viernes, 14 de febrero de 2014

viernes, febrero 14, 2014

Getting Technical

WEDNESDAY, FEBRUARY 12, 2014

More Support for Gold: Charts Take Bullish Turn

By MICHAEL KAHN

Gold stocks are moving higher and gold mining shares have retaken their 200-day moving averages.



Sochi is not the only place where gold is the object of desire.

Although there are still plenty of doubters, the charts of gold and gold mining stocks look rather good. And for the first time since December 2012, the Market Vectors Gold Miners exchange-traded fund (ticker: GDX) traded above its 200-day moving average (see Chart 1). That's bullish.

Chart 1

Market Vectors Gold Miners ETF


This technical metric is not the magic dividing line between bull and bear markets that some would make it out to be, but the move above it suggests something positive is happening for the sector. And while gold itself, as represented by the SPDR Gold shares ETF (GLD), is not yet above its 200-day line, it has several other bullish technical events under its belt. Let's start there.

There is no debating the rising trend in the gold ETF since December (see Chart 2). The question is whether this is just a short-term wiggle, or a shift in fortunes for the better. The evidence suggests we're witnessing meaningful change. Two Barron's colleagues have recently made the case for gold, arguing that economic fears in China may drive demand.


Chart 2

SPDR Gold Shares ETF



To be sure, we've seen a big rebound rally in this market before. After gold's bear market tumbled into a selling climax in June of last year it staged a rather strong, albeit short-lived, recovery. The more cynical among us would label it as a "dead-cat bounce" because it followed the steepest decline in the metal since 1999-2001.

But after six months of choppy, sideways trading, this market has had enough time to heal. In January I suggested gold might be near a bottom, and the GLD fund is up 4% since then. And this week the market moved above a ragged but still acceptable upside-down head-and-shoulders pattern.

No single bit of bullish evidence is especially huge, but taken as a package it is compelling. In addition to improving momentum, the trend is positive in on-balance volume, a measure of how much money is flowing into or out of a market.

Gold mining stocks have an even better story. With the exception of a postfinancial crisis rebound in 2008-2009, gold mining stocks have underperformed the metal in a big way. This was true when gold was soaring toward its eventual peak in 2011 and when it was gripped by its bear market after that.

But right now, the performance ratio of the GDX gold miners ETF versus the GLD gold ETF sports a bullish momentum condition on long-term charts. The ratio made a lower low in December than it did in June, but the relative strength index (RSI) made a higher low over that same span. It suggests a waning in bearish conditions and often presages a rebound in prices—the ratio itself, in this case.

Gold miners paused in Wednesday's trading but money continues to flow into many of these stocks, according to Kevin Schweitzer, a senior vice president at investment bank Maxim Group. He added that even if gold itself pulls back to test its previous lows, gold stocks have likely bottomed for good.

Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, offered an insight into sentiment for gold stocks. With regard to the precious metals stocks, analyst ratings on all component stocks show just 46.84% Buy ratings and 10.97% Sell ratings. It is the second-highest percentage of "sells" of the 32 sectors he tracks, and suggests that analysts are excessively bearish. Detrick calls that a great contrarian indicator for longer-term investors.

Some mining stocks are quite strong, such as Royal Gold (RGLD), which sports a 48% gain since December. Others, such as the giant Newmont Mining (NEM), are still officially in declining trends. But overall, the sector is in a fairly good technical position.

As for silver, the bullish case on the charts is not quite as developed. Schweitzer said it still feels like an elephant is sitting on that market but a breakout could be very quick to catch up with gold.

Precious metals and the stocks of companies that mine them are sporting much improved technicals, and that means it is time for investors to take a closer look.

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