Gapping Over the Gap Again

We have previously discussed the importance of gaps as areas of resistance for gold stock indexes in the bear market to date. It stand to reason that once the market turns for good, or at least begins to embark on an intermediate term rally, gaps could also begin to provide support on pullbacks. Given that the HUI has created an upside gap on Monday and gold has weakened a bit in overnight and COMEX trading today, this idea is being put to the test at the time of writing:

 


 

HUI-gaps-1Gapping back above the previous downside gap for the second time, and incidentally back above the 50 dma. We have included the next important gap as well as the 100 and 200 day moving averages in the chart above as well, as these are all going to be potential targets/resistance areas in a larger rebound – click to enlarge.

 


 

Gold itself still remains below the $1,350 level that represents stiff short term resistance. It is not unusual to see several attempts at a breakthrough before it actually occurs – the more often the market tests a resistance or support level, the more likely a breakthrough will occur per experience. It is also noteworthy that silver actually managed to stay quite strong in today's trading. Such short term divergences are usually positive.

 


 

Gold futures 30 minutes-1

At the time of writing, gold has weakened (above is a 30 minute chart of the December gold futures contract), giving back a good chunk of Monday's rally – click to enlarge.

 


 

Another chart worth taking a look at is the GDM bullish percent index. We're not sure whether the concepts of 'support and resistance' are really legitimate in such a derivation (the 'bullish percent index' shows the percentage of index components that are currently on a point & figure buy signal), but the chart actually seems to exhibit such levels. It is also worth noting that it has spiked to the 'zero' level three times in a row and has just experienced its biggest upward reversal in many months. The BP index obviously cannot go below zero – once not a single stock in an index or sector is on a 'buy' signal in P&F terms, things can no longer get any worse in terms of this indicator. That does of course not mean that prices can no longer decline, it merely is an indication of how extremely oversold the sector has become.

 


 

BPGDM

The GDM (NYSE Gold Miners Index) bullish percent index – moving above 'resistance' – click to enlarge.

 


 

Speaking of P&F signals, here is a link to the GDM's P&F chart that helpfully also provides a chart interpretation and a price objective (we would take such objectives with a big grain of salt, but it cannot hurt to be aware of them).

 

Addendum: OT, Haystack Movers

What else is there to say today? Oh yes, if ever you have to move a really big bale of hay, definitely call 'Kashmarik.com'. It is possible that the company is working along the lines of the NSA: if you want to find a needle in a haystack, you've just got to get hold of the entire haystack.

 


 

Hay

There is no haystack too big for us …

(Photo source unknowm – The Web)

 


 

 

 

Charts by: BarCharts, StockCharts


 

 

 

 

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One Response to “Gold Stocks – HUI Gap Spotting, ctd.”

  • SavvyGuy:

    Umm…where’s the mystery in the hay picture? It’s obvious that the cow hired the truck to move its annual supply of hay from the pasture to the barn. Moo!

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