Hope this helps...
GOLD STOCKS GET CREAMED—For those few who sent me nasty-grams when I recently suggested selling some gold stocks into this multi-month rally, all I can say is, “I hate to say I told you so—but I told you so!”
For the second day in a row, gold mining shares, which in the few previous trading sessions were already beginning to bend, are being sold mercilessly. Just since yesterday, many—even some companies I have a high regard for—have dropped anywhere from 10-20%.
Adding to all the reasons I gave around Thanksgiving why it was a prudent course of action to book some profits, Barron’s came out this week with a story telling pretty much the same thing. That no doubt gave a lot more people than Yours Truly reaches some food for thought. I have to believe that today’s beating for gold stocks in spite of gold pushing temporarily above $410 per ounce also shows that some smart money (smarter and certainly less “religious” than the typical gold bugs) also smells what I do where a coming intervention to give the beleaguered greenback some relief is concerned.
If I’m right, we’ll see $380 gold once more before we see $420. In addition, it would mean that this sharp correction for gold stocks will turn into a rout of similar magnitude to that of last summer. The only difference is that the HUI (the Amex Gold Bugs Index) would take only weeks, rather than a few months, to lose 30-40% of its value. Following such an event would again be another glorious opportunity to load up for the next ride.
Two things will have to happen for gold stocks to avoid this near-term fate. First, I’ll have to be wrong about the dollar staging a sharp rally. Second, gold shares will need to remain technically in their long-term up trend. Currently, the HUI’s 50-day moving average is 219.63. As of around 2:00 p.m. Eastern time, the index was at around 230, down so far by some 11% from its current bull market peak of just under 260.
The 50-day moving average has provided rock-solid support for several months, and will need to continue to do so. Any serious break below it, and—for a while—it will be “look out below!” If it holds—and, further, if the dollar still can’t get out of its own way—I’ll likely be recommending that subscribers wade back in heavier at these lower prices. |
