Finally the Bulls Score a Small, but Notable Technical Victory

As readers know, we have frequently updated the situation in gold land recently with a view toward the possibility that a reversal in fortunes could be in store. Now, we must once again warn from the outset that the situation remains fragile, in the sense that important medium term resistance still needs to be overcome.

Nevertheless, we can finally report that several of the preconditions for a reversal which we have recently highlighted have finally come to pass. In fact, at the time of writing, things could hardly look better. Having said that, please keep in mind that there are valid reasons to believe that HUI and XAU are currently in wave 4 of C. If so, then there will be one more down wave (possibly in October/November, traditionally a time frame during which important lows are put in) before a long term advance truly begins. However, we have some wiggle room regarding that interpretation. The size of the decline from 2011 equals or even exceeds several of the largest primary bull market corrections in gold stocks in history, therefore it is perfectly possible that the low has been seen (see also the wave count update at the end of this article).


Let's move on to the charts, to see what important changes there are to report. First of all, gold has not only managed to hold on to its overnight gains attained in Asian trade on Monday morning, it has even added to them. Currently it is trading just below the important upper rail of the medium term resistance zone at $1,350. it has also just bumped into its declining 50 day moving average, which will presumably provide resistance as well. As noted in the last few updates, if prices can overcome these resistance levels, it will be important to see if that happens with ease, or if a long, drawn-out struggle is required.







Gold. daily-with-ma

Gold, August contract daily. Bumping into the 50 day moving average and holding just below medium term lateral resistance. The former short term resistance level at $1,300 should ideally provide support on any upcoming short term pullbacks – click to enlarge.



As can be seen, the daily candle being put in in today's trading is a bit 'iffy', in that it looks like a small 'hanging man' candle. However, uncertainty is to be expected so close to resistance and upon rising into the 50 dma. Note that this is the first time this moving average has even been touched from below since February. Zooming in to a 30 minute chart that shows the action over the past week, we can see that a secondary short term support level has been created as well:



Gold,one week,30minGold, 30 minute chart: There are now two short term support levels: one at $1,300 and a secondary one at  $1,325 (again based on the most active August contract) – click to enlarge.



Gold Stocks – A First Important Step

The most important developments have however occurred in gold stocks. Not only has the gap resistance we have highlighted last week been overcome, but so has the 50 day moving average. And it has happened by creating another gap, this time to the upside. As a result, an even bigger 'island' has been left behind on the daily chart, so it could be that this time, a genuine island reversal has been put in.

We don't want to overrate any of these developments at this stage, since it has only been two days since the 50 day moving average has finally been bested. Still, this has not happened since October of 2012, and therefore represents as a significant step. Similar to gold, the HUI has also bumped into a short term resistance level in the process, namely the resistance provided by the April low in the index. The next important thing to be on alert for is what happens when the market pulls back. Ideally, the 50 day moving average should begin to serve as support.




The HUI has fulfilled the two major preconditions we named last week as important milestones: it has overcome gap resistance as well as the 50 day moving average. The current level roughly coincides with the April interim low – click to enlarge.



Obviously, there remain a number of short term resistance levels that need to be overcome (the interim highs touched between April and June), which happens to be consistent with the resistance gold itself faces at $1,350.

The HUI-gold ratio so far continues to rise as well, another important feature of rallies in the sector. Obviously, this rise too is at best only in its infancy, and another reversal cannot yet be ruled out; but things look encouraging so far.

In fact, the ratio has not traded this far above its 50 day moving average since October of 2012 either. Insofar, the recent move is qualitatively different from the rally attempts that have taken place on previous occasions. While by itself, this obviously guarantees nothing, it is one more confirmation that the recent move could get legs.



HUI-gold ratioThe HUI-gold ratio: Looking better as well – click to enlarge.



XAU – Elliott Wave Structure of the Cyclical Bear Market

We also want to present another update of the longer term Elliott wave structure, specifically the structure of the correction/bear market since 2011,  this time of the XAU Index. The following wave count has been created by our friend B.A., whose wave counts and comments on the gold market we have published previously.

Similar to Bernard, whose long term view of the HUI's wave count we have recently discussed, B.A. thinks that the XAU may be close to ending wave C of the decline from the 2011 high, with a possibility that waves four and five still have to be traced out (if so, then we are now obviously in wave 4).

It is noteworthy that the XAU has reached the target implied by the head-and-shoulders pattern that preceded the decline. Moreover, at the point the target was reached, various price/momentum divergences have occurred, which are typically associated with turning points. 

As shown below, it is also quite possible to argue that the wave 5 low has already been achieved, an idea that is supported by the fact that the recent rally has managed to break the index above its trend channel on a log chart:



XAU wave count-updated

The wave count of the XAU's decline by our friend B.A. – possibly, wave C has been completed already. If not, then there is at most a final 4-5 sequence left to endure – click to enlarge.




The technical backdrop for gold and gold stocks is looking better than it has in quite some time. Although it cannot be determined with certainty that 'the' low has been seen, there has undoubtedly been a character change in the market. So far the victories of the bulls are small, but this is a vast change from having no victories to report at all.  It seems ever more likely that our friend Ronnie Stoeferle's 'In Gold We Trust' Report was published at exactly the right time.


Charts by: BarCharts, StockCharts / B.A.




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


2 Responses to “Gold and Gold Stocks – More Signs of Life”

  • worldend666:

    Not having read about Elliot Waves, the chart above looks like something out of “Beautiful Mind” to me, but there is one relatively well accepted indicator that the low was put in in late June and that was the perfect 38.2% Fibonacci retracement from the 1915 peak.

    I pointed this out at the time here in the comments section, and I still think that of all the technical indicators discussed this is the most important. I am very surprised reading around the gold sites that a bid deal was not made of it.

  • jimmyjames:

    The technical backdrop for gold and gold stocks is looking better than it has in quite some time. Although it cannot be determined with certainty that ‘the’ low has been seen, there has undoubtedly been a character change in the market. So far the victories of the bulls are small, but this is a vast change from having no victories to report at all.


    I’ve bought miners at every low since March 2012- was always surprised that they kept getting cheaper-i think anyone who knows where this sh*t show is heading isn’t that concerned over negative returns on trying to pick the bottom (a fools game) but absolute bottom is not all that important-if you are a believer-

    The disbelievers will be late as always-

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990
      Stretched to the Limit There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance.   The end of an era - a little review of the mother of modern crash patterns, the 1929 debacle. In hindsight it is both a bit scary and sad, in...
  • How to Blow $12.2 Billion in No Time Flat
      Fake Responses  One month ago we asked: What kind of stock market purge is this?  Over the last 30 days the stock market’s offered plenty of fake responses.  Yet we’re still waiting for a clear answer.   As the party continues, the dance moves of the revelers are becoming ever more ominous. Are they still right in the head? Perhaps a little trepanation is called for to relieve those brain tensions a bit?  [PT]   The stock market, like the President,...
  • Despondency in Silver-Land
      Speculators Throw the Towel Over the past several years we have seen a few amazing moves in futures positioning in a number of commodities, such as e.g. in crude oil, where the by far largest speculative long positions in history have been amassed. Over the past year it was silver's turn. In April 2017, large speculators had built up a record net long position of more than 103,000 contracts in silver futures with the metal trading at $18.30. At the end of February of this year, they held...
  • US Stock Market – The Flight to Fantasy
      Divergences Continue to Send Warning Signals The chart formation built in the course of the early February sell-off and subsequent rebound continues to look ominous, so we are closely watching the proceedings. There are now numerous new divergences in place that clearly represent a major warning signal for the stock market. For example, here is a chart comparing the SPX to the NDX (Nasdaq 100 Index) and the broad-based NYA (NYSE Composite Index).   The tech sector is always the...
  • Stock and Bond Markets - The Augustine of Hippo Plea
      Lord, Grant us Chastity and Temperance... Just Not Yet! Most fund managers are in an unenviable situation nowadays (particularly if they have a long only mandate). On the one hand, they would love to get an opportunity to buy assets at reasonable prices. On the other hand, should asset prices actually return to levels that could be remotely termed “reasonable”, they would be saddled with staggering losses from their existing exposure. Or more precisely: their investors would be saddled...
  • US Equities – Mixed Signals Battling it Out
      A Warning Signal from Market Internals Readers may recall that we looked at various market internals after the sudden sell-offs in August 2015 and January 2016 in order to find out if any of them had provided clear  advance warning. One that did so was the SPX new highs/new lows percent index (HLP). Below is the latest update of this indicator.   HLP (uppermost panel) provided advance warning prior to the sell-offs of August 2015 and January 2016 by dipping noticeably below the...
  • Return of the Market Criers - Precious Metals Supply and Demand
      Ballistically Yours One nearly-famous gold salesman blasted subscribers this week with, “Gold Is Going to Go Ballistic!” A numerologist shouted out the number $10,000. At the county fair this weekend, we ran out of pocket change, so we did not have a chance to see the Tarot Card reader to get a confirmation. The market criers are back in gold town [PT]   Even if you think that the price of gold is going to go a lot higher (which we do, by the way—but to lean on...
  • Good Riddance Lloyd Blankfein!
      One and the Same   “God gave me my money.” – John D. Rockefeller   Today we step away from the economy and markets and endeavor down the path less traveled.  For fun and for free, we wade out into a smelly peat bog.  There we scratch away the surface muck in search of what lies below.   One should actually be careful about quotes like the one attributed to Rockefeller above, even if it of course sounds good and is very suitable for the topic at...
  • Incrementum's New Cryptocurrency Research Report
      Another Highly Useful Report As we noted on occasion of the release of the first Incrementum Crypto Research Report, the report would become a regular feature. Our friends at Incrementum have just recently released the second edition, which you can download further below (if you missed the first report, see Cryptonite 2; scroll to the end of the article for the download link).   BTC hourly (at the Bitstamp exchange). Although BTC has been in a bear market since peaking in...
  • US Stock Market – How Bad Can It Get?
      SPX, Quo Vadis? Considering the Crash Potential In view of the fact that the stock market action has gotten a bit out of hand again this week, we are providing a brief update of charts we have discussed in these pages over the past few weeks (see e.g. “The Flight to Fantasy”). We are doing this mainly because the probability that a low probability event will actually happen has increased somewhat in recent days.   Robert Taylor and Deborah Kerr cast wary glances at their...
  • Yosemite Sam is Back!
      Dubious Picks Unless this is part of another cunning negotiation tactic, the Donald's recent cabinet nominations have to be considered highly dubious, to say the least. First he promoted Mike Pompeo from his CIA post to the position of Secretary of State – removing the eminently reasonable, and as we believe widely underappreciated Rex Tillerson. Pompeo is mainly known for sharing Trump's irrational dislike of the  nuclear deal with Iran, which was pretty much the only laudable policy...

Support Acting Man

Item Guides


Austrian Theory and Investment



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]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


Buy Silver Now!
Buy Gold Now!

Diary of a Rogue Economist