Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18
How to Know If This Stock Market Rally Will Continue for Two More Months? - 14th Jan 18
Everything SMIGGLE from Pencil Cases to Water Bottles, Pens and Springs! - 14th Jan 18
Land Rover Discovery Sport Very Bad MPG Fuel Economy! Real Owner's Review - 14th Jan 18
Gold Miners’ Status Updated - 13th Jan 18
Gold And Silver – Review of Annual, Qrtly, Monthly, Weekly Charts. Reality v Sentiment - 13th Jan 18
Gold GLD ETF Update.. Bear Market Reversal Watch - 13th Jan 18
Stock Market Leadership In 2018 To Come From Oil & Gas - 13th Jan 18
Stock Market Primed for a Reversal - 13th Jan 18
Live Trading Webinar: Discover 3 High-Confidence Trade Set-Ups - 13th Jan 18
Optimum Entry Point for Gold and Silver Stocks - 12th Jan 18
Stock Selloffs Great for Gold - 12th Jan 18
These 3 Facts Show Gold Is Set to Surge in 2018 - 12th Jan 18
How China is Locking Up Critical Resources in the US’s Own Backyard - 12th Jan 18
Stock futures are struggling. May reverse Today - 12th Jan 18
Three Surprising Places You See Cryptocurrency - 12th Jan 18
Semi Seconductor Stocks Canary Still Chirping, But He’s Gonna Croak in 2018 - 12th Jan 18
Land Rover Discovery Sport Panoramic Sunroof Questions Answered - 12th Jan 18
Information About Trading With Alpari And Its Advantages - 12th Jan 18
Stock Market Investing 2018 - “I Hope I’m Making a Bad Buy” - 11th Jan 18
S&P 500 Fluctuates As Stock Market May Be Topping, Or Not? - 11th Jan 18
SPECTRE Microprocessor Security Flaw - Big Brother = You - 11th Jan 18
7 Market Forecasts 2018 from the Brightest Financial Minds I Know - 11th Jan 18
It’s Not Enough to Be Contrarian - 11th Jan 18
Stocks That Take One for A Roller Coaster Ride Through the Thick And Thin Of Every Single Investment Made - 11th Jan 18
Police Arrest Tree Protester on Meersbrook Park Road, Sheffield - 10th Jan 18
Stock Market Aggressive Sell Signals - 10th Jan 18
The 2018 Decline in Precious Metals - 10th Jan 18
Gold Hits All-Time Highs Priced In Emerging Market Currencies - 10th Jan 18
TMV : 3X Leveraged Short on US Treasury Bonds - 10th Jan 18
Here are the Key Levels in Gold & Gold Miners - 10th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

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

© 2005-2018 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