Obviously, we can’t know if the bottom is in but I’ll repost a chart
which is my best argument for why we can expect a big rebound over the
coming months. The chart shows all of the worst bear markets in gold
stocks. At the top right I’ve annotated the ensuing recoveries. As you
can see, D (the HUI from its 2011 top to last July 6’s close) is
extremely close to B and C in terms of depth and duration. B and C
occurred in a secular bull market and were followed by 606 percent and
560 percent gains. D is also close to E which was followed by a 205
percent gain in seven months. A, the 2008 collapse was followed by a 324
percent gain in less than three years.
The chart and data show that the recent downturn is well in-line with the history of gold stocks and more importantly, is well in-line with downturns in secular bull markets. Yet, the mainstream is acting as if gold stocks are going to go 0 and the industry extinct. The recent drivel from talking heads on CNBC and Yahoo Finance is exactly what you get at a major bottom. Simply put, it is the perfect contrarian opportunity and is the foundation needed for a cyclical bull market and future bubble.
Moving along, the gold stocks have a very strong resistance target which could come into play in Q4 of this year. GDX, the large-cap unhedged miners ETF has a confluence of retracement points near $38. Meanwhile, the current 400-day MA is at $43.71 and will likely come down to $38 before the end of the year. Following four major bottoms (1970, 1976, 2000 and 2008), the recovery hit that resistance (400-day MA) in the fourth or fifth month post-bottom.
Finally, GDX’s low is at $22 and there is some critical resistance at $30. A very complex head and shoulders pattern could be developing and that would target $38. In the meantime, both the 50-day moving average and lateral resistance are at $27 which is the next key resistance.
The equivalent to the GDX $38 target for the HUI is ~365. We looked at the price action following the major bottoms of gold stocks within a secular bull (1970, 1976, 2000, 2008) and combined the data into one. We applied that to last Friday’s close (215) and the result is below. The recovery template has the HUI rallying to 350 and then correcting for a few months before rallying up to 390. Then the HUI consolidates for another five months before breaking past 400 in August 2014.
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The chart and data show that the recent downturn is well in-line with the history of gold stocks and more importantly, is well in-line with downturns in secular bull markets. Yet, the mainstream is acting as if gold stocks are going to go 0 and the industry extinct. The recent drivel from talking heads on CNBC and Yahoo Finance is exactly what you get at a major bottom. Simply put, it is the perfect contrarian opportunity and is the foundation needed for a cyclical bull market and future bubble.
Moving along, the gold stocks have a very strong resistance target which could come into play in Q4 of this year. GDX, the large-cap unhedged miners ETF has a confluence of retracement points near $38. Meanwhile, the current 400-day MA is at $43.71 and will likely come down to $38 before the end of the year. Following four major bottoms (1970, 1976, 2000 and 2008), the recovery hit that resistance (400-day MA) in the fourth or fifth month post-bottom.
Finally, GDX’s low is at $22 and there is some critical resistance at $30. A very complex head and shoulders pattern could be developing and that would target $38. In the meantime, both the 50-day moving average and lateral resistance are at $27 which is the next key resistance.
The equivalent to the GDX $38 target for the HUI is ~365. We looked at the price action following the major bottoms of gold stocks within a secular bull (1970, 1976, 2000, 2008) and combined the data into one. We applied that to last Friday’s close (215) and the result is below. The recovery template has the HUI rallying to 350 and then correcting for a few months before rallying up to 390. Then the HUI consolidates for another five months before breaking past 400 in August 2014.
Read Full Article