Let me caveat what I am implying here by saying first that I fully expect the commodity price of gold to test the late 2011 lows of $1523, and perhaps even undercut them to really get the blood flowing. I am prepared for that, as I realize the run to $1900 — much like the run to $49 in silver, was too far and too fast, even in a fiat printing, race to the bottom, currency bubble. But with the $Gold:$HUI index approaching 2008 crisis highs, and the $Gold:$XAU index now reaching an unprecedented height, I am copacetic about holding what I have while becoming poised for a final shake out where I can harvest some of my favorite names once again.
Opportunities abound in high quality names, some of which offer dividends while one waits (I’ve already added AEM, as you know). There’s no need to stretch on speculation, now, and look for any miners doing business outside the safe zones of Canada and the U.S. and Mexico for some silver plays. RGLD at these prices is insane, and if you are worried about this pullback, please review that company’s past charts over the last ten years. All of these stocks — yes, even the quality ones like SLW and AUY — have trod this rocky path before. In my opinion, these, along with their underlying commodities, preferably held in part in the physical bullion, will help you weather the coming storm in collective currency crisis.
If however, you believe that Ben Bernanke can be the first Federal Reserve Chief to successfully inflate the economy out of a low growth, value inhibiting recession, then perhaps your trust in this new bull is warranted. In my business, and in the entire economy, I see inflated prices for everything already, so the valuations of the stock market come as no surprise. As we approach major all time highs in the SPX, I am increasingly skeptical that we can continue without a major correction, just as I was in late 2007-2008, when we saw similar overwrought behavior. I may miss the final euphoric highs, as I did last time, but I will not end up like the Capo Vito, either.
To be sure, I am not telling you to buy these miners at this bloody juncture. Even I am holding off for the turn, as I mentioned a few times over the last month. But I would also counsel you not to short a bull, no matter how wounded. Bulls are mighty, long lived beasts, and despite their weariness, can leave one singing soprano with little to no advance warning.
The Signs were out there, that’s for certain. They glow more balefully–frighteningly, perhaps – by the day. Soon you will find that their light will transform into warmth, and voila! — you are out of the cold. This week we saw the $HUI:$Gold ratio approach it’s late 2008 nadir, despite the lack of any similar shade of trouble in the SPY or any other major index for that matter. For many who have been suffering through this mind searing mini-bear in the miners, it was only one more pencil in the vile jellies. For me, it was the light at the end of the tunnel.
Adding reassurance were the hairshirt boys and the plungers. The hairshirt boys talked about “$21 dollar silver” and gold “heading back to $1200″ this week. More music to my ears. Then the dear plungers. Those who can always be counted on to ring the bell at the exact wrong time were actually starting to short stocks that had been pummelled for months now, quality be damned. Again, the scent of ambrosia, the ply of relief.
Can anyone predict the future? Only in Tom Hanks movies involving haunted vending machines, my friend. But there are time tested truths for all markets, and for the precious metal markets especially. Perhaps the hardest and truest is that both the bulls and the bears will suprise the hell out of you in this space. Such is the lot of a smaller capitalized, politically sensitive commodity group not exactly known for it’s GE-like management style. But an ancillary truth resides in the recovery from both a bull and a bear… namely, the harder the band is pulled either up or down, the greater the snap back to the up or downside.
Recently we’ve seen near-unprecedented disintermediation between the price of the miners and their underlying commodity in both gold and silver. Some of this is a result of input (cost) prices rising while commodity prices are remaining stagnant or falling off. Some is the result of rational hedging, and some the result of anticipatory momentum trading. It’s this last that has brought us to our most recent state, where one might say the blood in the streets approaches the door-level on our three-step brownstones.
But make no mistake, things are not going to be “different this time.” We’ve seen this all before, and the results have been similarly spectacular. We may have one more final “terrier shake” to throw the last remaining weak hands off the bus, but I have little doubt that the Fidelitys, the Blackrocks and the other large funds are right now gobbling up even more SLW and RGLD and AEM and AUY than they were last quarter. And AG…. oh my yes, AG.
I expect one more pullback today and perhaps into early next week, but I will initiate buys in AEM at any price under $40, if I am so lucky. Get yourself a dividend while you enjoy the rebound, why don’t you? You can always use the extra beer money, no?
As for our friends in the smaller silver market, I would think next week the safer bet, but if we see some pullback today, I wouldn’t gainsay your taking some risk. After all, for EXK to get back to a mere $7.00 (!!) is an almost 21% move from here. EXK will be $10 before next Christmas, if my predictions weigh out properly.
Avast Mateys! It’s time to strike the main sail and deploy the twin outboard Mercuries, as Her Majesty’s Treasure Frigate, The H.M.S. Dollar-Dollar Bill, is taking on water and listing amidships! Now is out time to pounce, Jag-you-are (sic) – style.
