"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

Trader Dan's free work will soon be available at www.traderdan.biz

Thursday, July 11, 2013

HUI Chart Improving but more Work Needed

The rally in gold is finally pulling the lackluster mining shares higher and while it has somewhat improved the technical chart posture of the complex as a whole, work remains to be done to cement a bottom or at the very least, spook some of the bears who have been extremely complacent.

I have noted a significant chart gap that the index has of yet been unable to close. For this chart to turn friendlier, bulls must at least push into the gap, preferably closing it completely and holding the index through it. Should that occur, we will begin to see some more sizeable short covering in the complex.

The key question potential buyers of the miners are asking is whether or not the rally in the metal will continue or stall out below $1300. There is a line of thinking that the sell off in the Dollar is only due to money flows reversing as many traders were completely caught off guard by Mr. Bernanke's almost bizarre reversal on the duration of the QE program yesterday afternoon in his comments. (Count yours truly in that crowd).

That being said, many look for interest rates to rise FIRST in the US before elsewhere around the globe meaning that the sell off in the Dollar, though quite deep, may only be temporary before buyers return and begin bidding it up again. Upcoming economic data will be critical in this regards.

So far the Euro remains well bid against the greenback but most would agree that the state of the overall European economy is decidedly weaker than that of the US (which isn't saying much now is it?). If the Euro were to clear 1.34, we would have to re-evaluate that but as of now, it has already retreated one full point off its best level against the Dollar. Let's see how it closes the week out tomorrow and whether or not the trade reversals are pretty much done by now or will continue some into the close of trading Friday. If the Dollar begins to start working higher again, gold could come under some selling pressure.


  1. hui gap underneath us today; the longer we can go without filling it, the better the chances are that the bottom could be in; sparks, nv

  2. Actually, that will be a strong sign of weakness and the A-B-C bounce will roll over into
    another plunge to make the next intermediate low over next week.

  3. Yeah, names like NEM should have been up 12% and juniors should have been up 18%.

    Instead, the top % gainers were Fed - sponsored and TPTB - approved stocks like Lennar and DR Horton, which is the most important sector to Ben Bernanke, furiously trying to get some momo into the bonds in order to incite yet another housing bubble.

    Where I live, I can tell you first hand that the "Rehab/Rent/Flip" bubble is in full swing and now starting to get out of hand, while many "Cash For Gold" storefronts are now going out of business.

    Anyway, after this week guys like Doug Noland are going to be suffering from acute shock, watching the indexes all break out to new record highs, up 11 consecutive trading days, despite the worst 5 year economic backdrop since the 1930's.

    Even the most staunch equity bulls like the CNBC pundits are even sitting in "shock and awe" at the incredible strength of the consumer-led stock market.

    I haven't even heard from Art Cashin, that guy must be white as a ghost after witnessing what has transpired the last 4 1/2 years.

    Bernanke is now more powerful than Caesar or Henry the VIII.

    1. @Mark. I'm not sure that the not screaming upward is so ominous. On the rally back from May 2012 - Oct 2012, the miners move from a base in gold that was profitable. We are now, according to CITI, at a level where basically all miners extract gold at a loss. On top of that, the miners that were producing Free Cash Flow @ $1,200 and even at $1,000 on the way up (NEM, AUY, EGO, etc. 2009-2011) are now bleeding. It might be a slow, but solid reconstruction for the miners. Another thought: if one takes the HUI as a proxy for speculative interest in general, it might be not such a bad thing. Obviously it depends if physical holds. But one could see an overreaching or Hubris on the part of the speculators in the HUI--pigs as it were.

      If you are looking at historical figures with which to compare Bernanke, try Potemkin.

  4. Thanks Dan,

    I hope you don't mind I share my own view of T.A with you all, I'm simply passionate with this and don't want to convince I'm right or that this will happen, just make the most of the opportunity to exchange and learn with you about T.A and fundamentals by sharing my point of view.

    "The key question potential buyers of the miners are asking is whether or not the rally in the metal will continue or stall out below $1300."

    Completely agreed : here is why. We are at the end of the week. Below is a chart of the 2 -week candlechart of gold prices.


