Loading ...Even More Oversold Than Last March’s Bottom!
The charts and technicals show that Gold is more oversold than last March’s bottom and this is confirmed by sentiment readings. https://www.thestreet.com/investing/gold-timers-are-finally-throwing-in-the-towel? 
Good stuff, thanks for posting.
Fred Hickey put this chart in his monthly newsletter at the beginning of this month drawing the same conclusion that the market was due to turn b/c of the extreme negative sentiment. It’s one of the tools I used to sharp shoot an entry point in my own portfolio on March 5 & 8th, It’s also one of the reasons I formed my view that the bump over the past 4 trading days is likely to develop into a lengthy BMR lasting 1-2 months. But we will take it one day at a time.
I had written a draft the other day after Plunger had posted his comments about Jordan’s Post. I hadn’t posted it yet so instead of doing so as a new post I just cut and pasted what I wrote and will put it into this comment since Plunger posted above. Thanks for the comments and insights Plunger. After comments by Plunger to my post yesterday, and especially his well presented comments today regarding Jordan’s Post, I have to offer some thoughts on why I don’t agree. I respect Plunger and again, he explained his position clearly. I don’t accept the premise that because we are approaching 8 months since the August 2020 top, and that may seem long for corrections or represent going past an average of past corrections, that we are in a bear market. He mentions using a model as a guide. I don’t dismiss models or past historical cycles or seasonals but I do caution that trying to fit markets or any asset moves into boxes of past behavior is dangerous. I am sure he has other technical and or fundamental reasons, but here are some arguing against a bear market. The fundamentals have never been better for precious metals. Bear markets come after massive, extended bullish moves that lasted for years. Most of all you don’t define bear markets by a 20% drop from a recent high, even with that being a conventional media definition of a bear market. You need to at least stop making new highs and take out the previous cycle low. We aren’t close to either. Gold may have started it’s bull either in 2016 or more likely 2020 when it finally took out the previous cycle high. Even if you choose to use 2016, that is pretty short for a bull market for gold. After climbing close to 50% from last years pandemic low in less than five months, an approx. 25% correction(50% retracement for you fibo fans) doesn’t come close to the low and only went about 10% below the previous cycle high, which is a good place for a correction to find support, is hardly a bear market. I understand that a bear could come if after the rally he has called for, gold rolls over and takes out last years low. I don’t see that as likely. Is the FED going to tighten aggressively, not likely. Are things likely to get bad for the stock market and even the economy after the stimulus sugar high wears off, probably. I don’t see either the fundamentals nor the technicals signalling a bear for gold and definitely not for silver. I have laid out what kind of drop we would need to see if I am wrong. If on the other hand, gold works it’s way to take out the August 2020 high (and not just in a fake out but a real breakout) then it will be clear that the bull has more to go. That’s what makes markets, differences in opinions. I respect the case presented, I just don’t agree. Time will prove one of our cases correct.
Debate is good, it sharpens the blade. Wish we had more informed debate vs shoot from the hip opinions. First off glad to see someone throwing darts at the ludicrous claim that a bear market starts at a 20% decline. Best I can determine is this stupidity began about 20 years ago on CNBC. It’s asinine, glad to see someone calling it out. Bear markets need duration as well as degree. Not only that but they need divergences to begin. One doesn’t just wake up one day and say: Oh the index is now down 20% so it must be a bear market. Worse yet is the stupidity of the CNBC phrase “We are now in correction territory” when a market drops 10%. If one goes back to the great market analysts last century they defined any move within 3% as simply noise. At 3% they said the market is correcting. I am good with that. A bear market occurs after a well defined process of non-confirmations of secondary reactions. I have explained this in detail in the past.
Next point: Bear markets do not come necessary after massive extended bull markets. That is kind of what we have seen since the FED got involved with market bailouts, but here is an example . The April 81-Aug 82 bear market lasted 16 months and it came after an anemic 13 month bull market (see chart) Not all bull markets last 13 years like today’s crazy FED fueled monstrosity.
https://stockcharts.com/h-sc/ui?s=%24INDU&p=W&st=1980-01-01&en=1983-01-01&id=p90360526799&listNum=43&a=920898681
Back to the gold market… ” Bear market hasn’t occurred until you at least have taken out the previous cycle low”. I would agree with this actually. So with regards to the GDX that cycle I would say was back in June 2020. GDX recently got down to that level around 31 and bounced off of it. So yes, this criteria has not triggered the definition of a bear market. When I say we are in a bear market it is more of a statement of what the market appears to be in. I certainly admit it is not fully confirmed and we may have just witnessed just a long agonizing correction and it’s now over. One of the reasons I have postulated we are in a bear market is the macro story. My view is the markets may collapse in later 2021 in a deflationary impulse and this could drag down the GDX to fill that gap that is itching to be filled down at 26. If this were to occur… yes Virginia gold is in a bear market.
“Gold may have began its bull in 2016”. Indeed this is my interpretation of the market. But the classification should be that gold began its SECULAR BULL in 2016. In the meantime we are in one of many cyclical bear markets within that secular bull. This can be seen in the oil market since 2008. Oil peaked at $147 in July 2008, that began its secular bear market that lasted probably until May 2020. A 12 year secular bear with 2 cyclical bulls and 3 cyclical bears within that secular bear market. Oh BTW that first bear market only lasted 7 months from $147-$40. I used a line chart so the drop to $0 didn’t distort the chart.
https://stockcharts.com/h-sc/ui?s=%24WTIC&p=M&st=2008-01-01&id=p72184801611&listNum=43&a=920912990
Bottom line these are all good points raised. My claim that gold is in a bear market, hasn’t been validated. by the price action yet. And I certainly could be wrong. In fact this is a minority opinion. I am just trying to skate to where the puck will be to the best of my knowledge, So it’s a defensive intellectual posture. Keep in mind I am presently long ON MARGIN WITH CALL OPTIONS to boot. Have been for a week now. BTW if the pm stock market does drop to lower lows after a rally the bear would have started back last August and not at the time gof the violation of GDX 31, we date it from the beginning.
“My claim that gold is in a bear market, hasn’t been validated. by the price action yet. And I certainly could be wrong. ”
Oddly, even in EW, gold would still be in a bull market, as the decline from the 2011 highs is expected to be an ABC. But a fib drop of 62% if that’s all we get would still be painful.
But if that pattern does apply, we’ve started the wicked leg down. And just as in 2011-12, it won’t be clear as mud at the outset.
I’ve already noted the connection to yields. And all of us SHOULD be aware the bond bull began 40 years ago. So the REAL question, to tackle gold itself, is whether the bond bull is over or not. Have yields bottomed or not? No the correlation doesn’t fit over the whole 40yrs, but it fits for now.