“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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


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Monday, May 20, 2013

Have the Mining Shares finally Bottomed?

While one day does not a trend reversal make (and it is very important to keep this is mind), the HUI has found some buying support (finally!) near the confluence of several important technical support levels on the price chart.

I am using a weekly chart to show both the Fibonacci retracement levels and some horizontal support zones plus the pitchfork lines.



The first thing to note is that the index did close below the last Fibonacci retracement level noted which is the 75% retracement of the entire rally off the 2008 low and the 2011 high. That level is near 272. Strict adherence to Fibonacci theory teaches us that if this level gives way, odds favor a complete retracement of the entire upside move meaning we could see the HUI move all the way back down to near 160. However, we have had only one week in which the index CLOSED for the week below this level. Usually we would want to see TWO CONSECUTIVE WEEKLY CLOSES below this level to increase the likelihood that the index will move back to its starting point of the rally. That has not occurred yet.

Also, as you can see, there is a band of horizontal chart support  shown by the red rectangle that comes in near the 240 level. This level of support dates back to early 2009 and still has some validity to it.

Lastly, just outside the median line of the pitchfork lies an area of support coming in right at 240. It seems to me that if this index is going to hold, it is going to hold here and now at this level. If not, it will more than likely track the lower dotted line over the next few weeks.

To feel that the worst is over in this sector, I would like to see the index move back above last week's high near 275 or so to close out this week. If it can do that, I believe we will have seen a final bottom in the mining shares. The jury is out until Friday.

Here is a look at Goldcorp (GG). Notice the Outside Day Bullish Reversal Pattern coming after a very prolonged move lower in price. That tends to give the pattern more credibility. I would prefer to see a higher volume reading, much like the one seen back in April, to go along with today's nice showing but if the bulls can build on this the remainder of this week, they might spark some more serious short covering in this particular share by Friday. We'll see.




13 comments:

  1. A closer look at G. Sorros trades show he did dump paper gold, but he put 40 mil. into mining shares, article was at goldseek. com.. I will try to post link.... stocks earn him money, he must see, or know there is only upside there soon...

    ReplyDelete
  2. Exactly what I was thinking. The MSM floods the airwaves with the report of Soros dumping more gold, but leaves out the important details. He has made a large bet that mining stock prices, especially the juniors, are going up relatively soon. I doubt that Soros, being the elitist insider that he is, would make such a bet without being fairly certain about the outcome (wink, wink). Here's a link to an article based on SEC filings:

    http://bullmarketthinking.com/soros-reports-over-239mm-in-gold-positions-buys-25mm-in-call-options-on-juniors/

    ReplyDelete
  3. http://news.goldseek.com/PeterCooper/1369096413.php

    ReplyDelete
  4. Here come the goons to bomb gold, silver, crude Tuesday morning whilst levitating futures on the back of blowout earnings from Home Depot.

    Everyone is terrified that Bernanke's "jawbone" strategy will be unleashed this week since crude oil is back up towards the top of the trading range.

    No doubt, he'll mention something about "tapering", and that will send the CRB Index plunging, and start a 5% correction in stocks.

    But of course, once that correction is completed, the 10-yr. yield will be at 1.4%, oil down below $90, and gold under $1,200 and speculators will once again "buy the dip" in stocks and eventually we make another new high.....

    Same old "wash, rinse, repeat" over and over.

    Central Banking has never been easier, markets deftly managed by mere "words", LOL...

    ReplyDelete
    Replies
    1. Its happening before our very eyes.

      Delete
  5. Here we go again, gold off $40 from last night's highs.

    Home Depot up from $27 to $79 in 2 years, now hitting world record highs.

    Starbucks hitting new highs at $64, now officially a 10-bagger off the 2009 lows.

    The consumer has never been stronger, thanks to Infinite Fiat, "zero percent" financing on virtually everything, world record low mortgage rates, and zero inflation.

    By the way, when is Eric King going to interview the CEO's of Whole Foods, Lululemon, Ulta Salons, Williams Sonoma, Panera Bread, and all the other "glam stock" companies?

    LOL....we should have all learned never to fight the Fed.

    ReplyDelete
  6. The longer bullion stays below a 14 handle, the higher the risk that the shorts are going to make one more run at it. Of course it will be the bullion banks to trigger the selloff, then standback and let the specs do the dirty work to finish the play.

    The specs are ripe for a squeeze. I think the cartel wants one more big push lower. It was a no-brainer that 1325 would hold. I expect it to go down on third try at resistance.

    ReplyDelete
  7. 1) Gold prices are oscillating around the median of their downward daily pitchfork while volatility decreases. Median seems to be a magnet for prices and trend in the short term.

    2) if prices go beyond the median, therefore, we can expect, taking the symetry of the recent lows vs median, a target of roughly 1435 i.e the daily ma20. If 1) keeps being valid then, ma20 will probably be the next resistance and see prices reverse down once more.

    I'm not taking a position with volatility decreasing at the moment. Take care all,

    ReplyDelete
  8. LOL, everyone is terrified of the Fed and "tapering".

    Result?

    Crude and gasoline sell off violently.

    Retail stocks who miss like Lowe's due to the weather surge to new, world record, lifetime highs.

    Man, central banking has never been easier.

    Trillion dollar markets pushed around with ease, by mere gum flapping and pie-holing.

    Imagine what Bernanke could do if he actually DID SOMETHING, instead of merely jawboning.

    He could send gold down $100 and crude down $5 instantaneously and cause a moonshot launch of any stock that is retail or consumer discretionary oriented.

    How easy is that?

    ReplyDelete
  9. The range in today's gold and silver charts at ino.com, barchart and similar quality monitors indicates a market having death throes, or twitching more and more each day.

    10 yr note and 30yr bond charts are interesting- unlike gold, they more quietly gather decisive volume:
    http://quotes.ino.com/charting/?s=CBOT_ZN.M13.E
    http://quotes.ino.com/charting/?s=CBOT_ZB.M13.E

    ReplyDelete
  10. Silver's range trade (and volume) is growing these days also.
    Depending on which data compiler, you'll see something like this:
    http://finviz.com/futures_charts.ashx?t=SI&p=m5

    ReplyDelete
  11. Not sure what you can make of the wild ride over the past few days. i don't think you can trust short term movements in oil, gold, or silver as any free market signal. What is interesting is that copper is moving up despite negative GDP growth in the Eurozone, anemic growth in US & China...

    As well, it will be curious to see how the HUI ends the day...As many of the mining issues remain a lot higher despite gold sinking into negative territory.

    Look to see how the S&P finishes today... It will be interesting to see who takes his chips off the table given the Bernanke roller coaster ride of today coupled with holiday weekend beginning of summer.

    ReplyDelete
  12. U.S. Dollar is going parabolic. Peter Schiff must be having a coronary.

    I'm sure Ben will let it run awhile, and after a 5% correction or so in stocks, he'll announce that tapering is "premature"....LOL

    At least the consumer is benefiting by lower oil and gas prices, and DBA is still plunging to new lows for the move.

    Gold could turn around in June if Bernanke gets a whiff of deflation after Bloomberg starts harping on it for a few days.

    ReplyDelete

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