Mining For Gold - 1/13/2018

In this Trading The Price, we will review the precious metals/gold mining stocks, and analyze them for trade setup using technical analysis technique.

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Gold Miners Updates

Here are the updates for the miners that were discussed in this post "Gold Miners" for possible swing long. Click on the chart to enlarge the image to read the commentary.

Gold Miners

Recent low made by some of the gold miner stocks could be setting up for a bounce back toward previous pivot high. Here are a few of these mining stocks.

The Rally Everyone Waited For

The rally everyone waited for finally arrived. This has to be one of the most anticipated rally in recent days. Every financial news network, financial program, and talking head are saying how the market is oversold and a relief rally is imminent. I was a bit surprise that it actually occur when such high level of anticipation existed. Normally, the market does not do what is expected. Since it is here, this rally is quite different than the one from last Friday, March 6, 2009. There are much more convictions in today's rally. The advance/decline ratio is more than 10 to 1, and the up/down volume ratio is greater than 20 to 1 in the NYSE. The Nasdaq advance/decline ratio is 5 to 1, and up/down volume ratio is nearly 20 to 1. DJI closed up 379.44, SP500 closed up 43.07, and Nasdaq 100 closed up 68.57.

In order for this rally to be more than a single day event, it needs to demonstrate some sustaining powers by following through with a few more up days and possibly move the DJI back up to test the support it had broken in the 7500 level, and the SP500 back up to test the 750 level. And maybe during this bear market relief rally, some market internals will be strenghten for the market to make a bottom on its next downward move. Lets not lose sight that the bear market is still in force, and a lower low for the DJI is still to come. So let make some money on the longs from this bear market rally while it last, and keep a watchful eye on the market to see if it can put in a bottom in the latter part of March or in the month of April. If a bottom is not made within this time frame, then it will be a long tough year for the economy and a recovery in 2009 will just be a dream.

Here are the charts for the indexes with my commentary embedded, click on the image to get a larger view:








There were two weaknesses today and they were the crude oil and gold. Crude pulled back a bit from its recent run up, but that did not discourage the big oil companies from participating in today's stock market rally.






Gold fell back to under $900 an ounce and exhibited a failed bull flag pattern. The bull flag pattern failure can turn into a bear flag if it break below the trendline support. In the short term, if a position is establish either on the long or the short side, tight stop must be exercise since it is at an inflection point that it can reverse just as quick as it breaks down. But I do share the longer term view that gold will rally back up to test and break the 1000 level before the bull move is over. For now, direction is unclear. Need more confirmations on its intended direction.

I'm Still Waiting

The Dow and the SP500 closed at another new low. The DJT continue to make new low and signaling lower low for the DJI. The SP500 closed below the April 11, 1997 low of 737.65 and the DJI is still more than 600 points away from its April 11, 1997 low of 6391.69. Strangely enough, the Nasdaq 100 and the Russell 2000 are still holding above their Nov. 20, 2008 low, but they are drifting toward that mark. With the market going down to a level made more than 10 years ago, one would think gold will be more than $1000 an ounce. Instead, gold has been consolidating from its recent high. It has pulled back below the $1000 mark and has been bouncing around the 970-930 level. Even some of the mining stocks have pulled back from its recent high and testing major support level. What do all these mean?

With the VIX below 50, there is just not enough fear in the market for gold to play its safe haven role. I believe when the DJI break below the 7000 level with increasing uncertainties in the financial system, fears will return and gold will resume its rise to $1000 an ounce and beyond.

The chart on the future contract for gold shows the price for an ounce of gold has pulled back to the 925 support level. If it break this level, then the next key support will be the 50 SMA around the 900 level. These are the key levels to monitor for the future direction in gold.



Similar for the gold ETF, GLD.



In order for gold to continue its rise, it must hold these support levels. For the gold mining stocks, the picture is mixed. When gold went above its July 2008 high, the mining stocks was unable to get close to their July 2008 level. The mining stocks EFT, GDX shows it has pulled back to the trendline and the 50 SMA after reaching its September 2008 level. Furthermore, it has formed an ascending triangle pattern with a possible breakout level of 37.50 on the upside and 32.50 on the downside.



ABX has the most unsettling pullback. It has closed below its January 2009 low with the 50 SMA turning down once again. If this stock break below 30, then GDX will likely to break below the 32.50.



The GG and NEM show a similar price pattern as the GDX.





While the market is trying to find the bottom and gold is getting ready for the next move up, I'm still waiting for them to set up for my next trade to go long on DXD and GLD.