Wednesday, November 28, 2007
Gold - Weekly Chart
Edit (11:25) And here we see the continued reaction of the oil bulls. Gold was vulnerable to the majority who bought it because "high oil is causing inflation!" and this combined with its still over bought weekly chart, makes us vulnerable. It is annoying watching others' mis perceptions hold sway, but it is what it is; a market correcting itself of its excesses and purifying the investor base to ever-smarter money.
Separately, the SOX and tech stocks are right on track to our view. I will not pretend I did not have a couple white knuckle moments after making that bullish call. But this may be more than just short covering as the wild ups and downs of the last couple days imply we have seen the making of a pained, well fought bottom. I remain bullish on tech - for a swing trade if nothing else.
Edit (1:01) Adding an HUI-Gold ratio chart. As you know, gold stocks rising in tandem with one of their cost inputs (oil) made me uneasy. We are entering a phase that will ultimately be very bullish. Gold is being hit by weak oil and the slowing inflation pablum. Think about this though; what is hurting gold now is absolutely necessary for the next leg up to 900. The Fed must have the leeway to drop rates and add the next round of inflation policy that the stock market is currently celebrating. They cannot do that with gold @ 800 and oil @ 100. At least they can't do it without looking like total snake oil salesmen. The big picture remains gold positive as it is THE monetary inflation barometer. But first it needs to shake off its economically positively correlated commodity cousins. The gold miners, as leveraged plays on the metal will look to smash the upside of the ascending triangle in the ratio and then the party really gets going. Until then the name of the game is survive and know who and what you are and why you are doing what you are doing.