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An excerpt
pulled from NFTRH142, dated June 26, 2011 follows. This was a time when
the now overtly bullish gold stock sector was not so overtly bullish and goldbug spirits were at a low point:
"It remains possible that HUI may register a lower RSI reading than
the ‘Bingo’ level [41-42 level noted, which was the RSI low,
in hindsight] noted last week on the chart [chart to the left is not
the original]. But in clearing out all of the noise I look at the chart
and see epic support, with the potential for a decline to the long-standing
470 +/- level, and even the chance for a quick washout decline all the way
down to the low 400’s.
I also see a massive structure that could be construed as a Cup (early
2008 to early 2011) and Handle (forming currently) with, you guessed it, the
3 Snowmen (+) [the 3 Snowmen is NFTRH-speak for the minimum upside target
- think about it] as its target. I look at the segment above and see
indisputable evidence that gold mining fundamentals are much improved from
the time of the 2008 wash out, and with no crystal ball, I put the sum of the
analysis into a big pot, stir it up and decide to hold a core of quality gold
stocks, with risk management as appropriate, into the conclusion of the current
consolidation (either a final capitulation wash out or a strong rise from the
Handle). [In hindsight, I'll take 'B' for a 1000, Alex].
We have not yet broken epic support, and no
amount of anxiety in the markets can change that fact. NFTRH is bullish the
gold stocks, and that is not a ‘price’ prediction. It is a simple
fact. Fundamentally, unless the analysis is garbage, I am supposed to be
bullish because I am not a day trader. And I can stand the ups and downs
(with a good helping of risk management).
Others may be well advised to await certain upside confirmations, which of
course NFTRH will [be] watching for each week, before strong
commitment."
Again, it was hard to write the last 3 paragraphs back on June 26, because
there was little in the way of positive reinforcement from the market action
of the time. But the technical parameters guided the way and allowed
the sector fundamental analysis the time needed to become compelling as
well. Now we are on new signals and new parameters and the markets a
flat out fun again.
Am I touting? Look, in Newsletter Writer 101 they taught us the ABC's;
Always Be Closing. If you are not going to tell your own story, who
will? Yet, I try to temper this because a) I am not always right and b)
unless you are willing to 'tout' every screw up, it is probably best not to
tout every swami-like feat of brilliance.
In my experience, consistent success in the markets requires these simple
tools: Perspective, conventional technical analysis (it is unbiased if
the chartist does not manipulate to her will), unconventional technical
analysis (like ratios between markets and assets that are really macro economic fundamental indicators), perspective (with
regard to one's ego, expectations and temperament) and patience. Oh,
and did I mention patience?
When the weekly chart of HUI above was produced, NFTRH was managing the
question "is the current situation (topping pattern obsessed over by
gold stock bears in a fetishistic manner) more like 2006 (1st yellow MACD
oval), 2008 (red oval) or 2010?"
HUI had long since broken out to blue sky above 519.68 and while top callers
came calling recently, the big picture weekly and monthly charts kept the
analysis calm and steady. Yes, the pattern at one point looked like a
bearish Head & Shoulders but... it came above what any technical analyst
worth his salt should have known was epic, long-term support. This
support held and Huey failed to decline into the mini-disaster that was the
broad global markets. This registered as a bullish divergence for the
gold stock sector.
Along with the compelling technicals, NFTRH managed
the developing fundamental story each week and could declare itself as
nothing other than bullish, subject to technical parameters which were the
epic support (green) zone and the lower (blue dotted) line of the Handle to
the massive Cup on the downside and the 610 level, which was the pivot to
'blue sky' on the upside.
The fundamental picture is beyond the scope of this post, but it is
compelling and it is not yet near fully expressed in gold stock prices.
There will be head spinning ups and gut wrenching downs, but there are
technical targets much higher; both near term and further out.
Meanwhile, NFTRH is now able to adjust its parameters after many months of managing
the previous ones. HUI is no longer in a bullish 'consolidation' Handle
to a massively bullish Cup. It has broken the Handle
While gold gains the notoriety (and top callers of its own), the gold miners
have likely entered the beginning of a phase where the mythical leverage to
the price of gold is to be exhibited. Many people will simply go along
with the gold stock story, but if they do not know why they are going along
how on earth will they know when to sell?
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