Gold & Precious Metals

Failed Bottom in Gold Stocks Initiates Start of Capitulation

Posted by Jordan Roy-Byrne - TheDailyGold.com

on Tuesday, 10 April 2012 8:18

It was only a week ago we felt the gold stocks had a great chance of putting in a bottom. Monday supported our thesis but after Tuesday’s action and Bernanke’s jawboning it was apparent that the gold shares were in for a very difficult period. We immediately went long DUST to hedge long positions and trimmed some of our most vulnerable positions. We aren’t day traders personally or professionally (in our service) but sometimes you have to be considering the day to day volatility in this sector. Having accounted for the short-term, the next move is to gameplan for a potential major bottom in the sector.

Below we show the HUI Gold Bugs Index, which declined by 7% last week and closed at the lows of the week at 441. When a market is breaking down or plunging, it is our job to identify areas of strong support which could temporarily reverse the trend and potentially establish a bottom. The 50% retracement from the 2008 low comes in at 395 and 375 marks mid 2009 resistance and early 2010 support.

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It is not groundbreaking news that sentiment in this sector is terrible. It is nearing 2008 levels. Yet, is the extreme bearish sentiment justified? We posit this because the HUI is currently 31% off its highs. Including 2008, this is the 6th correction of at least 30% or more. The HUI could fall another 13% to 385 and this decline would remain similar to declines in previous years. Sure, there is reason to be negative. This sector couldn’t perform with Gold, couldn’t mount any rebound from an oversold condition and now it is breaking down. However, the decline is likely to remain in line with past declines and the bull market is far from over.

gold-strocks-9-2

Over the past few weeks we were not sure if the gold stocks would form a stealth bottom or if we would get a panic selloff that would develop into a V bottom. As time passed we thought a stealth bottom could be forming. Now it is more than obvious that the market is likely to make a V bottom. The bad news is the V has barely begun. More pain is ahead. The good news is the market likely will be substantially higher six months and one year after the low.

This sector produced significant gains following the major bottoms from 2005 and 2008. Sentiment argues that his time will not be any different. First things first. Investors must identify strong support that could produce a V bottom or reversal. Second, investors should have a shopping list ready. This should include premier companies with strong fundamentals that can be bought at a discount as well as speculative ideas and instruments with extremely favorable risk reward scenarios.

Good Luck!

If you’d like professional guidance in this endeavour then we invite you to learn more about our premium service.

Good Luck!

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com” target=”_blank”>Trendsman@Trendsman.com
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Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Bernanke delivered the fatal blow to gold’s ten year bull market, according to Dennis Gartman.   Gold has been in bear territory since the summer of 2011, when it topped out above $1,900 an ounce, with the latest post-FOMC sell-off inflicting irreparable technical damage, he says.

Well close Dennis.  But let’s fine tune a little:  Unbridled panic-fueled momentum drove gold unsustainably higher as it took a mini blow off and very predictable correction.  Gold is not broken in its secular bull market (and not necessarily even the cyclical one out of 2008) by any rational technical parameters.  Not as of this writing and thus, not as of your little Forbes piece with the alarmist headline.  ‘Irreparable technical damage’ Dennis?  Where?

Technical damage could come about but here’s the thing, it has not yet come about.  Why the haste to make such a call good sir?  And you Forbes; why pile on now when everyone from Buffett to Bernanke himself is mowing down the poor, under-armed gold bugs?  If gold is so marginalized, why the big and seemingly coordinated negative ad campaign?

The time to have negative feelings was late last summer.  The time to think like a capitalist is now.

UBS’ Edel Tully adds that markets’ no-QE-for-now realization will push gold even lower, probably down to $1,550 an ounce over the next month.

Oh my… all the way down to 1550?  While that’s a little under my initial support parameter, it does not break the bull market.  Next…

….read more HERE

Traditional Seasonal Patterns: Sometimes a Picture is Worth a 1000 Words

Posted by Mark Leibovit - VR Trader

on Friday, 6 April 2012 0:17

Sometimes a picture is worth a thousand words. If gold is following ‘traditional’ seasonal patterns, a low in March or April should be followed by another rally try in May and again in July, though interrupted by bouts of some downside volatility along the way. In truth, until we get to the Fall, it could be a bumpy ride – at least based on these historical patterns. They key is combining technical work with seasonal work – so at present I am hopeful a rally is coming our way and it may have begun this past Friday. Stay tuned.

Screen shot 2012-04-05 at 5.06.24 PM

By From Mark Leibovit’s Gold Letter, # 1 Gold Timer for 10 year period & #2 Gold Timer for 2011

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Precious Metals are Poised for a Bounce

Posted by Ross Clark for Bob Hoye's Institutional Advisors

on Thursday, 5 April 2012 12:46

Our ongoing comparison of the 2003-04 and 1976-80 markets in gold related to the action of the current bull market continues to move along with few deviations. The scheduled late-February early-March high, coupled with the HUI testing its upper 50-day Bollinger Band, concluded with the dramatic $100 ‘leap day’ break in gold on February 29th. The next two time windows of significance were to be lows at the end of March ( ̧) and again at the end of May with the best advance following the second low.

The 61.8% retracement ($1625) of gold’s December to February rally continues to be an important support. Holding this level will keep it in the context of November 1979, with a close above $1770 (and 550 in the HUI) confirming the start of the next upward phase to new all-time highs in the bull market. A violation of $1625 would likely lead to new lows for the year as we move into late May.

The silver, mining indices and S&P are also moving similar to 1979 (even without the help of the Hunt brothers). The Barron’s Gold Mining Index peaked in October 1979 in both nominal terms and relative to the S&P (see ratio). This was followed by a period of underperformance and a 23% decline as the metals consolidated. It then increased by 122% (88% relative to the S&P) into February 1980.

Technical observations of
RossClark@shaw.ca
(604) 661-7759 (877) 331-5122

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….read and view page 2 & 3 HERE

Michael Campbell – “David is one of the best known Silver Analysts in North America, and he has been very very accurate on what he thought the metals were going to do in this last period, and it is unusual to find that. When the markets were excited last September with Gold at $1900 and Silver at $49, David Morgan called for just the type of consolidation we are experiencing now”.

David thinks we are in the “scare you out or wear you out” long consolidation. The “scare you out” being the sudden drop that occurred in silver in 1 1/2  weeks when it plunged from 43-33. The” wear you out” being the month after month of consolidation that is so tough for long term investors, some who might have bought silver at 38 and are now enduring months with it at 32. That said, David underscores this is typical bull market psychology.

David thinks this consolidation is going to continue, possibly until September, before Gold ultimately breaks out above 1900 and Silver breaks out above 40. He also firmly believes metals are going “far higher”.

Regarding the disconnect between the relatively high precious metal prices and the precious metal stocks that are trading at multiple year lows, he thinks precious metals stocks are so undervalued that it wouldn’t make sense to sell them now if you bought them at higher prices. Indeed he thinks that you should buy more if you have the ability to do so. Markets do not like these divergences and the stocks will ultimately rally and  become overvalued compared to the metals before this bull market is over.

In the interview David describes how the bottom will occur  in the precious metals stocks, what will send them soaring, and the precious metal equities he would buy, and is buying now.

Listen to the full interview. The full interview begins at the 26.25 mark on the Money Talks March 31st player located in the centre of the masthead at the top of any Moneytalks.net page.