Gold: A Deeper Dive

by JDH on November 16, 2019

Let’s start our discussion of gold with some long term perspective:

This is the 20 year chart of gold, and as is plainly obvious, gold began a long, slow, bull market back around the time the dotcom bubble burst, with gold in the $250 range.  There was a pull back in 2008 when the credit crises and real estate implosion caused investors to sell whatever they could to raise cash, but by May of 2009 gold had made new highs, and had a great run up to the peak of over $1,900 in September 2011. From there the bear market (within a long term bull market) began, with the bottom touched in December 2015 at around $1,050 an ounce.

So that’s an over 650% gain, followed by a 45% loss.  That’s gold.  Up and down.

The 10 year chart is equally instructive, as it shows two key levels:

First, gold didn’t drop below $1,000 an ounce, as many predicted, so there is a very solid base at $1,000.

Second, the $1,550 level was a solid base between 2011 and 2013, before the price collapsed, and the price did not exceed $1,500 for over 6 years, between 2013 and 2019, until September of this year, briefly.  The previous base becomes overhead resistance, and until gold decisively breaks through that level, new highs are impossible.  (Thanks, Captain Obvious!!!).

Which brings us to the more recent chart, and again, the last two years are instructive (although not as instructive as the longer term charts).  From the bottom in August 2018 gold had a great run up to the magic $1,550 level (touching $1,556 on September 4, 2019), but it’s been all down hill from there, as shown in the red channel, with a series of lower highs and lower lows.

That’s not good.

Are there any encouraging signs?

The Relative Strength Index is at 42, and turning upward, so that’s good news, but unless gold moves through $1,550 any uptick is just a momentary uptick in a medium term downtrend.

As you all know I’m not out there buying gold bullion; I prefer the riskier alternative, which is buying NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, an ETF that holds gold mining shares, and uses leverage to attempt to get 3 times the move in the underlying stocks (both up and down, so it’s a risky play).

As was obvious from the gold chart, the NUGT chart over the last six months shows a base around $25.50, and since the peak in September over $42.50 the picture is not pretty.  NUGT will have to get above this congestion area in order for the longer term uptrend to resume.  The consolidation period may continue for a while, or not, but purchases in the current range are probably a safe bet, with a stop loss around $22.50, just in case.

A final word: here’s a great video on the subject:

“CRIKEY!! (What’s Going on With Gold?) by Grant Williams

Mr. Williams is optimistic on gold, and I agree, in the medium term.

This week?  Who knows.  Check back next week and we’ll see what happened.

 

 

 

 

Pot Stocks Bounce Back

by JDH on November 9, 2019

Not much of a story today: cannabis stocks bounce back.

Canopy Growth, one of the biggest names, was up almost 13% on Friday.  So should we all buy pot stocks?

Nope.

Friday’s action was meaningless, nothing more than a blip in a massive downdraft.

Canopy Growth was almost $60 at the start of summer, and was as low as $25 on Friday, before bouncing over $28.  So, even if it doubles from here, it won’t be back to where it was a few months ago.

I assume that the smart money left pot stocks six months ago, or longer, and will likely never return.  Or, if they do return, it will be to US names, not Canadian, on the assumption that full legalization happens in the US, and that’s where the upside is.

I have spent the last few months selling my holdings in this area, and I have now built up a decent cash position, looking for the next opportunity.

For now, sitting on cash suits me fine.

When I figure out what to do with it, I’ll let you know.

Until then, sit tight.

Nothing to Add

November 2, 2019

I have nothing to say today, so I will say nothing, other than stay the course. Tesla has peaked and will fade, and gold is looking good, but I don’t see anything big happening in the next week, so whatever I’ve said in the past, keep doing that. How’s that for short and sweet? Perhaps […]

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Tesla – The Sequel

October 26, 2019

Well, that was quite the bump for Tesla. From around $170 back in June, Tesla touched $330 on Friday, very close to a high for the year.  Amazing. As long time readers will know, I am NOT a Tesla believer.  I think Elon is a great salesman, and has managed to convince numerous governments around […]

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What’s Next?

October 19, 2019

What is next?  We have a federal election in Canada this week, but I don’t expect that will have any impact on the markets, unless perhaps the NDP gets a majority government which would tank the Canadian dollar, but I don’t see that happening. In the U.S., Trump is Trump, but he is also a […]

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Have the pot stocks fallen so much that they are now a buy?

October 12, 2019

Fortunately for me, I began the liquidation process on my pot stocks many months ago, so I was spared most of the recent carnage.  The pot stock market is down around a third this year, and that’s a lot. TGOD.TO – The Green Organic Dutchman has a brutal looking chart: It closed on Friday at […]

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Bad week for the market, good for gold

October 5, 2019

I’ll keep this brief, since my thoughts haven’t changed since last week. The market hit a rough spot this week, and so did gold, but gold finished strong, and I expect gold to have a strong week or two coming up.  Why?  It’s down, but it’s in an uptrend, so we should see strength in […]

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Not Quite Ready for Liftoff

September 28, 2019

Last week I said gold was ready for liftoff.  Oops.  Didn’t happen. However, like the stubborn mule that I am, I’m still not worried. As the chart shows, since the middle of July NUGT, my proxy for gold, has had a series of higher lows (the vertical lines) and higher highs (the blue circles).  That, […]

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Gold: Brief Pause Over, Ready for Liftoff

September 21, 2019

Pretty optimistic title, eh, from a guy who started buying gold heavily three weeks ago?  No worries, I am very optimistic for the next few weeks. Here’s the chart of NUGT – Direxion Daily Gold Miners Bull 3x Shares NYSE + BATS, an ETF with 3 times leverage to shares of gold miners: As you […]

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Two Weeks Too Early on Gold?

September 14, 2019

Two weeks ago I told you I was increasing my allocation to gold.  Last week, after gold had it’s biggest one day drop in three years, I told you I was a week too early. It would appear that I was at least two weeks too early, as the above chart of gold for the […]

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