    I'm sorry I don't know how to translate "ligne de poussee" in english, but that's what we saw in the first red circle and that's what we are about to see here as well :
    - a first down "marubozu" down candle
    - followed by a candle going up but blocked by the middle of the body of the previous candle.
    This is a figure of weakness, and of continuation of the downtrend.
    The middle of the body is the 1300 $ area.
    If we fail to break up through that area, one can see what happened last time (first red circle).
    Conclusion for me : I sold 50% of my position at 1300 (I put the order before, didn't think I'd reach 1300 so fast), and put a stop loss above my buying order for the last 50% already. No losses possible. Protect capital.
    Agreed 100% we could stall from 1300 once more towards new lows...
    Many thanks for al your posts and comments :)

    1. P.S : in fact my chart should be this one (updated) as we had 2 "ligne de poussees" already, followed by further down price action.

  5. @Hubert,
    I'm not trying to convince or make a point or say I hold the truth. Just exchanging my point of view with yours here. You wrote 5 points :

    "1- The 3 falls in gold were not orchestrated by people who acted not based on fundamentals (meaning order because the move can be explained by logic) but their own personal reasons (protection of US dollar for example) and this means chaos.
    2- Fibonacci numbers are very, very well known by the people I mentioned above. They know how to play with it and there is NOTHING you can do about it because you do not have their financial power.
    3- You "don't care what Bernanke said yesterday". Good for you BUT this is what makes the market move and if you do not listen to him you are out of sync with the market.
    4- You said:
    "T.A made it likely from 1st of july that we'd get back to 1300 $ because of the Bollinger Bands on the monthly unit.". I am saying to you: You are wrong! The move is due to the FED being cornered and Bernanke and Co. have NO choice but continue QE and the market yesterday decided that QE is going to continue and tapering is off the shelves for now on. IF the minutes had shown that a majority of the FED members wanted QE to end next month the POG would have crashed $150 in one day. This is TA? Definitely not. It would have been pure manipulation.
    5- We are, in my opinion, seeing the beginning of the end for the USD and a new move UP for gold. My reasons have nothing to do with TA... but are based on the economic/political/monetary events that have been taken place from the moment the greedy American "elite" decided to push China UP. "

    My opinion :
    1. I agree with you. But I'd say T.A makes you focus on prices and price movements first, therefore protects you from chaos. No matter what you think the market should do, don't try to reason it : follow T.A and if prices go some other direction, just respect it and use stop losses. I'm a long term investor in gold, but I cut my losses when we broke 1539 then 1469 $ levels because of T.A and discipline. I didn't like it at the time. Now I'm happy I did it.

    2. agreed...and yet not. They can trap you sometimes. But look at Fibos : if they knew and were almighty, the we would systematically break through those levels. And yet...they work. So if they work, that's all I need to know.

    3. don't agree. How many times did I read lately that it was not understandable how gold prices could plunge on this or that news, that the move was counter-intuitive or that it was a blatant proof of manipulation. How many times Sinclair wrote that "the price of gold will not be allowed to bother the Chairman of the Fed the day he speaks". It means that the news doesn't make the direction anymore. Then in this manipulated environment, why should I care what the guy says? But this time, we didn't have a krach, or if there was a raid, it didn't work. Is it not worth noticing?

    4. don't agree : 1300 is a weak retracement of the 1805-1180 plunge. It's nothing. It's not even the first 23% fibo. It's hardly more than "noise". It's no proof that the bear market is not over, even if the Fed is "cornered". I'm not excluding new lows soon.

    5. agreed : the beginning of the end. Yet the collapse of the dollar make take a long time. Meanwhile, the rotting periphery is looking for a safe haven which still appears to be the dollar. Eventually, the dollar will probably lose its status. But in the meantime, I'm not sure we'll see a USD index at 70 very soon. Meaning the road up for gold may take some time (years) before reaching again 2000 $. As a long term investor hab\ving bought gold as an insurance against sudden hyperinflation or worse, I don't care. I don't speculate on gold as an investor. Gold is the price of my safety.


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