The counter trend bounce signal issued for Randgold Resources on 10/20/13 has ended as of last Friday. As I mentioned in the initial post, price traded higher after the signal, but was a failure (loss of -1.37%) from the bounce signal to closing it last Friday. Sentiment is still running high for the precious metals even though price continues to make new lows.
For all you precious metals fans, sorry I missed a counter trend bounce signal for the iShares Silver Trust (SLV) on 10/16/13. I saw it on Friday (10/18/13) so the chart is marked as such. Sentiment for Randgold Resources (GOLD) issued a counter trend bounce signal at the close on Friday (10/18/13). Sentiment generated from the Twitter stream has painted a positive divergence with price as it made a lower low and has subsequently broken the down trend line that was confirming the move into the last low. The fact that both SLV and GLD are issuing counter trend bounce signals adds a bit of weight to the possibility for a bounce in the entire precious metals space. As you know I don’t like to trade stocks in a down trend. For those of you that do please be aware of one thing. Although the counter trend bounce signals in the precious metals have almost always seen higher prices after the signal. Most of them were failures over the course
A couple of weeks ago I posted charts of precious metals with their Twitter sentiment indicators. In that post I concluded that “precious metals need a bounce right here or we’re probably seeing the resumption of the longer term down trend.” Gold and gold stocks didn’t get the bounce and subsequently broke back below their 50 day moving averages. This increases the odds that a continuation of the down trend is underway. There is a silver lining though. Sentiment hasn’t broken down too badly with price. Although the SPDR Gold Shares ETF (GLD) smoothed sentiment broke its uptrend line, it has turned back up at a point that is still confirming the move out of the June lows. This puts GLD back in a position that it once again needs to bounce right here. Market Vectors Gold Miner Shares ETF (GDX) has a much healthier chart and sentiment pattern. GDX is still holding its uptrend line for price that started with the June lows. Smoothed sentiment barely dipped below its
During the rally out of the late June low the gold ETF I track (GLD) has had confirmation from sentiment generated from the Twitter stream. Smoothed sentiment has had a good uptrend that has held on dips. It’s currently coming back to the trend line and attempting to turn up even as price has fallen over the past few days. This is a good sign, but GLD needs to bounce right here or there will be a high probability for a resumption of the down trend. Another factor that may bring heavy selling if a bounce doesn’t materialize is that GLD is sitting right on its 50 day exponential moving average. A break below that level will almost certainly trigger some stops. The gold shares ETF that I track (GDX) has a stronger sentiment pattern than GLD. Smoothed sentiment had a large positive divergence from the hard break down in price in April to the break down in June. Since that time sentiment has held its upward sloping (and confirming)
A quick update on precious metals today. We didn’t get a counter trend bounce signal from Twitter sentiment for any of the precious metals before the current rally. This was because we didn’t see good positive divergences from price before the move started. Now that the metals are rallying we’re seeing confirmation of the move from Twitter sentiment that is painting higher lows and higher highs. Sentiment isn’t extremely over extended yet, but is getting near levels that might suggest a pull back is necessary before the metals can move higher. Below are charts of GLD, GDX, and Randgold Resources (GOLD). Notice that sentiment for Randgold is starting to paint a negative divergence from price as it nears the underside of the 200 day moving average. This is another indication that a pull back in precious metals may occur. A break of the uptrend in smoothed sentiment for Randgold would create an official sell signal for the stock (or consolidation warning if you believe it is in an uptrend). I’ll
We’re finally starting to see some hopeful signs for gold (GLD) and gold stocks (GDX). In our last update we mentioned that the chasing of precious metals by traders had stopped and that we’d finally got some capitulation in sentiment (calculated from the Twitter stream). This was the first thing we were looking for in order to create an environment where gold could create a durable low. Now we have our second piece of good news. Twitter sentiment for GDX is signaling that it is ready to attempt a counter trend bounce. This signal is created by the positive divergence between smoothed sentiment and price which subsequently broke above the prevailing down trend in sentiment (green line on the chart below). Volume on the recent low compared to the April low is also suggesting that GDX is trying to bottom. The high volume sell off in April forced weak holders of GDX to capitulate. In addition, it caused fear even among long term holders. This relieves some of the overhead
We haven’t done an update on gold and gold stocks since the end of February. The reason for this is that their charts have been broken. As technicians we look at price, volume, trend, strength, sentiment etc. to help us determine the likely path of a security. But, when price breaks down hard it skews the chart pattern so badly that the most important component for technical analysis (price) becomes of little value (other than the obvious message that the stock is broken). As a result, all we can do is wait for enough time to pass for the stock to reassert a readable pattern. Finally we’re starting to see a trickle of information from precious metals charts. In early February when GLD was trading above 160 and bouncing against the underside of its short term down trend line we gave up almost all bullish hope for the metal. By the 13th of February we stated that if GLD traded back down to 150 that “GDX will almost certainly break
In the first week of February did an update on precious metals and stated that we were “getting concerned that gold stocks are going to renew their down trend”. Then two weeks ago we reiterated our pessimism due to the lack of tweets talking about being buyers of gold stocks. As we look at the charts again today we’re even less hopeful than before. Gold (GLD) had a small bounce above the $150 level and now appears to be ready to break it. Since the first of the year our Twitter sentiment indicator for GLD has mirrored the movement in price. This tells us that traders and investors alike are confused and are simply chasing price. When traders are making “rational” judgements about the future prospect of a security sentiment plots its own path. Short term traders often take profits on bounces and buy on dips, which shows up in our sentiment indicator as divergences from price near turning points. When market participants are confident in the direction of a
It’s make or break time for gold (GLD) and gold stocks (GDX). We mentioned last week that we weren’t very optimistic for precious metals based on the extended down trend, the break of medium term up trend lines, and the consolidation of GDX below a longer term down trend line. GLD has held up better, but it now appears that it is resuming its downtrend. We mentioned that if $160 was broken then $150 would most likely be back in play. Well, $160 broke yesterday and today we got a close below it again. Meanwhile GDX in in the $41 area visiting the lows from last July. This just isn’t a good situation for precious metals shares. If GLD revisits $150 then GDX will almost certainly break below $39 in a very sharp and very ugly way. There are a few positives. GLD is still above the up trend line from last May’s lows. Smoothed Twitter sentiment for GLD has a small positive divergence with price (even though the
A few weeks ago we did an update on Gold (GLD) and Gold Stocks (GDX) where where stated that it was critical for them to hold their trend lines from the May 2012 lows. Well GLD has held the trend line, but GDX has not. We’re getting concerned that gold stocks are going to renew their down trend. We’ll give the negatives first, then move on to the positives (or what might better be called a sliver of hope). We already mentioned GDX breaking its most recent up trend line. Now there’s more bad news in that GDX has also broken back below the downward sloping trend line that goes back to the August 2011 highs. It is now consolidating below that line. When GDX broke and consolidated above it we thought the worst was over for precious metals. Now that it’s consolidating below the odds favor a resumption of the down trend. The break of both trend lines brought with it very negative Twitter sentiment that shows the backs
Market Risk Moderate
Long / Short Hedge Portfolio
Long / Cash Portfolio