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.