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Let's dial in the ratio of the HUI Gold Bugs index vs. the S&P 500 that we have been reviewing from a monthly 'big picture' perspective. This weekly chart is also a big picture, but it adds the 250 week moving average and weekly MACD, along with its slower brother, TRIX, for more definition.
People should realize that while there is significant reason for fundamental optimism about quality companies within the gold stock sector this is, on a pound for pound basis, one of the most aggressively hyped stock sectors on the planet. The same can be said for gold itself.
Why is this? I believe it stems from a core and righteous belief by many gold bugs that things are not right with the system (thanks Captain Obvious :-)), gold should be money again (or at least it should anchor the paper of the modern realm) and it is simply a matter of time before destiny is achieved.
Gold, while in a predictable phase of under performance due to the Euro relief and US earnings and temporary 'jobs' pumps, has been beaten back from its impulsive highs during the acute phase of the Euro crisis. Hype took gold up, and hype is taking it down or more accurately, is causing it to under perform what is now being hyped; namely the salvation of the system as we know it and the ever present tout of conventional stocks.
That was a very nice day for the bears yesterday until the rally in the last hour wiped out the day's losses. Overnight ES has broken to a new high and so far the broken resistance area at 1352-3 is now holding as support. Technically however, despite all the drama, nothing much has changed on the SPX chart apart from a double pinocchio of support from Dec 19th that is suggesting a bigger break downwards soon. Short term I have trendline resistance in the 1362 area, and support is now in the 1344-5 area. The 2011 high was at big resistance in the 1370.6 area and that isn't far away now: