“As has been the case often lately, the precious metals are positive in pre-US open.  These have tended to be fleeting positive vibes, but we should keep the technical parameters in view nonetheless because a) you don’t want to buy (or at least hold) a sucker bounce and b) just maybe the forces of right and good will one day break out of this funk.  So we should stay tuned up on what constitutes bull and bear in the precious metals.” – From the last eLetter dated 5.22.14 (pardon the duration between letters):

The precious metals complex eventually broke down, testing the support in gold, silver and notably the critical HUI parameter of 205 also noted in that update.  This parameter is the one that keeps the potential for a weekly bottoming pattern in play. 

Gold stocks rallied today.  So is this something real?

Stockcharts.com is down today, but we used backup Barchart.com to post a couple charts of GDX at the website, illustrating a potential bear flag, low volume and resistance on the daily chart:  Gold Stocks at Resistance.

As you can see, the daily chart is at important resistance.  It is considered a bear flag until this zone is successfully cleared, preferably with some conviction (read: volume).

Why do we continue to work this sector?  Well, it sure is not due to current fundamentals (a subject for another day… or every week in NFTRH).  It is due to the ongoing potential that GDX/HUI have been forming Inverted Head & Shoulders bottoming patterns and that technicals would lead fundamentals.

So I wanted to call your attention to the fact that GDX has not proven anything yet, despite today’s bullish activity and indeed the entire bounce of the last week, which we have been anticipating.  The daily chart is the key to the weekly because if the bounce continues and morphs into a rally that starts clearing resistance levels, then the weekly pattern takes over… and it is bullish.

First things first, however.

Some notable posts at the website since the last eLetter:

• Two Sentiment Pictures  A view of low mutual fund cash and gold and silver discounts of 6.5% (June 10)
• Pivotal Events from Bob Hoye (June 9)
• Bears Say “Rut Roh”  The Russell 2000 (RUT) breaks out (June 5)
• Government’s Disastrous Reign Over US Money  EWI on the grizzly details, includes a free report from Prechter.  (June 3)

‘

Thank you again for reading. If you’d like an affordable weekly guide (with interim TA and Trading updates as needed) that is always on the job for its clients’ best interests, I’d be more than happy to welcome you to the Notes From the Rabbit Hole Premium subscriber base.  –Gary Tanashian

“Many thanks for a really consistently great service.”  –John C  6.5.14

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Biiwii.com does not recommend that any trading or investment positions be taken based on views expressed in this eLetter. If you speculate or invest it is suggested that you consult a financial adviser qualified in your area of interest.  See full Terms of Service (ToS) above.

The first chart is the gross short positions in Gold (as a percentage of open interest). This has accelerated in recent weeks. It was quite low a month ago. 

Sticking with Gold, here is a look at our junior gold stock index against Gold. The index contains 20 stocks and most of the stocks are part of GDXJ. Gold is plotted in black and the ratio is plotted in blue. We know that the stocks versus the metals can be an important leading indicator for the sector. The stocks led the metal higher in 2006 and then turned down in spring 2007. Also note that the ratio kept rising in 2009 as Gold consolidated before breaking $1000/oz. The ratio declined sharply as Gold went parabolic. The ratio bottomed in summer 2013 and made a higher low before reaching a 14-month high.

Next here is our silver stock index against Silver. Silver is plotted in black and the index is plotted in blue. The stocks have consistently led Silver at key turning points. The stocks have been weak during the recent decline. The ratio has declined quite a bit. However, it was just at a 16-month high and appears to have bottomed. 

Anyway, the stocks/metals relationship is a leading indicator but it isn’t necessarily an imminent leading indicator. It’s one of many things we like to keep an eye on. Nevertheless, we are nearing the end of the bear market and it’s a positive sign that these ratios are showing a positive divergence. That wasn’t the case at the last two bottoms. The stocks showed quite a bit of relative strength during the December to March period, reaching 14 and 16 month highs respectively (against the metals). It’s a reason to think that when the metals finally do bottom, look out above! 

Thanks for reading. I wish you all great health and prosperity in 2014. 

-Jordan

These are just three of many charts included in premium update #364 which was 30 pages. These charts are an example of the kind of charts we provide. We like to provide charts from which you can draw an insight or conclusion from. When we provide top-notch research and analysis, our subscribers can become better educated and empowered. They don’t need us to voice our opinions because we are providing actionable charts, information and analysis.

As we’ve noted in recent weeks, we’ve made some changes to our premium service that I’m very excited about. I think the quality of our premium service is now higher and with subscribers able to follow our trades (knowing our plans in advance) in the new portfolio, I expect our and their performance to be better. Click below to learn more about our service and watch the new video for details.

Disclaimer: Sponsor Companies are paid sponsor companies of TheDailyGold.com website and this free newsletter. Do not construe sponsorship with a recommendation. The author of this newsletter is not a registered investment advisor. This newsletter is intended for informational and educational purposes only and should not be considered personalized and individualized investment advice. Investment in the precious metals sector contains significant risks. You should consult with an investment advisor and due your own due diligence before making any investment decisions. This email may contain certain forward looking statements which are subject to risks, uncertainties and a multitude of factors that can cause results and outcomes to differ materially from those discussed herein. 

Look at the chart below from technical analyst Clive Maund that he says makes it clear that ’silver HAS NOT been in a larger order bear market but a giant correction these past three years’.

His latest silver market update (click here) concludes silver ‘is at an excellent point to turn up and begin a major new uptrend’…

‘On its 14-year chart, which shows all of the bull market in silver from its inception, we can see that, although the drop from the 2011 peak has been severe, involving losses of more than 60 per cent from the highs, it has not thus far resulted in a breakdown from its long-term uptrend, which remains intact.

‘Over the past year silver appears to have been basing in the zone of strong support shown with its supporting long-term trendline gradually coming into play to provide additional support. This is in fact the perfect setup for a major new uptrend to begin, and the only further supporting factor required is a favorable COT structure – and that we now have.’

Bullish comment

This is not the first time Mr. Maud has been bullish on silver but it is true that the real breakdown in the long-term trend to very much higher silver prices has not been smashed, despite many contrary predictions among the more bearish analysts.

At the same time public opinion about the silver outlook is almost universally bearish – a good signal that prices are as low as they are going to go. Some further weakness is possible, concedes Mr. Maund but September is traditionally the best month for the shiniest of precious metals:

…also from Arabian Money:

Chinese companies just starting the slide towards bond defaults as property boom turns to bust

US stocks are the most expensive in the world

Mohamed El-Erian asks just how strong is the US economic recovery?

That title is not meant to imply Gold shan’t trade nary a pip lower from here; instead there is evidence of price remaining in broad consolidation, that the worst of the selling has truly passed, and that we ought be facing up the road rather than down.

To wit, we commence straight-away with this one-question quiz:

What number did both Gold and the S&P 500 have in common back on 15 January 1991?

“The same number of secret admirers, mmb?”

Hardly that, Squire. Gold better than 23 years later to this day remains the most under-admired, under-owned, under-understood, tried-and-true asset of irrefutable wealth on the planet. The answer to the quiz is 369, the closing price of both Gold and the S&P on that day. Which with their percentage growth tracks, along with that of StateSide M2 money supply from 1991, make for quite the fascinating chart as follows:

…continue reading HERE