On the heels of continued volatility in key global markets, the Godfather of newsletter writers, Richard Russell, put out one of his most import notes. This is a fantastic piece where Russell notes that the gold market is now rising on a “stairway of hatred.” The legendary writer also includes 7 key charts.
Richard Russell: “Friday ended with a late sell-off in the Dow, and some fireworks in the gold area. The real gold action was in the mining shares, which, because they are highly leveraged, tend to lead the actual price of gold bullion.
It’s notable that nobody talks or writes any more about the price movement in the market. 99% of everything written about the market has to do with the news and how it might affect the market. As a result, I feel all alone in writing about the action of the stock averages, and its implications.
For instance, I’ve described the “box” or the trading range that we now find the Dow in. What are the implications of a Dow break out above or below the trading range? In the meantime, what are the Transports and the A-D line doing? I search Barron’s for a column or even a paragraph on the price action but not a word. It’s all endless conjectures regarding what the Fed may or may not do.
When I first started Dow Theory Letters in 1958, technical analysis was unknown, and most market people called technical analysis “voodoo.” I feel as though I’m back in 1958 again.
Next, I want to talk about another forbidden and hated subject — gold and gold miners (my, how gold is despised these days).
I am going to show charts of some representative gold miners, and you’ll notice that RSI (relative strength) is, or was, in almost all cases below 30 which puts them in the oversold area. And note the bullish action of last Friday, which almost nobody has commented on.
Below, the ARCA “gold bugs” Index
The AMEX gold miners index
What’s significant is that all these gold items saw RSI in the oversold (below 30) area, and all surged higher on Friday. Also, anti-precious metals sentiment was so black-bearish last week that I thought, along with RSI below 30, that we might, at last, have struck a true bottom in the precious metals. Of course, it’s always possible that after Friday’s explosion, the gold miners may back off this week and test last week’s lows.