14 replies to this topic

[Russ]

Gold Stocks: Its Time To Be BRAVE!
Written by Chris Vermulen: The Gold & Oil Guy
Tuesday, 21 May 2013 07:45

May 17th- 2013- Article by David Banister, Chief Strategist www.TheMarketTrendForecast.com

I used to half joke with some of my investing friends that the best time to buy stocks is during or right after a crash. Think 1987, 2000-2002, 2008-09, and now perhaps Gold Miners?? Well, before we get too far ahead of ourselves, lets examine evidence of a "Crash": I like to use crowd behavioral, empirical, and technical evidence in combination.

1. In a recent money managers poll, virtually nobody was bullish on Gold or Gold stocks, and over 80% of those polled were bullish on the SP 500 and US stocks.

2. The percentage of Dumb Money traders (non-reportable traders) in the futures markets with short positions on Gold is at all time highs, they tend to be very long at the highs and very short at the lows.

3. The insider buying ratio of Gold Mining stocks to sellers is running over 10 to 1, the highest since October 2008 when Gold bottomed out at $685 per ounce from $1030 highs. Quoting Ted Dixon, CEO of Ink Research, "such a high level of buying interest among officers and directors within their own businesses in the resource sector has correctly foreshadowed a recovery in share prices in the past: That high point of nearly five years ago came about six weeks before the Venture market bottomed on Dec. 5, 2008...While the excitement that surrounded mining stocks as recently as two years ago has waned, experienced value investors recognize that such periods of investor neglect often give rise to the best deals" Source: Theglobeandmail.com

4. The ratio of the HUI Gold Bugs Index to the SP 500 is at multi year lows and in near crash mode on the charts. The RSI Index (Relative strength) on the weekly charts is at 10 year lows at -13.71, which is off the charts low!!

5. Most trading message boards I view at Stocktwits and others are universally bearish on Gold and Gold stocks.

6. Gold is in a wave B or Wave 5 down re-testing the 1322 lows which we have discussed here for weeks as very likely if 1470 was not taken out on the upside... this is a normal sentiment pattern and re-test.

7. Gold has been in a 21 Fibonacci month correction pattern off a 34 Fibonacci month rally from 686-1923. In August of 2011 I penned articles from 1805 right up to 1900 warning of a massive wave 3 top forming. Everyone was bullish, now it's the complete opposite.

8. Currency debasement continues around the world with negative real interest rates. This is bullish for Gold once this correction has run its course.

9. Hulbert Digest Gold Sentiment index is at an all time low (gold newsletters at -35 sentiment readings!!)

10. Gold -Silver put to call ratios are at all time highs

I could go on and on with headlines and such, but you get the idea. This is the same type of sentiment I wrote about on the stock market on Feb 25th 2009, here is that article... and nobody on the planet was bullish.

Below is a chart showing the Bullish % index for Gold Miners, as you can see the last time we were at 0% was late 2008 when Gold had bottomed out and insiders were also buying like crazy like now:

http://moneytalks.ne...o-be-brave.html

Edited by Russ, 22 May 2013 - 05:21 AM.

[senorBS]

great summary of current situation - kudos to them BSing away Senor

[fib_1618]

great summary of current situation - kudos to them

BSing away

Senor

Agreed...and I'll add...

1) The 13 1/2 month cycle for gold, which goes back to the 1990's, is due to bottom in this time period.

2) According to Commitment of Traders (COT) data, commercial traders are at their lowest net short positions since the 2008 lows.

3) Price related oscillators on the gold stock indexes are both oversold but rising into the latest sell off in the metals showing a loss of downside momentum.

All we need now is for the balance of sellers to buyers to improve enough for a bottom to be put in place.

I'll make a post when that happens, but until then, the trend remains lower minus any reflex moments from those who are attempting to catch this elusive low.

Fib

[Russ]

All we need now is for the balance of sellers to buyers to improve enough for a bottom to be put in place.