As I type, the dollar has broken below the crucial $82.00 “line o’ death” it’s been flirting with this last month, and fighting against even as all the stochastics began to show divergences marking an imminent change. I think that change is here, and provided we finish the day below $82.00 (we are at $81.94 right now), I think we should be clear to fly until at least $80.70, which is the long term 50% fibonacci. I do believe we should bounce then, just in time for a little September flattening while the dollar gets ready for a test of the 38.2% fib line down below $79.00. That should coincide with some nice seasonality for the precious, which always seems to be great offerings for the Turkey Gods, come November.
As I mentioned yesterday, I pushed the risk pedal with some AGQ, as silver was moving first. However, I think today is gold’s catch up day, so if you want to add to your NUGT for a brief period, I wouldn’t gainsay that additional leverage. As always, I recommend small and cautious with these instruments. If you are seeking less “muss & fuss,” GDXJ is probably our most oversold ETF, as it got cranked the hardest in the recent “junior miner recession” this Spring. It’s relatively overbought in the near term, but nonetheless a good bet to test it’s 200-day EMA here ($23.40) before pulling back.
A more speculative play is AUQ, which got trounced recently on bad numbers, but appears to be forming an island bottom on the daily chart, and has almost a full dollar gap to fill north of here. Of course, the landscape is littered with these plays, and some of far higher quality. Keep an eye on the 200-day EMA of gold bull index $HUI for a near-term guide. It’s next resistance (top right of a daily cup) coincides with that 200-day mark, at about $465, and that should provide the near term stand by.
Happy near-term buccaneering to you all, me mateys!
_________________________ Ladies and Germs I love it when my pain becomes your gain, and thanks to my “way too early” entry back into the precious metal miner market with both hands full of ham, you more cautious readers will have the opportunity to enter into the severely beaten-into-disability gold and silver miner market, which we’ve always characterized (lovingly) as Baby $HUI. One can best participate broadly in this market using GDX and SIL (and to a lesser more risky extent, GDXJ).
I am hoping the following chart will show up, as I am posting it on the rogue computer, but if not I encourage you to look at the twelve year monthly chart for $HUI, which limns the extent of this current bull in both gold and gold miners:
Note how we are oversold to an extent not seen since the beginning of this very bull… in fact, to an extent even deeper than in late 2008! That’s pretty incredible folks and indicates a strong ability to bounce hard here, provided that long term bull line holds.
Now I do expect we’ll get a pullback and maybe even two from this strong resurgance, as the various bottom scrapers and chicken littles bail with a quick profit, so be cautious. Go small here in this first wave, no matter how tempted you may be to go all in. You should have plenty of opportunity, all the way to the $500 mark and maybe even $520 on the index.
_____________________ Yes, that’s me, under the stone, there. Actually, it’s what’s left of me after I burned up in a fiery husk doing the classic “buy at the bottom” move.
Now I just sit and wait as I watch my accounts draw down. Luckily, I don’t need the dough right now, so I can afford to play the longer game here. I still have about 10% cash left after deploying into a number of bounces over the last two weeks. I think those bets will pay off in the near term, and I may even take something off the table as a result.
But things continue to be insanely busy here, so one solace is I can only look at the market a couple of times a day. Yesterday, I had two sit down lunches with two completely different parties. Usually I can schedule around anomolies like that, but in this case, I just could not, and had to take both meetings.
Last week, I had to take two separate simultaneous conference calls. I’d never done that before, and last week I had to do it twice. Do you know what the level of difficulty on such a stunt is? First, you have to have the right equipment. In my case, I had my office phone on speaker and my cell phone in an earpiece jack. While simultaneously listening to both calls (one of which was playing in my right ear), I had to be able to “respond and mute” at a moment’s notice in order to speak to one or the other respective parties. I felt like a schizophrenic dj at a retro-70′s disco party.
I am looking at some long term charts right now, and $HUI is approaching a ten year monthly line right now (about 350) that looks like good support. But we can bounce at any time now, as we are ridiculously stretched below the 200 day EMA (almost 26%!!), and that means we are getting stretched to the utmost…
Hang in there, my friends. My next post will feature a phoenix.
Yes, the Cards kicked ass in their usual inimical, erosive fashion, but the Lucky Birds are you today, my friends, not my 13 point winning, New York Giants imitating Louisville Cardinals. Why you ask?
Oh! How lucky you are to be able to catch the $HUI at the 200 day moving average! It’s not often we get there:
I’m going to grab some GDX and GDXJ, today as I think we’re close to at least a tradeable bottom. We will likely have to be somewhat nimble, but I think this might be the nadir — especially if the dollar moves down into an intermediate cycle low. ANV and BAA are my best individual bets for the risk takers.
For those among you who are adventurous… the cheap stuff on the silver side is really, well… cheap ! SSRI is looking especially tasty here, for example, as is AG. EXK already started taking off yesterday. Of course SIL is there for those looking for “pool” instead of “pond.” Note also, the rare-earths as well. If the dollar drops, they will all benefit.
Have a great weekend, and go Cards (and Cats and Hoosiers, whoops! I win either way on that one!).