"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, June 18, 2012

Gold Stocks Recover from Late Friday Afternoon Mauling

AS many of you no doubt are aware, there appeared to have been some sort of coordinated bear raid on many of the smaller gold companies late Friday afternoon, particularly in the aftermarket hours when trading conditions are at their absolute thinnest.

The entire sector however is getting a firm bid in today's session even with the metals initially lower. Their strength seems to be pulling both gold and silver higher.

The HUI is closing in on very stubborn chart resistance in the 460 region. This region marked the bottom of a consolidation period back in March of this year and is now serving as a line for sellers to short against. If the leaders in the sector can manage to attract additional buying going into tomorrow's session, it should drag the entire index right back up towards 460 once again.

IF, and this is a big "IF", the bulls can force enough of these hedge fund shorts to cover and in the process take the index through 460 and keep it above this level, we should see additional short covering and fresh buying emerge to take the index all the way to the top of that same former consolidation range. That region lies near 480. That will be the next big test.


  1. Dan,

    Why can't the opposite be done as well? Drive the price higher in these after hours periods? Is it that there are no heavy movers to do this or does it require someone on the inside?

  2. Hey Dan, about Friday's mauling -

    Friday was not only a Quad Witching day, but also a S&P rebalancing today. Now obviously none of the smaller miners that got hit such as TRX, NGD, among others are part of the S&P 500, there were sizeable closing imbalances in all those stocks. Perhaps other indexes had to rebalance on Friday also, and I also know of this story that might explain some.


    Either way, the mining shares are still some of the best performing stocks in the last few weeks, and look like they will continue to do so.

  3. The brutalization of gold the morning of the FOMC announcement, and the cratering of the CRB Index the last 6 months proves without a doubt that:

    1) Bernanke is the "Master and Commander" of the financial markets, able to jawbone the direction of currencies, commodities and stocks at will.

    2) Paul Krugman is right. We simply are not printing fast enough. The Fed should double its balance sheet again and start handing out checks to the middle class. Maybe if the Fed did that, gold might have a small chance of clearing 1,700 again.

  4. Hi Dan,
    observing a handful explorers on the TSX & TSX-V i do not understand, how shares seem to be completely decoupled from fundamental news: exciting new drill results create no interest at all. But on other days, when certain forces seem to be around, without any news, the volume rises.

    I mean, if really good drill results of explorers don't move the stock, don't even create additional volume, but instead all the stocks of the sector are moving in almost perfect correlation, then this doesn't look like a market where different companies are present, it looks like algos are playing ebb and flow with the whole sector. Does it depend on a handful of big players, if their algos inject or withdraw liquidity from the sector? This is my impression.


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