Best of the Week
Most Popular
1.What Happened to the Stock Market Crash Experts Were Predicting - Sol_Palha
2.London Housing Market Property Bubble Vulnerable To Crash - GoldCore
3.The Plan to Control ALL Your Money is Now at Advanced Stage
4.Why Gold Is Set For An Epic Rally This Spring - James Burgess
5.MR ROBOT NHS Cyber Attack Hack - Why Israel, NSA, CIA and GCHQ are Culpable - Nadeem_Walayat
6.Emmanuel Macron and Banking Elite Win French Presidential Election 2017 - Nadeem_Walayat
7.Trend Lines Met, Technical's are Set - US Dollar is Ready to Rally (Elliott Wave Analysis) - Enda_Glynn
8.The Student Debt Servitude Sham - Gordon_T_Long
9.Czar Trump Fires Comey, Terminates Deep State FBI, CIA Director Next? - Nadeem_Walayat
10.UK Local Elections 2017 - Labour Blood Bath, UKIP Death, Tory June 8th Landslide - Nadeem_Walayat
Last 7 days
Stock Market Forecast for Next 3 Months - Video - 23rd May 17
Shale Oil & Gas Production Costs Spiral Higher As Monstrous Decline Rates Eat Into Cash Flows - 23rd May 17
The Only Metal Trump Wants More Than Gold - 23rd May 17
America's Southern Heritage is a Threat to the Deep State - 23rd May 17
Manchester Bombing - ISIS Islamic Terrorist Attack Attempt to Influence BrExit Election - 23rd May 17
What an America First Trade Policy Could Mean for the US Dollar - 22nd May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 22nd May - 22nd May 17
Stock Market Volatile C-Wave - 22nd May 17
Stock Market Trend Forecast and Fear Trading - 22nd May 17
US Dollar Cycle : Deep Dive - 21st May 17
Bitcoin Breaks the $2,000 Mark as Cryptocurrencies Continue to Explode Higher - 21st May 17
Stocks, Commodities and Gold Multi-Market Status - 21st May 17
Stock Market Day Trading Strategies and Brief 20th May 2017 - 21st May 17
DOW Needs to Rally Big or Correction is Next - 20th May 17
EURUSD reaches DO or DIE moment! - 20th May 17
How to Get FREE Walkers Crisps Multi-packs! £5 to £28k Pay Packet Promo - 20th May 17
UK BrExit General Election 2017 - Will Opinion Pollsters Finally Get it Right? - 19th May 17
Gold Mining Junior Stocks GDXJ 2017 Fundamentals - 19th May 17
If China Can Fund Infrastructure With Its Own Credit, So Can We - 19th May 17
Evidence That Stocks are More Overvalued than Ever - 19th May 17
Obamacare May Become Zombiecare In 2018 - 19th May 17
The End of Reflation? Implications for Gold - 19th May 17
Gold and Silver Trading Alert: New Important Technical Development - 19th May 17
Subversion And Constructive Synthesis Of Capitalism And Socialism - 18th May 17
Silver: Train Leaving Station Soon! - 18th May 17
Credit and Volatility Signal That Financial Conditions Are Very Overheated - 18th May 17
Another Stock Market "Minsky Moment" or Will the Markets Calm Down? - 18th May 17
WannaCry Ransomware Virus Is a Globalist False Flag Attack On Bitcoin - 18th May 17
Euro, Stocks, Gold Momentum Extremes All Round! - 18th May 17
US Stock Market Slumps on Establishment / CIA Trump Impeachment Coup Plan - 18th May 17
Tory Landslide, Labour Bloodbath - Will Opinion Pollsters Finally Get a UK Election Right? - 17th May 17
The stock market sectors which are breaking out in 2017 - 17th May 17
A ‘Must-See’ Chart for Gold and Silver Aficionados  - 17th May 17
Will the SPX Stock Market Final Surge Fail to Appear? - 16th May 17
Claim your FREE copy of Jim Rickards’ explosive book - 16th May 17
GOP Establishment Elite Plots Trump Removal - 16th May 17
Walkers Crisps Pay Packet Cheats, Shoplifters and Staff Conning Customers - 16th May 17
Gold and Sillver Markets - Silver Price Sharp Selloff - 15th May 17
Gold Stocks Poised to Soar Sharply Higher! - 15th May 17
This One Undiscovered Pot Stock Could Help Investors Cash In On The “Green Gold Rush” - 15th May 17
WIll Trump Tax Cuts Debt Binge Save Stock Market From Double Top Bear Plunge? - 15th May 17
Trump Rally or Geopolitical Meltdown: Currency Management for Dollar Risk - 15th May 17
A Shallow Stock Market Correction? - 15th May 17

Market Oracle FREE Newsletter

Trading Commodity Markets

Gold Vs Gold Stocks ($HUI) Who is Leading Who?

Commodities / Gold and Silver 2012 Dec 17, 2012 - 03:26 AM GMT

By: WavePatternTraders

Commodities

The Gold stocks have failed to deliver on my expectations of a move higher and it has caused me to re-think the direction of the yellow metal.

The past few weeks I have suspected that Gold stocks and Gold was a corrective pullback but should have been a shallow pullback, relative to the ideas I was expecting. With the breakdown in the $HUI, it strongly suggests Gold and the Gold stocks could be in some trouble.


When you look at this chart, you can clearly see that the Gold stocks and Gold move well together, but it’s when they diverge that it becomes an issue.

