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.

 


 

HUI-annotated

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.

 


 

Conclusion:

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.


 

 
 

 
 

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: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

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-

    http://2.bp.blogspot.com/_nSTO-vZpSgc/RbmMtplgCjI/AAAAAAAAAPk/NtN5JDlwHio/s400/homestake.png

    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:

  • The Biggest Stock Market Crashes Tend to Happen in October
      October is the Most Dangerous Month The prospect of steep market declines worries investors – and the month of October has a particularly bad reputation in this respect.   Bad juju month: Statistically, October is actually not the worst month on average – but it is home to several of history's most memorable crashes, including the largest ever one-day decline on Wall Street. A few things worth noting about 1987: 1. the crash did not presage a recession. 2. its...
  • Canada: Risks of a Parliamentary Democracy
      A Vulnerable System Parliamentary democracy is vulnerable to the extremely dangerous possibility that someone with very little voter support can rise to the top layer of government. All one apparently has to do is to be enough of a populist to get elected by ghetto dwellers.   Economist and philosopher Hans-Hermann Hoppe dissects democracy in his book Democracy, the God that Failed, which shines a light on the system's grave deficiencies with respect to guarding liberty. As...
  • Federal Reserve President Kashkari’s Masterful Distractions
      The True Believer How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam?  How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts.  Today we offer a brief case study in this regard.   Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT] Photo credit: Linda Davidson...
  • Thoughtful Disagreement with Ted Butler
      Too Big to Fail?   Dear Mr. Butler, in your article of 2 October, entitled Thoughtful Disagreement, you say:   “Someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding.”   Ted Butler – we first became aware of Mr. Butler in 1998, and as far as we know, he has been making the bullish case for silver ever since. Back in the late 90s this was actually a...
  • Donald Trump: Warmonger-in-Chief
      Cryptic Pronouncements If a world conflagration, God forbid, should break out during the Trump Administration, its genesis will not be too hard to discover: the thin-skinned, immature, shallow, doofus who currently resides in the Oval Office!   The commander-in-chief - a potential source of radiation?   This past week, the Donald has continued his bellicose talk with both veiled and explicit threats against purported American adversaries throughout the world.  In...
  • Precious Metals Supply and Demand Report
      Fat-Boy Waves The prices of the metals dropped $17 and $0.35, and the gold-silver ratio rose to 77.  A look at the chart of either metal shows that a downtrend in prices (i.e. uptrend in the dollar) that began in mid-April reversed in mid-July. Then the prices began rising (i.e. dollar began falling). But that move ended September 8.   Stars of the most popular global market sitcoms, widely suspected of being “gold wave-makers”. From left to right: Auntie Janet...
  • The Donald Can’t Stop It
      Divine Powers The Dow’s march onward and upward toward 30,000 continues without a pause.  New all-time highs are notched practically every day.  Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date.  What a remarkable time to be alive.   The DJIA keeps surging... but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During...
  • 1987, 1997, 2007... Just How Crash-Prone are Years Ending in 7?
      Bad Reputation Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years.   Sliding down the steep slope of the cursed year. [PT]   Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place:  the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007,...
  • Stocks Up and Yields Down – Precious Metals Supply & Demand
      Where the Good Things Go Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?   Since putting in a secular low at the turn of the millennium,...
  • The 2017 Incrementum Gold Chart Book
      A Big Reference Chart Collection Our friends at Incrementum have created a special treat for gold aficionados, based on the 2017 “In Gold We Trust Report”. Not everybody has the time to read a 160 page report, even if it would be quite worthwhile to do so. As we always mention when it is published, it is a highly useful reference work, even if one doesn't get around to reading all of it (and selective reading is always possible, aided by the table of contents at the...
  • The Falling Productivity of Debt
      Discounting the Present Value of Future Income Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed.   We add this chart to provide a slightly different perspective to the discussion that follows below (and the question raised at the end of the article)....
  • Precious Metals Supply and Demand
      Fundamental Developments The prices of the metals shot up last week, by $28 and $0.57.   Heavy metals became pricier last week, but we should point out that the stocks of gold and silver miners barely responded to this rally in the metals, which very often (not always, but a very large percentage of the time) is a sign that the rally is unlikely to continue or hold in the short term. [PT]   Last week, we said:   “One way to think of these moves is...

Support Acting Man

Top10BestPro
j9TJzzN

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]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com