I'll make a post when that happens, but until then, the trend remains lower minus any reflex moments from those who are attempting to catch this elusive low.

Fib

I think what is more important is that the sellers have dried up, as there has been far less volume on the test of April's lows, the positive volume is not going to come in until people like you throw in the towel, but perhaps you have a secret weapon I don't know about...lol

[fib_1618]

people like you throw in the towel

People like me?!? After I gave other pieces of TECHNICAL evidence to support the OP ED piece that you posted?

Now you're being emotional.

As far as volume is concerned, in bear market declines, volume dries up as the pattern begins to bottom as those who wanted to sell have, those who are going to hold, are doing so, but more importantly, there isn't any buying going on to substantiate enough of an imbalance between opinions to create a structural bottom.

Look at today's short covering rally, for example. Once those who have covered are out, the vacuum of moving too far, too fast takes over and you lose $25.00 in 20 minutes.

This is all supply and demand....if you have an problem with that, you have to take that up with the market participants.

I am just a mere conduit in all this...I am just a technician.

Fib

[Russ]

I acknowledge that you have agreed with me overall but you still think we are going lower. I predicted the April low back in Feb which is on my blog, I don't think that flash crash low we saw in April is going to be taken out until Gold goes up and tests the floor it fell from.

people like you throw in the towel

People like me?!? After I gave other pieces of TECHNICAL evidence to support the OP ED piece that you posted?

Now you're being emotional.

As far as volume is concerned, in bear market declines, volume dries up as the pattern begins to bottom as those who wanted to sell have, those who are going to hold, are doing so, but more importantly, there isn't any buying going on to substantiate enough of an imbalance between opinions to create a structural bottom.

Look at today's short covering rally, for example. Once those who have covered are out, the vacuum of moving too far, too fast takes over and you lose $25.00 in 20 minutes.

This is all supply and demand....if you have an problem with that, you have to take that up with the market participants.

I am just a mere conduit in all this...I am just a technician.

Fib

[fib_1618]

but you still think we are going lower.

No...the lack of buying suggests that a price bottom can not be created at this time.

I don't "think" anything...I just follow money and its implications to price.

I'm reporting fact...not supposition or guesswork.

It's like the equity fundamental bears...all of the bad news out there doesn't mean squat if the flow of money is moving in the opposite direction.

Prices can NOT move in one direction or the other unless money is leading the way. It's supply and demand....its the way free markets work.

Fib

[Russ]

lack of buying suggests that a price bottom can not be created at this time.

Gold going from 1338 to 1376 sure looks like buying to me, with higher lows on each pullback.

[diogenes227]

Really nice wrap up on how can it ever get worse. Thanks.

Actually the Bullish percent index for the gold miners last went to zero about a month ago. The metals complex generally bounced on the first pop up on the index (April 22) with the GDX close at 28.97 but by the time the bounce was over (May 14), it was a little loser with the GDX close at 28.71, and subsequently the April lows were taken out.

Still, there is potential for double bottom here once the bullish-percent index again pops up. I wouldn't go long anything until the BP pops (it can't go any lower than zero -- prices, on the other hand, can keep right on going down), but I would buy when it does pop with an initial stop at the lows. And once again... I would not be surprised it the stop gets hit since this sector is a relentless bear.

Good luck and good trading.

http://stockcharts.c...69240785348.png

[fib_1618]

lack of buying suggests that a price bottom can not be created at this time.

Gold going from 1338 to 1376 sure looks like buying to me, with higher lows on each pullback.

The lack of volume, the COT data, and the speed in which we moved highly suggest short covering.

Nothing supportive of a tradable bottom.

If you caught it, you did so unexpectedly as you were also working with Don's $1365 (which was broken) along with the divergence in silver.

I'm all mechanical...I have no bias.

When I see constructive evidence of a bottom being created, I will post it.

Until then...

Fib