Speculative Gold Index UP Over 100%

In my last missive, in early January, I sure was on target. 

First was the suggestion that the DIREXION Daily Gold Miners Bull 3X ETF was on a short term move to its previous high of $60 (it hit $59.50) but with the added suggestion that it should first cross $32 before acting (which it did the day of commentary posting).   Unfortunately, it has since dropped like a rock and is sitting at $36.86 on the Friday close.  For those keeping track of such things that is still 52.7% above its December low point (although only 15% above the suggested $32 level).

Of greater significance, I also suggested that the place where one might see the greatest gains would be in the speculative gold stocks such as those in my Merv’s Penny Arcade 50 Index, which I mentioned were already on the move.  More on this Index below but suffice it to say that THIS index is ahead more than 100% from its December low, even after a slight decline these past couple of weeks.  That is an AVERAGE gain for the 50 component stocks so some have seen considerably greater individual gains (and some not so much).

The groans you hear are due to the strains in my arms as I try to pat myself on the back.

So, let’s go quickly through a review of where we are presently with gold and gold stocks.

GOLD

Gold is being pounded up and down by global events.  Something is happening out in Eastern Europe that seems to affect gold prices, but not always.  You can find a chart of gold in many other commentaries so I will just briefly summarize gold’s technical position as I see it.

LONG-TERM

Gold had been above its long term moving average line for several weeks with the line having turned upwards, but gold has just crossed back below the line and the line slope is turning back to the negative.  My long term momentum indicator has been moving upwards since the beginning of the year and has been above its positive sloping trigger line most of that time.  Although the momentum had touched the positive zone it did so for only one week and has since moved lower inside its negative zone.  It is now below its trigger line and the trigger has turned downward.  The long term volume trend has levelled of (from a downward trend) but is no great shakes.  All in all I would place the long term rating as NEUTRAL, trending towards the negative.

INTERMEDIATE TERM

The intermediate term view looked good there for a month or two but has now changed for the worst.  Gold has now dropped below its intermediate term moving average line although the line still has a positive slope.  My intermediate term momentum indicator has now moved into its negative zone and below its negative sloping trigger line.  The intermediate term volume trigger line is still in a positive slope although the volume indicator itself has now crossed the line to the down side.   I would normally consider the intermediate term as BEARISH except I like to see the short term moving average line confirming this assessment by moving below the intermediate term line.  This has not yet happened so I’ll go with a – NEUTRAL rating, trending towards the bearish.

SHORT-TERM

This is the easiest to assess.  Everything is negative.  Gold is below its negative sloping moving average line.  The momentum indicator is in its negative zone below its negative sloping trigger line and the volume indicator is below its short term negatively sloping trigger line.  The short term can only be rated as BEARISH at this time.

Merv’s Gold & Silver 100 Index

The 100 largest market value gold and silver stocks trading on North American markets have had a roller coaster ride these past few years.  It looks like we are at a critical stage being set for a new long term (years) bull move or maybe a new bear continuation.  I’ll go with the bull scenario.  This Index gives us a very clear positive divergence in the actions of the long term momentum indicator versus price action with a good rally following.  It is not unusual for the Index to react at a major resistance level (the last rally high).  The next move should put us decisively through that resistance which should put us into a 50% Index move to its next rally high.  The Index action here is very similar to that of the major North American Gold Indices except maybe the Merv’s Index is slightly more volatile.

LONG-TERM

Following that long term positive divergence the Index went bullish.  It remains above its positive sloping long term moving average line.  The long term momentum indicator had been trending positive but couldn’t hold above its neutral line.  It is once more in its negative zone below its trigger line although the trigger is still pointing upwards.  Looking at the table of technical information for these 100 stocks (not shown) we get an overall rating of the individual stocks as 54% bull and 28% bear.  From all this I remain BULLISH for the long term although we are seeing some weakness lately.

INTERMEDIATE-TERM

The Index closed the week below its intermediate term moving average line although the line slope remains in a positive direction.  The intermediate term momentum indicator is moving lower but is still in its positive zone.  It is below its trigger line and the trigger slope is negative.  The bull/bear ratings for the overall individual stocks are 21% bull and 64 bear.  Although the momentum has not yet gone negative I’ll have to go with a BEARISH rating on the intermediate term.

SHORT-TERM

Unfortunately my Indices are based upon weekly (Friday close) data and this is not convenient to determine short term information. 

Merv’s Penny Arcade 50 Index

As you can see on the chart there were many technical signals back in early January to give me the confidence that this was where real profits would come from in the months ahead.  We had our normal moving average cross over, average turning positive, momentum positive and above its positive trigger line.  But most important was the crossing of my FAN PRINCIPLE third FAN trend line.  We don’t often get such a well defined and significant FAN so along with everything else THIS was the icing on the cake.

Now, where are we? 

LONG-TERM

From a long term perspective everything is still rosy.  The Index is above its positive long term moving average line.  The long term momentum indicator is still in its positive zone above its long term positive trigger line.  The only problem is the slight reversal of trend these past couple of weeks which pushed the momentum indicator below its overbought line.  This usually sets the stage for a long overdue rest period, but not yet a long term reversal.  As for the overall individual ratings, these stand at 94% bull and 3% bear, so bullish that a reaction is to be expected to bring the bullish rating down a bit.  On the long term the rating remains BULLISH.

INTERMEDIATE-TERM

As with the long term everything here is positive except the crossing of the momentum indicator below its overbought line.  As for the overall bull/bear ratings of the 50 individual stocks, that shows 49% bull and 26% bear.  That is our one slightly negative reading in the intermediate term.  I still rate the intermediate term as BULLISH but with one eye open for a reversal of rating in the not too distant future should things continue as they have these past couple of weeks.

Sorry for the long delay in posting.  I try to get a post in about on a monthly basis but procrastination gets in the way.

If someone out there has a legitimate web site and would be interested in posting my technical information TABLES of Merv’s Index stocks, let me know and we’ll see what we can do. 

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I read all the emails but may not always respond, time factor and all that.  The email address is [email protected].