Tuesday, July 27, 2010
Last week as several sources got bullish on gold stocks...
Yes, I am promoting... as much as a guy who is getting whipsawed right along with most everyone else can promote. :-) But this gold stock view is working out pretty well.
You do not pay me to tell you what you want to hear. You pay me to tell what I think, or what I think I see.
So, in response to a bullish looking weekly chart of the HUI sent to me this morning which originated at a popular blog, I have attached a daily chart of the GDX. I used this instead of HUI because it shows volume and chart gaps, unlike the HUI index.
The daily chart will control what the weekly eventually does. In other words, it is more sensitive. The MACD is not good and volume looks more distributive than we would like to see. As noted in the most recent update:
"Also attached is an updated HUI chart, showing a pretty simple line in the sand there. Huey is attempting to hold the SMA 200 which, if successful, would set up for a try at the SMA 50 back above the broken short term trend line. Watch RSI at 50 and MACD for signs of triggering up. Neither of these indicators looks good right now. HUI has seen healthy short term rallies the last two times it hit the SMA 200 and may well do so this time. But the MACD is in worse shape now than the previous examples, so this is a tough call."
Now, that said, I continue to be positioned such that I will welcome either strong upside or downside to around the xxx-xxx area noted as the preferred buy level. Fortunately, we will know which way this is going soon. As to the GDX chart, watch to see if the gap fills and the SMA 50 is approached. If these happen and the miners continue up, the noted resistance (red dotted) line comes into play. A break above that opens up the opportunity to test the highs, which of course opens up a big time breakout potential. But that is getting way ahead of ourselves.
We have a bullish weekly chart and we have a daily that has proved nothing yet. On balance this tells me the current analysis is correct: even if additional downside presents itself, it will not be a repeat of 2008.