Gold and Materials Update

Materials are running, there’s nothing secret about that.  Let’s take a quick look at where we are.

We are now at a critical juncture in the materials sector $XLB, an area that has acted as both support and resistance on several occasions.  It’s amazing to think that the sector has now retraced the entire collapse from 2008.  I highly doubt we are going to just blow through this level, especially with the fact that the sector is extended on the daily time frame.  It’s time to take a rest which means you should start rotating out of those steel names that have been on fire.  If you have large positions that you’d like to hang on to, I would be selling some calls here to protect yourself a little.

Gold $GLD $GC_F found support at the 20 week moving average, above a critical consolidation area.  This is very positive action as major investors stepped in to support their earlier buys on the breakout.

I’ve added to my gold miner position last week by picking up $IAG and $RBY, I still hold a large position in $EGO.  I don’t think we take off from here, it’s going to take some time to regroup and work off the froth from November.  I’ve drawn on the chart what I believe to be the most likely path.  You have to accumulate the materials and underlying commodities on dips, do not chase the strength, it hasn’t worked.  Be patient, gold is going higher, my ultimate target is 1300 and as high as 1360.

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