Like our post last week, here is another, a fundamental rant on Gold. This one deals with the US Dollar. Like all of these types of fundamental articles, they fail to connect the totality of the global flow of capital.
Once again, this article is tortuously long. It focuses on the fundamental meme of the US Dollar collapse. Busy people do not have the time or energy to read articles like this. Never mind the validity of content of the article. The dollar collapse crowd has been ranting for decades. These rants are fear porn. As if we don’t have enough of fear porn in the mass media at the moment.
The best thing to do, for individuals (and money managers) is to just follow the price action. Filter out all of the rant fear porn articles (and teevee, and tubes and podcasts). One of the fear porn podcasts this AM is droning on and on about Deflation versus Inflation (another fear porn topic going on for decades). They barely mention the price action of Gold. This is almost comical.
To their credit, the Macleod article, does have a chart of Gold with the 50 day and 200 day moving average. We post here a chart of Gold relative to a 50 day and 200 day 20% annualized rate of growth (the bottom indicator). This is a Bullish trend investing trend filter. Almost everything (indexes) else doesn’t come close.
As always, trend investing is not a prediction, and is not a forecast.
This post departs form our usual news format and goes into as to why fundamental analysis is not only obsolete, but very distractive. From the perspective of individuals trying to make decisions on managing their retirement portfolio. Individuals are faced with looking up into a waterfall of what? .. nonsense?
They make 5 points as to why they like Gold Miners. So, they have the correct posture towards gold miners, which is Bullish, but really muddle the reasoning. They sum the reasons up with five points and associated charts. These points are not only irrelevant, they are very distractive to the price action of gold miners. So we’ll list their 5 points and vastly simplify them.
The article starts with a short mention of history of Colorado mining. Nice stuff, but not needed for DIY (do it yourself) retirement portfolio management (or any portfolio management). Boulder and Denver have long become detached from the original Colorado roots. Some of the small towns over on the western slope are struggling to maintain some thread of their heritage, instead of becoming a Wall Street petting zoo.
The 5 article points are:
United States M2 & 65 Day Rate of Change The problem with this fundamental information, which is sketchy to begin with, is 1) that analysis is obsolete, but, more important, 2. totally unnecessary. No one cares.
Gold Miners vs. Gold Essentially this is the ratio. Totally unnecessary. Again, no one cares.
Gold Miners vs. the S&P 500 Index. The problem is the S&P 500 Index is Bearish. This is like comparing a Porsche vs. a BMW out on a track, and the BMW is broken.
Gold Miners Price vs. EBITDA ratio WTF? No one cares.
Gold Miners Current Ratio Repeat: WTF? No one cares.
These correlations (or non- correlations) do not cause the asset class to do something, and are distractions from looking at the long term price performance of the asset class. The Fed M2 doesn’t make miners go up or down.
So instead, start with a benchmark of an absolute rate of return over a time segment. Eliminate extraneous noise, such as comparing gold miners to a bearish market (the S&P 500).
Here is Gold Miners Index (GDM) or the Gold Miners Index ETF (GDX) compared to a 20% annualized rate of return over a 200 day average. The GDM is trading 20.4% above the benchmark. The stats are printed in the upper left corner. The Indicator is the bottom panel. Obviously this is Bullish, with no obfuscation from obsolete info from the Fed website. (BTW the Fed is probably the worst forecasting entity in the history of the planet, using their own obsolete information, such as M2, etc).
And, the chart of Gold vs. 20 % annualized over 200 days average, Bullish:
And the chart of The S&P 500 index annualized over 200 days average, Bearish.
So all summed up in three charts. no need for The Fed and other extraneous and superfluous and obsolete information.
Using the long term trend investing model of 20% annualized rate growth over a 200 day moving average, the following indexes are Bullish, as of the close Friday. Ranked by performance. Pure Trend Investing, no predictions, no forecasts, no fundamentals.
Gold, on a long term Buy signal, trading way above most everything else, including the wild casino biotech stocks (virus), seems to be totally ignored, at least by the mass media, and by most people that we talk with. .. this is very Bullish.
Using our long term trend investing model of 20% annualized rate of growth , in the stock chart below, the stock is trading above the 50 day 20% annualized, and the stock is trading above the 200 day 20% annualized, and the 50 day is above the 200 (the bottom panel). This is very Bullish momentum. Most everything else doesn’t even come close. Most of the podcasts and video posts talking about gold, yammer on and on about fundamentals, which is faulty at best, none of that is necessary. It might be entertaining, if you have the time.
The Dow Jones 30 Index (DJIA), has rallied up to a major Price Reversal area, S/R (support and resistance) at $24,668 to $24,722, as displayed in the stock chart below. The price action here is a Reaction High, and resulting in selling. The index is not trading above the long term benchmark, of, at least a 20% annualized rate of growth over a 200 day moving average. Several other Indexes are at benchmark, such as Gold (GC) and The Gold Miners Index (GDM) and The Nasdaq 100 Index (NDX), as of today.
This is pure Trend Investing, using price action only, no fundamentals, and no predictions.
The Dow Jones 30 Index (DJIA), today is trading at major S/R (support and resistance). The S/R level is $24,668, as displayed in the stock chart below. We will look to see if this level holds. The index is not trading above the long term benchmark, of, at least a 20% annualized rate of growth over a 200 day moving average. Several other Indexes are at benchmark, such as Gold Miners Index (GDM) and The Nasdaq 100 Index (NDX).
The Gold Miners Index (GDM), trading in excess of our trend filter of at least a 20% annualized growth over a 200 day average, has broken out over long term resistance of $886.00. Next, we will to see the index stick for at least a week, or longer.