Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
National Identity Demands Restrictive Immigration - 21st Feb 18
Best Opportunities for Freelance Technical Writing Jobs - 21st Feb 18
4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling - 20th Feb 18
Governments Are LYING about Their Gold Activities while Mining Companies Cower - 20th Feb 18
No Silver Lining Here - 20th Feb 18
Semi Conductor Stocks SEMI Bearish? - 20th Feb 18
The Prisoner Promised Land - 20th Feb 18
Best Car Dash Cam Review: Z-Edge S3 Dual Dash Cam - UNBOXING (1) - 20th Feb 18
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18
How to Trade as We Near March Stock Market Top - 16th Feb 18
Bitcoin as Poison - 16th Feb 18
GDX Gold ETF Weathers Stock Market Selloff - 16th Feb 18
Casino Statistics and Demographics - 16th Feb 18
IS Today Thee Stock Market Turn Day? - 16th Feb 18
Huge SMIGGLE Shopping HAUL, Pencil Cases, Drinks Bottles, Back Packs, Toys.... - 16th Feb 18
Tesla Cash Keeps Burning at $320 a Share - 15th Feb 18
Big Conflict Ahead in the Financial Markets - 15th Feb 18
Stocks Extend Rally Off Friday's Low, But Short-Term Exhaustion Near - 15th Feb 18
Stock Market Out on a Limb... - 15th Feb 18
Things Only a True Friend Would Say About Gold - 14th Feb 18
Global Debt Crisis II Cometh - 14th Feb 18
Understanding Crude Oil Behavior - 14th Feb 18
Stock Market is Getting Scary... - 14th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Gold Stocks Secondary Bottom Soon, Bullish Trend 2013

Commodities / Gold and Silver Stocks 2013 Dec 07, 2012 - 06:51 AM GMT

By: Jordan_Roy_Byrne

Commodities

I have to admit, I never saw the gold stocks correcting this much. After making a textbook double bottom and registering very strong momentum readings, I expected a relatively tame October correction to be followed by another leg higher into year end. I thought GDX would bottom at $49. Obviously I was wrong on all counts. It’s difficult to make predictions when they are about the future. Kidding aside, forecasts are only a guide or a potential road-map. No one can predict the future. However, we can assess risk, reward and probabilities. We think the current probabilities favor a secondary bottom in the gold stocks and very soon the risk/reward dynamic will be heavily in favor of longs.


Posted is a chart from sentimentrader.com. Their sector sentiment indicator is a combination of short interest and put-call ratios. It can’t get much worse for the gold stocks. (Well, perhaps just a bit).

Next, we want to look at the breadth of the gold stocks. Breadth is a measurement of participation. I wanted to look at a large group of stocks and measure their breadth at major bottoms and at secondary bottoms. For simplicity, I looked at the number of stocks trading above their 200-day moving average. The results are in the chart.

I wanted to compare the current breadth to the breadth seen at the secondary bottoms in 2005 and 2009. Note that at the major lows, breadth is usually at or near zero. At the secondary low in 2005, breadth was 41%. The market was in a stronger technical position then as the cyclical bear market was tame. In 2009, the breadth at the secondary low was 20%. Go back to 2002-2003 and you’ll notice a triple bottom. Unlike the present there was no major technical damage.

At the third and final bottom breadth was 10%. Presently, breadth is at 38%. It can fall to 20% and that would be in line with the most recent secondary bottom (following a major bottom). The conclusion is that following a major bottom long-term breadth should remain healthy. It still is.

Moving from the complicated to the simple, here is one thought as to how this secondary bottom could play out. We are watching $43 as it is both lateral and trendline support.

Less than three weeks ago we wrote:

If we are indeed correct that the metals and shares will remain range bound then your task is simple. Prepare yourself for further consolidation by having your buy list ready and then be ready to act when the time comes. A wise friend once told me that in a bull market the goal is to accumulate positions at the lowest prices possible.

It is always easy to say buy later or buy on a correction. How often do we hear that? Rick Rule says that when investing in the resource sector you are either a contrarian or a victim. Consider the present sentiment and technical construct and it is difficult to ignore this emerging contrarian opportunity. Oh and by the way, the Fed is meeting next week. With gold stocks tanking into the meeting, it provides the setup for a bottom and rebound into January. Now is the time to be vigilant as the time to be a contrarian could be only days away.

If you'd be interested in professional guidance in this endeavor, then we invite you to learn more about our service.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2011 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules