CyclePro Outlook

Fundamental and Technical Market Analysis
For All Markets: Stocks, Commodities, Currencies, Cryptocurrencies

Updated At Irregular Intervals


I would rather be prepared and wrong
than to be unprepared but right!

Current Commentary -- Where Are We Now?

Monday, August 14, 2017 12PM:

Gold Stock Rally - Part VIII

Sorry, no charts tonight. Gold's recent reaction to the N. Korea scuffle was much less aggressive that what I probably would have otherwise expected. The cryptocurrencies appeared to take a lot of the shine off of gold & silver where Bitcoin, for example, rallied as high as $4400 as I write this. But gold & silver barely exhibited sufficient strength anywhere near Bitcoins. While it is easy to say that Bitcoin is in its own bull market, and the N. Korea affair is just a small blip along its own path, Bitcoin did experience a substantial increase in volume over the past several says. Gold & silver had an increase in volume too, but that did not also reflect in a comparable higher price, just a weak and feeble climb to re-test the recent highs made on April and June this year. And, that re-test fell slightly too short as well.

After N. Korea has backed off of its aggressive rhetoric over Guam, Gold & silver have backed off and are now 1275 and 16.86, respectively. But I am expecting the weakness we have observed so far, to play out as continued weakness as these prices pull back even further.

The GDX, GDXJ, and HUI gold stock indexes have not been able to breakout of their triangle patterns. The N. Korean scuffle probably "should have" been enough to cause a breakout but that did not play out. This demonstrates underlying weakness.

A few stocks, like SBGL and AUY that I have discussed previously, continue to hang on to their breakouts. AUY has re-tested its support line twice and still remains above. SBGL charts still looks very good, excellent in fact. These are the rare exceptions from the rest of the mining stocks.

Another huge sign of weakness is how the individual stocks have been treated following their recent earnings reports. Those that reported good earnings retained their prices or had a little pop. But those that disappointed investors were not only knocked down, but in some cases knocked very hard.

One example is Primero (PPP) which has been plagued with severe mismanagement issues that have seen this stock drop from as high as $8 to the recent price of $0.17 last Friday, only to have it drop again yesterday to $0.152 just before a trading halt as the NYSE formally de-listed it. Primero will continue to trade on TSE (symbol P) but I suspect it will linger around as a scrap penny stock for a long time. After they sold Black Fox mine to McEwen (MUX), which was their only cash-generating property, they are basically toast. The only hope one might give Primero, is that they figure out how to resolve the various labor disputes in their existing mines and slowly claw their way back. But the current management does not seem capable. And the current gold price is not going to help reduce operating losses.

This time of the year for seasonality charts suggests we are in the timeframe for most calendar lows for gold & silver. But the recent weakness seems to be much weaker that I would have expected. So I must accept that a year-end rally seems much less likely this year.

Given the argument herein, I think the gold & silver weakness will persist through late-November and into December, 2017. The chart will probably look similar to 2015 where the low comes late in the year and then a rally beginning in 2018.

The following chart is what I presented back in May, 2017 as a possible map of how HUI might pay out over the year. Although HUI has not followed this chart exactly, I believe the basic flow is still valid. The chart low 5/11 actually occurred on 5/4, and the high for 6/30 actually occurred on 6/6 which was far short of these expectations. Therefore, considering the chart was anticipating weakness after June, this weakness may persist through end of the year as this chart suggests.

Click chart to enlarge.

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