Those manic-depressive gold stocks
The malaise is in the stocks
themselves, and so we will turn our attention to the long-term
HUI chart to clarify what is going on. Remember, stocks are speculative
counters to a much greater degree than the metals themselves,
and therefore are subject to manic-depressive price behaviour
- and I know from the emails I am receiving that we are
very much in the depressive stage - the stage where those who
bought at higher levels compulsively compound their misery by
selling at, or near, the bottom.
The first thing to notice on the 4-year chart is the huge underlying support around the 150 level. It is highly unlikely that this level will break unless the metals break down from their long-term uptrends. In other words, the current decline should go no lower than this level, at worst. We have referred to the importance of this level in the past. On this chart we can also see that the HUI index is at its normal oversold limit as shown by the RSI and MACD indicators. There is another important support level shown on this chart, which the index has now just about arrived at, which we can see much more clearly on the 2-year chart.
On the 2-year chart we can
see this strong support at the lows of Spring and Summer last
year. We see again the increasingly oversold condition shown
by the RSI and MACD indicators, and by the position of the index
relative to its moving averages. Of course, given the current
weakness and propensity of the PM stocks to move with the broad
market (which is not an automatic or permanent state of affairs),
this oversold condition can get considerably worse, which is
why, although there is a good chance that we are now at or close
to the lows, the index may yet decline to the 150 area. In the
event that this happens, we would would then be at a major buy
spot, provided that the metals do not break down from their long-term
up trends in the meantime.
is an English technical analyst, holding a diploma from the Society
of Technical Analysts, Cambridge, England. He lives in Chile.
Copyright ©2003-2011 CliveMaund. All Rights Reserved.
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