Keep an Eye on Newmont for signs of a bottom in the gold shares
Newmont has recently been one of the best performing gold stocks on the board. As such it should be closely watched for signs of a potential bottom across the entirety of the gold mining sector. Note the chart below and look at the former resistance level near the $60 region. That held the stock in check for some time and prevented it from moving solidly higher. Now that it has decidedly cleared this level, technical analysis principles tell us that this level should provide some support in the way of buying once it is approached again on a retest lower in price. The reason is that buyers who missed the initial move higher and still want to own the stock will use the move lower towards this level as an opportunity to acquire the stock.
It does seem that there were some fairly active buyers in Newmont today. The stock rebounded fairly well off its worst levels of the session. In the process it has created a POTENTIAL hammer formation (not yet confirmed). Some refer to this as a spike low. If the stock can close above $66, that would confirm a bottom is in. It does not mean that the stock will go immediately higher. It only means that the stock has found willing buyers at the $60 level and that it could then move in a sideways pattern marking time until it can build a base for another leg up towards the recent high. Time as always will make things clearer for us.
Wow.... The complete destruction of the broader commodity markets was not what I expected following the FOMC statement this week, but it is exactly what we got. Gold, silver, copper, oil, coal, agriculture and all the companies supporting the production of these commodities took an absolute beating after the Feds "twist" announcement. "downside risk" turned to "SIGNIFICANT downside risk" in the Feds statement in the course of one month and apparently we gold bugs are paying hell for it. A spike in the dollar is in large part to blame as well.
ReplyDeleteDan, I appreciate your forum and would like your input on this thought. As an economy we are in the dumpster. The few of us who are actually working in this country have really only had one positive to hang our hat on over the last 2 years in terms of gathering wealth, especially considering very high unemployment, underemployment and stagnant wages. What has that positive been? The stock market, which has been artificially propped up beginning with the first round of quantitative easing.
Here is my point. If there's one thing I know about Ben Bernanke it is this: he is a student of the great depression and would certainly choose the destruction of the dollar over deflation. The commodities hit we took this week could be, if it continues, the start of a nasty case of deflation, especially if the EU continues to crumble, leaving the dollar without a valid competitor. A rising dollar paired with a slowing global economy could be a problem comprising Bernankes worst nightmare in terms of deflation. Getting to my point here, do you think there is any chance that QE3 will be introduced as a way to battle potential deflation? And when I say QE3 I mean a fresh, non sanitized round of bond purchasing. Also how might the introduction of a euro bond affect the commodities market? I am still floored by massive losses this week, do please excuse my long post. I am looking forward to the first round of Gold mining companies earnings calls by the way, which should start in about 4 weeks. Have a great weekend and I'll be listening to your metals wrap as always! Thanks again
"screamed liquidation" is the cause of this week's huge downward spike for gold and miners. Picking bottom is always a risky business, we always expect someone brave enough to jump in before ourselves. Right now all asset markets (except us dollar or US bond) look helpless. I suspect S & P 500 August low will be broken... Market sentiment is negative, but not negative enough for me to take risks to buy any stock... Do people still care about fundamentals if being panic,... FED will not do anything (QE3)until markets nosedive, in the same time, market will not have meaningful bounce if no QE3... So the safe bet is to wait market having relief rally (if there is any) and then go short...
ReplyDeleteEvery day I wake up in the morning, I am worried about my investment, I just feel 2008 all over again.... Maybe this time it is even worse regardless talking heads say "not"... Maybe it is different form 2008, in 2008 I was overly leveraged, 2011, I am all in cash... so do a lot of hedges, so downside may be limited...
ReplyDeleteNEM sits at 40DMA. ABX fell below it. Gold recovers when ABX goes over 40?
ReplyDeleteAny Trader Dan readers finding any silver at their local coin shops this weekend?
ReplyDeleteLocal Coin Shop Open Thread- Any Silver to be Found?
Nope ,bullion direct and apmex for me. Just ordered a monster box in stock. I didn't see a lot of non-availability. However, premium is at 2.50 an ounce at 500 oz.
ReplyDelete