Review Of Gold Shares
Eric De Groot | May 02, 2016 01:46AM ET
Gold shares decline, a largely uninterrupted decline since late 2011, broke the ice of uptrend support in 2014. The destruction of liquidity, the depth of markets from declining participation as governments fight the natural flow defined by the invisible hand to save failed ideals and distorted economic theories, has traders wondering when, or worse, if the gold shares will rally again.
The unwinding of extreme optimism, the transfer of ownership in which the minority wisely fades the actions of the majority and pushes long-term cycles to negative extremes, is coming to an end. Those following the message of the market will recognize the transition long before the majority realizes that selling the rallies no longer works.
Summary
The long-term oscillator (LTCO) defines bull opportunity (green box) since February 2016 (chart 3).
Price
The long-term trend oscillator (LTCO) defines an up impulse from 152 to 201.87 since February 2015, an exceptional annualized return for followers of the message of the market (chart 1, 2, 3). The bulls control the trend until reversed by a bearish crossover. Compression, the final phase of the CEC cycle, generally anticipates this change.
A close above 394.08 jumps the creek and returns the trend mark up. A close below 112.06 breaks the ice and maintains mark down. April's monthly close above 187.68 supports continuation of rally that challenges resistance and likely surprises the majority (chart 3). 328.12 and 394.08 represent major resistance.
Chart 1 1922-2025
Chart 2 1971-2025
Chart 3 2000-2025
Concentration
GPMC3 and GPMC4, long-term cycles approaching extreme Z-Scores, suggests a decline closer to an end than beginning (chart 3). GPMC3 and GPMC4 reached -1.90 and -1.87 at the 2000 bottom. Continuation of gold share's decline, the pushing of GPMC4 closer to -2, should complete the bottoming process as the majority increasingly renounces them.
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Chart 4
Chart 5
Time/Cycle
The long-term seasonal cycle defines weakness in the risk-free monthly returns for precious metals mining stocks (GPMrf) until May. This path of least resistance restrains upside expectations (see price).
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