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Gold Stocks
This is a
snippet from NFTRH172 focusing on the writer's methods of viewing markets
from a visual and psychological perspective. I just want readers to continually
think about herds and about what it takes to be able to get contrary these
herds at the appropriate times. NFTRH172 then proceeds on to actual intensive
analysis of the precious metals sector and the macro market backdrop.
I learn by
looking at pictures. When I was a kid I took a psychograph test on some
machine that asked me to list my favorite colors and then spit this out,
among other things: "You appreciate beauty in your surroundings... you
are a visual learner", and damned if the machine was not right. I am not
a 'facts and figures' learner, which by the way is why you do not pay me to
analyze the bottom lines of your favorite individual stocks. :-)
No, here at
the newsletter with the
weird name, we are going to proceed within our comfort zone, and that
means we are going to be bullish when it is appropriate on a risk vs. reward
basis, per simple pictures that cannot be disputed (okay, along with a few
facts and figures here and there). For instance, the picture above cannot be
disputed in that gold stocks are in a decade long secular uptrend vs. the
broad S&P 500. The HUI-SPX ratio broke upward out of an uptrend channel
with the euro hysteria, and was simply hammered for having done so.
As this
process played out, risk management was employed to mitigate a particularly
nasty phase for gold stock players, in anticipation of better things to come.
This picture was created during the carnage to lend perspective to the
proceedings. The perspective was that the HUI was simply coming back to the
positive side of the risk vs. reward equation vs. broad equities, as the
ratio settled at a strong support area.
Everything
else is just noise in my book. We know the generally supportive fundamentals
of the sector and the 'in line' valuations of quality gold companies, but
this view into the mechanics of a major macro theme playing out after the
acute phase of the European debt meltdown, refines and distills the process
into something understandable and actionable, for visual learners at least.
Every step of
the way the gold captains implored the troops as to why precious metals were
a vital asset in the face of monetary crisis, and why gold stocks were a good
play on the precious metals as they sported excellent valuations, not seen
since 2008. Well, the market did not care about all of this egghead stuff for
four - count 'em - FOUR months after the September
high.
But the
picture above provided perspective that would prove important for people who
ultimately would like to be on the right side of things, at least where the
interplay between broad stocks and the gold sector is concerned.
Gary Tanashian
http://www.biiwii.blogspot.com
http://www.biiwii.com
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