Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

New Low in Gold Stocks is a Strong Buy Signal

Commodities / Gold and Silver Stocks 2018 Feb 20, 2018 - 11:50 AM GMT

By: Jordan_Roy_Byrne

Commodities

Gold has been on the cusp of a major breakout but someone forgot to tell the gold stocks. Gold is right back at resistance levels yet the various gold stock indices are off their September 2017 highs by 11% to 16%. The relative weakness in the gold stocks (and Silver) is a signal that Gold is unlikely to breakout now. In fact, if Gold were to correct here the gold stocks could threaten support and perhaps make new lows. While that sounds quite bearish, history shows that a break to new lows in gold stocks would be a massive buy signal.


The history we refer to is the path of recovery for a market following a mega-bear, which we define as nearly 3 years and at least an 80% decline. There are three strong historical examples. Those are the S&P 500 during the Great Depression, Thailand after its bust in the mid to late 90s and the housing stocks after 2005 to the March 2009 low. The recovery in each (following the mega-bear) followed three distinct phases. There is a sharp initial rebound which is followed by a correction and lengthy consolidation which lasts at least 18 months. Eventually, the long consolidation ends and the market surges higher in an impulsive fashion.

The gold stocks are currently in the 19th month of their correction and consolidation. They bounced from support in December but retraced that entire bounce. After a second rebound from support, they could threaten a break of that support. Below we show the HUI Gold Bugs Index which does not include the royalty companies as GDX does. The HUI is not too far from its December 2016 low and could even break it if Gold were to correct.

Conventional technical analysis would imply that is a sell signal for the gold stocks.

But history argues the complete opposite.

In the 21st month of its correction and consolidation in 1935, the S&P 500 had broken down to a 2-year low. Was the market headed for a retest of the Great Depression low?

In the 19th month of its consolidation in the fall of 2011, housing stocks had broken to a 2-year low. Was the sector headed for a retest of the Global Financial Crisis low?

Thailand’s correction and consolidation phase was different than the others as it made its low only 15 months in but then consolidated and grinded slightly higher for the next 13 months before exploding to the upside. At its corrective price low 15 months in the index was at a 2-year low.

The HUI closed Friday just below 185. Its December 2016 low is 163.49. A 12% decline would put it below its December 2016 low and at a 2-year low.

The three historical examples all made 2-year lows before their correction and consolidation phase ended.

A potential failed breakout or correction in Gold could leave gold stocks vulnerable to a decline to new lows. While that sounds bearish, the historical context argues otherwise. Two of the three historical examples that show similarities to the gold stocks broke to new lows. Yet that break proved to be the best buying opportunity since bear market low. All three of the historical examples made 2-year lows before exploding higher. History shows that if the HUI Gold Bugs Index were to break to new lows it could be a false break and a massive buy signal. Quality juniors that are bought on forthcoming weakness (if Gold corrects) should deliver fantastic returns over the ensuing 12 to 18 months.

To follow our guidance and learn our favorite juniors for 2018, consider learning more about our premium 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 2010-2014 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.

Jordan Roy-Byrne 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