stock analyst and because to me stocks are vehicles, nothing more, nothing less. Part of this viewpoint has been formed by my years of dealing with corporate management people (public and private) and often times coming away unimpressed. But mainly it is because to do my job correctly (running a macro market service) I have got to tune out the ins and outs of individual stock picking and management thereof.
A new subscriber had a question as to the point of yesterday’s update about the Silver-Gold ratio and so I want to try to be clearer for other newer subscribers. The statement in question was “But until the Silver-Gold ratio breaks out, it has not broken out.”
I like a party as much as the next guy, but here is a turd in the punch bowl just to make sure we are balanced and partying within bounds. The top panel is the Silver-Gold ratio (SLV-GLD) and the lower is the Commodity sector ETF.
In US pre-market silver is +2.47% and gold is +.72% at 7:00 Eastern. The silver-gold ratio closed like this yesterday, still above the daily SMA 200.
Note: A reminder that I will mostly be away from the markets on Thursday and Friday. This update is an extensive review of where markets stand now. We will update the situation on Sunday with an abbreviated NFTRH 391.
Precious Metals
HUI made it to the resistance line and the projected zone of 202 to 211 off the consolidation triangle (ref. daily chart reviewed in this update last week). From the ‘bottom line’ of that update: “Watch the gold miners. A breakout (on a weekly close) here would signal a new leg to an initial target of 211.”