Retest Turns Into Nail-Biter

On occasion of our last update on gold's technical and sentiment condition (slightly overoptimistic, as it turned out), we wrote:

 

“All in all, the sentiment and positioning data give us however no unequivocal 'buy signal'. They merely tell us that the downside is probably limited. If we were to guess, there could easily be at least one more 'shakeout' in order to get small speculators in gold futures to capitulate and bring the sentiment gauges to new extremes. This would also provide an opportunity for the gold stocks to re-test their 2012 low. It is possible that such a retest is required in order to put in a durable low (preferably a retest at lower volume, following Tim Ord's rules for successful tests).”

 

In the main, the downside turned out to be a lot less 'limited' than we thought, as various technical support levels were breached with ease. Not even the lower rail of the triangle shown here  survived the assault, although the first of the lateral support levels drawn in did (so far that is; at the time of writing, gold is oscillating around its vicinity). Yesterday the January Fed minutes were greeted with a heavy dose of renewed selling, on the widely held view that they indicated a sooner than hitherto expected return to a somewhat less expansive monetary policy. Bridges in Brooklyn come immediately to mind, but of course we cannot know the future with certainty.

Gold itself remains above a few major near term support levels (barely), but the gold stock indexes actually breached their equivalent supports and are now poised above what looks like a lot of empty space.

Not surprisingly, already bearish sentiment has turned even more bearish. For instance the daily sentiment index (DSI), a survey of futures traders, clocked in at 3% bulls yesterday. That is an all time low and is incidentally equivalent to the percentage of SPX bulls found at the March 2009 low in terms of the DSI.  We wanted to show a few charts that illustrate the situation further:

 


 

sector sentiment

Sector sentiment according to sentimentrader: the gold bugs pendulum has finally arrived at what looks like the worst possible reading.

 


 

gold public opinion

The public opinion indicator has now plunged below the 2008 crash low (this indicator merges several surveys). The red line near the bottom of the chart indicates the lowest level this indicator reached in 2008 – click for better resolution.

 


 

Hui-Gold ratio

We see something analogous with the HUI-gold ratio: this is roughly where it was at the 2008 crash low (of course both gold and the HUI were at far lower nominal levels) – click for better resolution.

 


 

Conclusion:

To a large extent sentiment is simply following prices; one must therefore be cautious not to read too much into it. Price action itself remains the most important market datum. However, there are two things that can be said about sentiment extremes: first, they tell us that the recent trend is getting very stretched. Secondly, the more pronounced they are, the more likely the eventual rebound will be lively and possibly of the durable (medium to long term) variety. Note though that if a cyclical bear market has begun – and one could certainly argue for this view in the context of the gold stocks – then extreme bearish sentiment will be a recurring feature. In other words, until price action invalidates the recent bearish trend, it is only of limited importance. However, if and when such a reversal occurs (indicated by higher highs/higher lows and the retaking of previously breached support/resistance levels), then it will be meaningful that such extremes have been recorded.

 

 

Charts by: Sentimentrader, StockCharts


 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

8 Responses to “Gold – A Brief Remark on Sentiment”

  • jonnfaircrest:

    Thank you Peter for you article,,I enjoy reading and learning as much as possible about economy and finance,,
    I do not know about sentiment,,but I think recent currency wars has something to do with Gold going down,,
    my thought is that the vast printing of other countries fiat paper money (Japan) and others has given the perception that the dollar is stronger, thus driving Gold down….And if this is true we can expect Gold to continue going down because people will thing that the dollar is stronger????? How long this will last I do not know,,,I would be interested on your view on this….THANK YOU

  • Rob:

    Oh really? Just to produce an ounce of gold on average costs 1450 USD. Your analysis is most, most incomplete and frankly speaking, completely nonsensical.

  • tyroneosoros:

    What is the significance, if any, of the fact that gold’s inflation adjusted price from 1934 is under $700/oz?

    At $1585/oz how much more paper can the fed print?

  • jimmyjames:

    I’m of the personal belief that there is simply less need of a flight to safety with bottoming and improving economic data to *require* the flight to safety of both gold and bonds. The break of the 100wk SMA is quite disheartening to say the least.

    ***************
    Improving economic data?
    You must have missed the euro flash pmi data that the author just finished posting–you must have missed Arthur Ramsey’s posting of US real estate data-what it portrays and his conclusions-which I agree with-
    Gasoline consumption has crashed in the US (a good thing) but not indicative of an improving economy-
    England down graded today-
    Walmart sales are crashing–
    Copper is crashing-

    Not sure where you’re coming from here-

  • Forgive me as I do not wish to sound like a troll, however I have always been skeptical of any chart w/indicator reflecting a 5 year history. Upon first glance, one might assume that public opinion is at it’s lowest but then again there may be more to the larger picture which we’re not being shown. Can you provide a 15-20 year chart to give more of a historical perspective with the Public Opinion overlay?

    I’m of the personal belief that there is simply less need of a flight to safety with bottoming and improving economic data to *require* the flight to safety of both gold and bonds. The break of the 100wk SMA is quite disheartening to say the least.

    This is the first time I’ve encountered your blog and I’m intrigued. I will be returning.

