"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, May 20, 2013

Have the Mining Shares finally Bottomed?

While one day does not a trend reversal make (and it is very important to keep this is mind), the HUI has found some buying support (finally!) near the confluence of several important technical support levels on the price chart.

I am using a weekly chart to show both the Fibonacci retracement levels and some horizontal support zones plus the pitchfork lines.

The first thing to note is that the index did close below the last Fibonacci retracement level noted which is the 75% retracement of the entire rally off the 2008 low and the 2011 high. That level is near 272. Strict adherence to Fibonacci theory teaches us that if this level gives way, odds favor a complete retracement of the entire upside move meaning we could see the HUI move all the way back down to near 160. However, we have had only one week in which the index CLOSED for the week below this level. Usually we would want to see TWO CONSECUTIVE WEEKLY CLOSES below this level to increase the likelihood that the index will move back to its starting point of the rally. That has not occurred yet.

Also, as you can see, there is a band of horizontal chart support  shown by the red rectangle that comes in near the 240 level. This level of support dates back to early 2009 and still has some validity to it.

Lastly, just outside the median line of the pitchfork lies an area of support coming in right at 240. It seems to me that if this index is going to hold, it is going to hold here and now at this level. If not, it will more than likely track the lower dotted line over the next few weeks.

To feel that the worst is over in this sector, I would like to see the index move back above last week's high near 275 or so to close out this week. If it can do that, I believe we will have seen a final bottom in the mining shares. The jury is out until Friday.

Here is a look at Goldcorp (GG). Notice the Outside Day Bullish Reversal Pattern coming after a very prolonged move lower in price. That tends to give the pattern more credibility. I would prefer to see a higher volume reading, much like the one seen back in April, to go along with today's nice showing but if the bulls can build on this the remainder of this week, they might spark some more serious short covering in this particular share by Friday. We'll see.

Today's Commentary by Trader Dan posted over at King World News

Dear friends and readers;

Eric King over at King World News has asked me to put together some commentary on today's wild ride in the precious metals markets. Please check in over at www.kingworldnews.com to read those along with the charts detailing the price action.

I need some time to go and find my stomach!

Trader Dan

CME reporting Silver Trading halted 4 times last evening

I will get more info posted on this as it becomes available from the CME Group. As mentioned in the brief piece I posted last evening, volume on the collapse in price was extremely light. There was an air pocket underneath the market but once price fell towards that major support zone near the $20 level, it rebounded quite ferociously. Further aiding the buying off the lows is the fact that Copper is proving to be quite resilient.