by Pater Tenebrarum, Acting-Man.com:
Bad News … At Least in the Short Term
Unfortunately the HUI index violated the previously highlighted gap support in Tuesday’s trading, which killed the ‘island reversal’ idea (it did however revive the idea that all upside gaps in the index tend to eventually be closed). It was especially worrisome that this happened with gold relatively stable, i.e., the HUI-gold ratio once again went into the ‘wrong’ direction. Per ample experience that is a sign that gold is set to decline further in the short term (we are always open to surprises on that front, but those are rare).
Gold itself is conspicuous by its utter failure to profit from recent weakness in the US dollar. This is a bearish sign as well. So at present bulls are reduced to hoping that the long term statistics on extreme oversold conditions in the gold sector are going to pan out for the 8th time since 1969. Since those have in all previous cases but one involved additional weakness in the short term, all is not lost. However, in fairly typical bear market fashion, the index has again declined after almost touching its sharply declining 50 day moving average from below. So it is once again uncertain whether the recent back and forth is actually part of a bottoming process or not.
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