G

ABX, G, FVI gold stocks big and small

Hamilton

abx jan 20 2011 g jan20 2011

Both these large cap. gold stocks developed rising wedges/flags, pennants, contracting triangles in EW speak or whatever you want to call it. More often than not these structures are erased in their entirety.Roughly that would take ABX down to $36 and G to $35. That is not all of it as, depending on how we get there, 3-waves as shown in the ABX chart, or 5-waves as in the G chart, these stocks COULD drop a lot further. Notice that on both these stocks the RSI and MACD were ringing the proverbial bell on the floor. Goldcorp rang the bell even louder having failed 5 times to rise measurable above it’s previous peak.

Small gold stocks have not done much better recently, see for instance ZJG which is a sort of small cap.index. Recently, November last year, right at the top, we pointed to FVI for the simple reason that it is called Fortuna and all though we do not speak Spanish ,we suspect that it translates , more or less as fortune. Of course it does not say which one – the one you are going to make or the one you are going to lose. Here is the (short-term) chart;

FVI jan 2011

We are trying to keep an open mind with regard to the count. The one used above is by no means the only one possible so we concede that it,and the conclusions drawn from it, may be dead wrong. On the other hand there are a few good reasons to assume it might be correct. For one thing , the upper-trend line is respected perfectly by each and every high in the stock, of which there are five or six. Also the 5th wave, which is the extended one, is pretty close to being equal to waves 1 to 3 combined, again a common occurrence, especially where commodities and/or commodity based stocks  are concerned. Furthermore the RSI and MACD started rolling over about half a year ago. If correct $2,50/ $2,00 are consistent with this count, which if you own it from the highs would mean the loss of , at least, half your fortune.

GOLD, the stuff , and the XAU

Hamilton

Once again I acknowledge that I do not understand all the hoepla surrounding gold, nor do I have a clear EW count to lean on. Nevertheless it seems to me, once again, a good time to step aside. Here are a few charts, of the stuff and the stocks by way of the XAU.

Gold Nov 2010 XAU Nov 2010

Also Goldcorp G.

G Nov 2010

A few things are immediately clear. Goldcorp dropped like a stone just as the world as we know it, at least the financial part, supposedly came to an end. When subsequently Europe became unhinged with Greek , Portugees  and other PIG problems Goldcorp barely budged, in fact it flat-lined for almost two entire years as if oblivious to world events. Fortunes were lost on this stock as a result of predictions then by the pundits that gold would go to $3000 and above, now it is just double topping.

Looking at the XAU as a broader guage of gold stocks, it is readily apparent that there is a disconnect between the stuff and the stocks. The XAU has been triangulating for a year and a half and have only recently continued its trek upwards. Even so it is essentially just double topping and could potentially have completed (or nearly completed) its thrust. The next move should be back to the lowest point in the triangle. The disconnect between stocks and the stuff is probable due to the many ETF that have been created in this space creating the artificial demand for the stuff relative to the stocks. This disconnect or non-confirmation does not bode well.

Gold itself has managed an impressive gain over the past few years, but not more than many other commodities like coffee, wheat and a whole host of others. At this point it is approaching the upper parallel trend-line which has been in force for over two years now. It could go a further $100 or so but then will probable drop at least $250/$300 which it seems to do with the regularity of clockwork.