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Metals Stocks Update
For the past couple of months,
we've focused on gold mining company stocks, which have largely
remained under pressure per our previous forecasts. This month, we
take a broader view of the precious metals stocks group, as reflected in
the PHLX Gold & Silver Sector Index (XAU).
Although we believe a top was
made in the bull market for metals stocks, we think that near term, they
should likely continue their recovery from the early October lows.
As the Elliott Wave labels suggest, this would be Minute Wave ( c )
advance to complete a larger Wave 2 rally. If correct, our
expectation would be a retracement towards the 216-219 area, right around
the peak of Minute Wave ( a ). At this point, it would require a
violation of 228.98 to tell us a bull market top was not made. The
202 and 209 areas offer lower resistance.
Because the November
8th-December 29th decline could arguably labeled as a "five,"
our alternative wave count indicates the November 8th high ended Wave 2,
and the decline to December 29th is a Minute Wave ( i ) down. Should
the current rally fail and reverse to violate the 173.96 low of December
29th, the ALT count may then be applicable.
One concern about this group
is that despite 25 percent corrections in both the XAU and HUI indices,
put/call ratios for a number of index participants remain amazingly
low. The lack of any deep investor pessimism following these
corrections argue strongly against anything but short term bottoms having
been made. With investor optimism for metals shares evidently still
riding high, the margin for a sharper correction to follow still very much
remains.
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