The $HUI has been underperforming the price of Gold for a number of weeks, but it’s the latest breakdown that should be of concern to the bulls in both markets.

Back in April last year whilst Gold has hovering  around the $1650 area, those that were watching the Gold stocks were one clue ahead of the move as it was suggesting that there was an arbitrage between the 2 markets. The same is setting up again, clearly one market is either behind the curve or ahead of it.

If we look back to the prior fractals from last year we can also see we have a similar fractal playing out in Gold, it’s one of the reasons I strongly suspect that the recent price action we have seen on Gold is not bullish at all, as I have tried to give the bulls many opportunities to rally the markets higher, it appears they have failed to so do.

Even with a new round of QE, (is it QE4, 5 I lost track) the metals can’t get a bid, as the US$ sold off heavily this week the metals showed little upside to that US$ reaction, that should be a concern to the bulls and the fact we saw Gold and Silver push lower with the US$ is in my opinion a vital clue that we could be playing out a similar fractal from last year.

Whilst Gold remains under $1750, short term it remains in a bearish trend and I think the $1680 support area will likely get tested and be broken, for a sharp move towards $1620-1600.

When you look at the $HUI and the failed break out above the granite floor, it looks like a failed retest from below.

Having initially it my target back in May 2012, I had strong hopes that the Gold stocks would lead the charge higher and drag yellow metal with it, but the weakness shown in the $HUI is a concern for me to remain bullish on Gold short term as I think the Gold stocks are speaking and a lower target of 250 is not out of the question.

If the prior low “gives out” then I don’t see much support until the lower target around the 250-270 area.

The failure at the underside of the granite floor in 3 waves from an Elliott perspective suggests that the move is a 3 wave bounce and likely part of the trend that started back from its high in Sept 2011.

If we are to see more downside in the Gold stocks I fear it’s going to drag  Gold lower just like before and looking at that arbitrage between the 2 markets, Gold could be near a nasty move lower if the $1680 support gives out in a big way.

To negate this setup, I really want to see the Gold stocks reverse from this current down trend and Gold to follow higher and rally aggressively above $1750, the fact it’s not showing any strength with the US$ moving lower, should be a concern to all bulls in both Gold stocks and the yellow metal.

Goldcorp (GC)

If we take a look at the largest weighted stock in the $HUI we can see a similar pattern, so it pays to watch the biggest stocks as they have a large effect on where the $HUI is likely going.

According to this source http://en.wikipedia.org/wiki/HUI_Gold_Index GG has a weighting of 16.20%, I don’t know if that is true but it sure seems a lot for one market.

Now if we overlay that with the $HUI.

So GG is to the $HUI as AAPL is to the NDX. If you follow Goldcorp you can see where the $HUI is likely heading and it don’t look at pretty picture on GG.

Let’s look at another stock from that list.

Barrack Gold (ABX)

When we look at this chart, we can see it has a similar appearance to the $HUI and GG. With a weighting of 15.37%, that’s 2 stocks with a combined weighting of 31.57%.

That’s impressive that 2 stocks have that much weighting, with both stocks in a down trend, it seems a that the bulls need to see those two stocks break out to the upside or reverse their current trends before we can get bullish on the $HUI.

Let’s look at the 3rd stock from that list.

Newmont Mining Corp (NEM)

This is the bearish of the 3 stocks shown as we can see it’s almost back to the prior lows and if you look carefully there appears to be a text book 5 wave impulse move, so not a pretty sight in the 3 major stocks in the $HUI.

Conclusion

Just looking at the 3 major stocks in the $HUI, it would appear that Gold stocks are in trouble and I suspect further downside is setting up.

If we are in a similar situation from last year, when the $HUI was leading Gold then I suspect we are about to see a new leg lower in Gold to catch up with the Gold stocks.

Until next time

Have a profitable week ahead.

Click here to become a member

You can also follow us on twitter

What do we offer?

Short and long term analysis on US and European markets, various major FX pairs, commodities from Gold and silver to markets like natural gas.

Daily analysis on where I think the market is going with key support and resistance areas, we move and adjust as the market adjusts.

A chat room where members can discuss ideas with me or other members.

Members get to know who is moving the markets in the S&P pits*

*I have permission to post comments from the audio I hear from the S&P pits.

If you looking for quality analysis from someone that actually looks at multiple charts and works hard at providing members information to stay on the right side of the trends and making $$$, why not give the site a trial.

If any of the readers want to see this article in a PDF format.

Please send an e-mail to Enquires@wavepatterntraders.com

Please put in the header PDF, or make it known that you want to be added to the mailing list for any future articles.

Or if you have any questions about becoming a member, please use the email address above.

If you like what you see, or want to see more of my work, then please sign up for the 4 week trial.

This article is just a small portion of the markets I follow.

I cover many markets, from FX to US equities, right the way through to commodities.

If I have the data I am more than willing to offer requests to members.

Currently new members can sign up for a 4 week free trial to test drive the site, and see if my work can help in your trading and if it meets your requirements.

If you don't like what you see, then drop me an email within the 1st 4 weeks from when you join, and ask for a no questions refund.

You simply have nothing to lose.

By Jason Soni AKA Nouf

© 2012 Copyright Jason Soni AKA Nouf - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

WavePatternTraders Archive

© 2005-2016 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

Catching a Falling Financial Knife