Gold Sentiment Lesson #3,000

The number in the title is in honor of the boldest forecast burped up by the gold community in February as the metal (and the miners) jerked upward and jerked the holdout would-be enthusiasts into the market. It was included in the anonymous (but real) quotes from a cautionary post last week on the Gold Bull Horns.

We also used these quotes in an NFTRH update in order to try to make a point, despite what were very short-term contrarian bullish readings that day (per Sentimentrader’s data) for junior and senior gold miners.

From the update (2.28.19)…

“Regarding sentiment, I have personally been a bit vulnerable as a bull since reading these over enthusiastic pronouncements that were bullhorned in the gold community when the sector jerked bullish for all to see. Quotes below from last Friday’s post. The hypersensitive indicators above are one thing, but stuff like this has reliably been a tried and true tell on gold sector sentiment. Last Friday it sucked and the question is whether or not it has been fixed yet by this moderate pullback.”

“It’s been a long time coming so enjoy this day as there will be many more to come. It’s just getting started.” (2.19.19)

“Gold appears to be rallying from the final right shoulder in a multi-shouldered inverse H&S bull continuation pattern. Incredibly, that pattern itself appears to be just the head of a much more gargantuan pattern with a target price of $3000!” (2.19.19)

“What is going on is that gold is in the early stages of a parabolic slingshot uptrend as shown, that should soon vault it above the key resistance approaching and around $1400. Once it breaks above this resistance it is expected to accelerate dramatically.” (2.19.19)

Repeat after me… gold cheer leading by public figures (greater or lesser) is always followed by a negative reaction before too long.

While we’re at it, let’s also note another point of caution. When gold rallied yesterday, supposedly because the Trump-Kim summit flopped, a negative outcome was already in bag.

As our handy graphical Macrocosm of the gold sector’s important fundamentals clearly states at the upper left, avoid all thoughts of geopolitics in your thesis for getting bullish on gold. Period.

Moving on, we can (and I do) use sentiment data from sources like Sentimentrader, Hulbert’s HGNSI, the Commitments of Traders (which have been delayed and of less help so far in 2019 due to the US government shut down, but which were at last reading not positive) or we can use the oldest, most tried and true sentiment indicator, the gold analyst eye (and smell) test.

On February 19th there was an over abundance of talk about a) the moonshot-to-be known as gold and b) the death of the dollar. What got gold analysts so hopped up? One look at the GDX chart shows the point of max pressure for those who would tout to tout; the volume-driven gap and spike coming out of the bull flag.

Now I am not going to pretend to be any sort of genius who thought the situation was bearish well ahead of time. GDX and its fellow precious metals ETFs and indexes have been up trending and bullish since September. A bullish chart is a bullish chart and this one was bullish as it broke out of the bull flag we noted two weeks ago in NFTRH 539.

But as the excerpt from the update above notes, I got the yips when even a casual scan around the community yielded those ‘bull horn’ quotes without even digging for them. There they were, confidently letting the average bug know of the great things to come.

STOP RIGHT THERE!

This is the gold sector. This is not the Dow Jones Industrial Average. But enough with the cries of foul. It’s a relatively (to the broad stock and bond markets) tiny market that moves sharply when it moves. It pumped with a backdrop of some sort of macro noise or other and it has now fallen back against some other macro noise.

I’ll continue to suggest that if you are reading something that blames the Plunge Protection Team, the Fed or JP Morgan for this pullback you should run don’t walk in the other direction from that narrative and not look back. That is because it is the other side of the same face that is going to tell you that gold is going to $3000 (or 4, 5, 6… hell 10K!) every time it makes a dynamic short-term rally.

Now, despite the lower low below the former bull flag’s low point GDX remains in an uptrend. I have drawn in the next support area coinciding with the SMA 50 and another coinciding with the SMA 200. Fine, any chart dork can tell you that.

But with respect to the planetary ‘Macrocosm’ above, it is the sector and macro fundamentals (we’ll update these charts this weekend) along with some precious metals internals indicators (also to be updated) that will join the technicals in defining what comes next. Oh, and that sentiment, so dangerous not even two weeks ago, will need to get back in line as well.

This concludes gold sentiment lesson #3,000. I for one never get tired of reviewing these situations because we are all (well, most of us) human and it is all too easy to get caught up in the hysterics that are pretty much a tradition in the gold sector. Two weeks ago it was no longer Gold Community Crickets, it was a cacophony of much louder bugs. :-)

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