Wednesday, 20 August 2014

Gold falters, but miners resist (for now)

I'm writing well before the stock market close. That rounding bottom in gold has clearly broken to the downside, as can be seen in this chart of the gold ETF GLD, my proxy for the gold action:

Given the importance of this break, at least in my eyes, I would be expecting the miners to be much weaker than they are.  I find the stubborn strength in the miners extraordinary under the circumstances.

I'm keeping my eye on the miners -- their relative strength remains the fly in the ointment for the bearish case.

Tuesday, 19 August 2014


That rounding bottom in gold is being tested again this morning, as can be seen in this chart of the gold ETF GLD and my proxy for the gold action:

The U.S. dollar is strengthening and is trading above key resistance this morning. If it can hold above that key resistance in the days ahead, it may pressure gold further. 

I remain impressed with the determination of the gold bulls here. The bulls are hanging tough in the face of increasingly daunting headwinds. 

It seems something has to give fairly soon. Either gold cracks -- or this time really is different.

Late notes: The miner bulls got a case of the jitters when gold hugged that rounding bottom support curve today, instead of moving up and away. I was impressed at the fortitude of the bulls to maintain key support in the GDX and gold in the face of a strengthening dollar. That being said, the current technical posture of gold and the mining indexes is now leaning bearish. The bulls need to perform here and now or risk crashing down through critical support directly beneath current levels in gold and GDX. If that support gives way, it could get ugly in a hurry. Wednesday ain't gonna be dull.

Monday, 18 August 2014

Trouble starts here

Many of the mining indexes are making rounding bottoms.

These bottoms are being tested now.

A sustained break of the rounding bottom in GDX may suggest trouble dead ahead:

A similar rounding bottom is being tested in gold. This can be seen in the chart of the gold ETF GLD, my proxy for the gold action:

Saturday, 16 August 2014

If $1275 gold falls, it's likely over for the bulls

The action in the precious metals sector this past week proved treacherous yet again.

Early in the week, the bulls charged hard enough some of my "early warning" indicators were starting to look wobbly -- but by week's end, the bulls couldn't press their advantage to forge a convincing defeat of the bears, and the bulls started to choke.

Of greater importance, however, is on the weekly close, all of my bear models remained intact and in play. I view this a potentially ominous for the bulls. I view it this way because in my models, the way the mining indexes in particular closed the week was back under key overhead resistance as identified in my models. Extremely odd action for a pending bull move so many seem to think is in the cards. Time will tell.

The key level for gold according to my models appears to be around $1275, only some $30 below current levels. If that level should give way in a sustained way, my models suggest it is likely over for the bulls.

My view is that it is the metals that are leading the miners reluctantly lower on this leg, which is a twist from the usual order of things in the precious metals sector. There is always a twist in the precious metals markets.

This twist poses a challenge for many investors, including myself, who tend to watch the miners for clues as to the future direction of the sector.  That is why it is key to view the action in the precious metals sector from as many perspectives as possible.  This sector seems to be always devising new ways to send false signals.

After gold made its big initial breakdown from its top in 2011, the physical gold holdings of the gold ETF GLD actually peaked on the backtesting process of that breakdown. This was a false signal at the time suggesting strong gold demand would usher in a renewed advance in the Noble Metal. The strong buying at the time was likely due to investors who had been waiting for a price break, piling in after the top, a common occurrence at the end of bull markets.

The strength in the miners may be be the real deal -- or it could be the kind of false signal the sector revels in sending investors at key junctures.  The risk is that it may be the latter.

Wednesday, 13 August 2014

What is bothering me about this rally

There are a few things bothering me about this rally in the PM complex:

1. Holdings of physical gold in the Gold ETF GLD vaults continues to decline, suggesting to me a lack of investment interest.

2. The chart of Central Fund, Which holds gold and silver, offering a unified view of the gold and silver market, remains iffy, with the price action below the 50-day for more than a week. This speaks to the ongoing weakness in silver.

3. My bear market echo formations, while under pressure, remain in play.

4. The strong action in the miners is coming just ahead of the back end of August, which has a tendency to be a weak time for the precious metals sector.

5. The U.S. dollar remains strong and the commodity sector as a whole remains under pressure.

The real anomaly here is the strength in the miners. It has been my view that the metals may be leading the sector (lower), and the miners are being pulled reluctantly along.

The strength in the PM sector suggests the risky idea that "this time is different." Perhaps. Given the backdrop, this remains a potentially treacherous market.

Tuesday, 12 August 2014

Bulls take control

 On Tuesday, gold was up and the miners were rising strongly.

The action in the miners in particular suggests the bulls may have overcome strong resistance and may be in a position to continue higher.

I am on the road and can't access my charts, so am unable to post any. The bear case now looks tenuous at the moment.