The golds are behaving rather badly. Goldcorp , unexpectedly made a new high albeit with a miniscule fraction and American Barrick certainly wants to take its time. In this case the wedge is pretty clear (wave 3 is longer than 5 , by the way) and consequently the target remains the same, $36.
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;
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.
Just a few weeks ago we recommended selling this stock when it was slightly over $53. It did, very briefly, shoot up to $56 but has dropped about $10 from there. That recommendation was based on a triple, multiyear top and the near perfect ,symmetric, A-B-C ( a larger B wave) that took us there. Of course having undone its hedging programme entirely was enticing the Gods a little too much.
More importantly, this buy gold craze that seems to be going around for some time now, is either based on the coming end of the world (which, if correct , makes trading the stuff pretty well pointless), or on the coming inflation. Everybody seems to know that the 2+ trillion of money created by the Fed. must lead to inflation. That, however , may not necessarily be so. With regard to that I would highly recommend reading an article (28 pages) by Vijay Boyapati, called “Why Credit Deflation is more likely than Mass Inflation”. Just Google the titel and it is available/downloadable as a pdf file. The article is readable and is not written using the usual esoteric math and formulas that tend to disengage the reader after the first paragraph.
Right or wrong ABX should drop further to about $35, regardless.
ABX is a reasonable proxy for gold being the largest producer and, only recently, being totally un-hedged . Here are a few charts;
I am very agnostic about all the arguments that are doing the rounds that gold can only go up. For 15 years or so this stock has made no progress whatsoever. Even after doing away with its hedge programme, a change that really sounded more silly than ever at the time, hardly a budge for this largest gold miner. Looks very much like a wedge, that is for the c part of an a-b-c correction. These sometimes go on longer than one could reasonable anticipate, but since we are pretty close to double-topping , my guess is that it is game over. It is actually quite a non confirmation between the ‘stuff” and the stock. From the lows in 2001 , or so , this stock has gained about 150%+ in value, the stuff itself is going up by 5 to 6 x.
Some silver stocks, poor man’s gold, equally suggest a little caution. Here is one out of many.
Nice 5 waves, maybe?