Tuesday, August 24, 2004 12:56:45 AM
this board is eerily quiet... calm before the storm for the gold stocks...? cashed in a little this AM, will be looking to buy back Wednesday or so... we got that 2 year Treasury auction on Wendesday...
Hulbert is interesting today:
By Mark Hulbert, CBS.MarketWatch.com
Last Update: 12:01 AM ET Aug. 24, 2004
ANNANDALE, Va. (CBS.MW) -- If bull markets like to climb a wall of worry, and bear markets like to descend a slope of hope, then the gold market may be on shaky ground right now.
Consider: The editor of the average gold-timing newsletter is currently as bullish as he has been at any time since February 2002, some 21/2 years ago.
So far this year, furthermore, even though gold bullion (38099902: news, chart, profile) has fallen by some $10 per ounce, the gold market exposure of the average gold-timing newsletter has risen by nearly 60 percentage points.
These are not encouraging developments from a contrarian point of view, since the market rarely accommodates the majority. It would be less worrisome if there weren't so many gold timers convinced that gold is in a bull market.
Consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended exposure to the gold market among a subset of gold timing newsletters tracked by the Hulbert Financial Digest. As of Monday night's close, the HGNSI stood at 69.2 percent.
As recently as Aug. 6, the HGNSI stood at 7.7 percent. In other words, the HGNSI has risen by more than 60 percentage points in a little more than 21/2 weeks. By no stretch of the imagination can such an unseemly rush to jump on the bullish bandwagon be considered a wall of worry.
The HGNSI rose to as high as the current level on just two other occasions since February 2002, and soon after both of them the gold market entered a significant correction. The first came at the end of 2002, soon after which gold bullion dropped by more than 16 percent, and the second was in late May of 2003, following which bullion dropped by more than 8 percent.
The current HGNSI reading is worrisome not only because it is so high in an absolute sense. It also is high in a relative sense.
For example, consider the HGNSI level in early April, when bullion nearly reached $430 per ounce, nearly $20 per ounce higher than its current price. At that time the HGNSI got no higher than 46.9 percent, or more than 20 percentage points lower than the current reading.
In other words, despite gold being significantly lower today than then, the average gold timer is much more bullish.
These developments in the gold market are well illustrated in the accompanying chart, which compares the HGNSI so far this year with the price of an ounce of gold bullion. Note carefully the upward slope of HGNSI's trend line, which is the line that is the closest fit to this index's daily readings since New Year's. Sure looks like a slope of hope, doesn't it?
To head off at the pass the e-mails I no doubt otherwise would get, let me stress that the decline that this analysis suggests is imminent need not be the beginning of a bear market. On the contrary, that decline does not necessarily have to last very long or take gold's price down very far.
In fact, that decline could be relatively mild if, during the next correction, the average gold timer quickly becomes more skeptical of gold's prospects.
But if the average gold timer remains stubbornly bullish in the face of that decline, then a tradable bottom may have to wait until the gold market has dropped a lot further.
Hulbert is interesting today:
By Mark Hulbert, CBS.MarketWatch.com
Last Update: 12:01 AM ET Aug. 24, 2004
ANNANDALE, Va. (CBS.MW) -- If bull markets like to climb a wall of worry, and bear markets like to descend a slope of hope, then the gold market may be on shaky ground right now.
Consider: The editor of the average gold-timing newsletter is currently as bullish as he has been at any time since February 2002, some 21/2 years ago.
So far this year, furthermore, even though gold bullion (38099902: news, chart, profile) has fallen by some $10 per ounce, the gold market exposure of the average gold-timing newsletter has risen by nearly 60 percentage points.
These are not encouraging developments from a contrarian point of view, since the market rarely accommodates the majority. It would be less worrisome if there weren't so many gold timers convinced that gold is in a bull market.
Consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended exposure to the gold market among a subset of gold timing newsletters tracked by the Hulbert Financial Digest. As of Monday night's close, the HGNSI stood at 69.2 percent.
As recently as Aug. 6, the HGNSI stood at 7.7 percent. In other words, the HGNSI has risen by more than 60 percentage points in a little more than 21/2 weeks. By no stretch of the imagination can such an unseemly rush to jump on the bullish bandwagon be considered a wall of worry.
The HGNSI rose to as high as the current level on just two other occasions since February 2002, and soon after both of them the gold market entered a significant correction. The first came at the end of 2002, soon after which gold bullion dropped by more than 16 percent, and the second was in late May of 2003, following which bullion dropped by more than 8 percent.
The current HGNSI reading is worrisome not only because it is so high in an absolute sense. It also is high in a relative sense.
For example, consider the HGNSI level in early April, when bullion nearly reached $430 per ounce, nearly $20 per ounce higher than its current price. At that time the HGNSI got no higher than 46.9 percent, or more than 20 percentage points lower than the current reading.
In other words, despite gold being significantly lower today than then, the average gold timer is much more bullish.
These developments in the gold market are well illustrated in the accompanying chart, which compares the HGNSI so far this year with the price of an ounce of gold bullion. Note carefully the upward slope of HGNSI's trend line, which is the line that is the closest fit to this index's daily readings since New Year's. Sure looks like a slope of hope, doesn't it?
To head off at the pass the e-mails I no doubt otherwise would get, let me stress that the decline that this analysis suggests is imminent need not be the beginning of a bear market. On the contrary, that decline does not necessarily have to last very long or take gold's price down very far.
In fact, that decline could be relatively mild if, during the next correction, the average gold timer quickly becomes more skeptical of gold's prospects.
But if the average gold timer remains stubbornly bullish in the face of that decline, then a tradable bottom may have to wait until the gold market has dropped a lot further.
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