Tonight I would like to show you some short and long term charts for some of the PM stock indexes. In the very short term they have had a good run and are getting overbought and need to work off some of the bullishness. This is perfectly normal and should be expected. What we need to focus in on now is where we should look for support to keep the uptrend intact.
This first chart is a daily look at the HUI which shows us a one year support and resistance line. Two weeks ago already, the HUI broke above that very important S&R line telling us the bulls were in charge after the bears held resistance keeping the bull in check. Now we should look for that S&R line to reverse its role to what had been resistance, to now support. Critical support comes in around the 207 area which would be the backtest. The green circle shows where the 20 day ema crossed above the 50 day ema back in August for a buy signal.
This next chart is one we’ve been following for many years and gave us one of the biggest clues the bear market may be ending in January of 2016. This chart is the 35 year ratio chart which compares gold to the XAU. For our many new members that might not be familiar with this chart I’ll give you a quick rundown. The first thing to know is that if the price action is rising, gold is out performing the XAU. For many many years this ratio let you know when it was time to buy or sell the XAU or your precious metals stocks. When the ratio would get up to the horizontal blue line it was time to look for an entry point and when the ratio traded down to the red line it was time to sell those positions you bought at the blue line.
As they say, all good things must come to an end. The end came during the crash in 2008 when the ratio burst above the blue horizontal buy line which had never happened before in history. I labeled that massive failure with the green circle on the XAU chart on the bottom. For years that area suggested it was a great time to buy your favorite PM stocks. That breakout above the horizontal blue dashed line represented a paradigm shift where gold was going to massively outperform the PM stocks.