  • I suspect that weak gold is a sign of other weakness to come. In 08, it followed the market down. I suspect that gold is easy to sell and the stock bulls aren’t prepared to get out, so they are selling gold instead to pile in. Prechter says gold is the leader down this time. Of course, he has been bearish the last $1000 plus of the run to the top. The crunch is coming out of the blue. Again, no one but us idiots will see it coming.

  • zerobs:

    In the US, sequestration may have something to do with it. I don’t know though, sequestration amounts to merely one month of Bernanke’s QE at his present rate. I just get this feeling that sentiment is finally coming around to admitting that maybe we really do have a spending problem, maybe the large banks really are too large, maybe QE is perpetuating denial… Seems like there was a lot of rah-rah leading up to the elections, the inauguration, and the state of the union and now that those stage acts are over we can get back to reality.

  • mihir.28290:

    talking about sentiment indices,what about the hulbert gold newsletter sentiment index ?
    lot of bulls out there seem to be capitulating.
    please post the latest read on the Index.
    cheers.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Trade War Game On!
      Interesting Times Arrive “Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.   Ancient Chinese curse alert... [PT]   “One moment markets are gorging on financial slop like fat pigs in mud.  The next they’re collectively vomiting on themselves. I’ll tell you one thing.  President Trump’s trade war with China won’t end well.  I mean, come...
  • The Dollar Cancer and the Gold Cure
      The Long Run is Here The dollar is failing. Millions of people can see at least some of the major signs, such as the collapse of interest rates, record high number of people not counted in the workforce, and debt rising from already-unpayable levels at an accelerating rate.   Total US credit market debt has hit a new high of $68.6 trillion at the end of 2017. That's up from $22.3 trillion a mere 20 years ago. It's a fairly good bet this isn't sustainable....
  • Getting High on Bubbles
      Turn on, Tune in, Drop out Back in the drug-soaked, if not halcyon, days known at the sexual and drug revolution—the 1960’s—many people were on a quest for the “perfect trip”, and the “perfect hit of acid” (the drug lysergic acid diethylamide, LSD).   Dr. Albert Hoffman and his famous bicycle ride through Basel after he ingested a few drops of LSD-25 by mistake. The photograph in the middle was taken at the Woodstock festival and inter alia serves as a...
  • From Fake Boom to Real Bust
      Paradise in LA LA Land More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.   Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]   For example, here in the land of fruits and nuts, things are whacky, things are...
  • Rise of the Japanese Androids
      Good Intentions One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.   It seemed a good idea at first... [PT]   Many thrilling stories of doom and gloom were published...
  • US Stock Market: Happy Days Are Here Again? Not so Fast...
      A “Typical” Correction? A Narrative Fail May Be in Store Obviously, assorted crash analogs have by now gone out of the window – we already noted that the market was late if it was to continue to mimic them, as the decline would have had to accelerate in the last week of March to remain in compliance with the “official time table”. Of course crashes are always very low probability events – but there are occasions when they have a higher probability than otherwise, and we will...
  • Claudio Grass on Cryptocurrencies and Gold – An X22 Report Interview
       The Global Community is Unhappy With the Monetary System, Change is Coming Our friend Claudio Grass of Precious Metal Advisory Switzerland was recently interviewed by the X22 Report on cryptocurrencies and gold. He offers interesting perspectives on cryptocurrencies, bringing them into context with Hayek's idea of the denationalization of money. The connection is that they have originated in the market and exist in a framework of free competition, with users determining which of them...
  • No Revolution Just Yet - Precious Metals Supply and Demand Report
      Irredeemably Yours... Yuan Stops Rallying at the Wrong Moment The so-called petro-yuan was to revolutionize the world of irredeemable fiat paper currencies. Well, since its launch on March 26 — it has gone down. It was to be an enabler for oil companies who were desperate to sell oil for gold, but could not do so until the yuan oil contract.   After becoming progressively stronger over the past year, it looks as thought the 6.25 level in USDCNY is providing support for the...
  • The “Turn of the Month Effect” Exists in 11 of 11 Countries
      A Well Known Seasonal Phenomenon in the US Market – Is There More to It? I already discussed the “turn-of-the-month effect” in a previous issues of Seasonal Insights, see e.g. this report from earlier this year. The term describes the fact that price gains in the stock market tend to cluster around the turn of the month. By contrast, the rest of the time around the middle of the month is typically less profitable for investors.   Due to continual monetary inflation in the...
  • Flight of the Bricks - Precious Metals Supply and Demand
      The Lighthouse Moves Picture, if you will, a brick slowly falling off a cliff. The brick is printed with green ink, and engraved on it are the words “Federal Reserve Note” (FRN). A camera is mounted to the brick. The camera shows lots of things moving up. The cliff face is whizzing upwards at a blur. A black painted brick labeled “oil” is going up pretty fast, but not so fast as the cliff face. It is up 26% in a year. A special brick, a government data brick of sorts, labeled...
  • Russian Gold Rush - Precious Metals Supply and Demand
      Goldfinger Strikes, Sort Of This week, we saw a tweet from a prominent goldbug. He said, "Russia added another 9 tons of gold to its reserves in March. The hits just keep coming." How many errors in this short quip? We count six, exactly one error for every two words.   This one's got everything: Smersh, Spectre, Putler and Pussy Galore! [PT]   One, we call this the fallacy of the famous market actor. Russia is famous. Its purchase of 9 times is therefore imbued with...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

The Review Insider

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist