Below is the only Figure present in this update, with further
explanations of what each coloured line represents.
Potential outcomes for the HUI are examined, with the strongest being to the
upside rather than downside. Upside targets are discussed and what must
happen for them to be met.
Weekly Chart of the AMEX Gold BUGS Index
Larger Image
In order to address where the HUI is, I have taken the monthly chart
and added parabolic curve lines to indicate support/resistance lines. A blue
parabolic line was drawn over all the major tops from 2002 until 2011. An
upper black parabola was drawn to include the 2008 and 2011 top, followed by
the lower 2012 high. Finally, a lower black parabola was drawn to include the
2005 and 2008 lows.
The two black parabolas intersect around August 2013,
with current lower support at 345...a close below this level on the monthly
chart would invalidate this analysis and trigger a move lower. At present,
the HUI is now down for the fifth consecutive month that follows a two month
rally. Trader time frames vary and my personal is following 6-8 month
trends...based upon the anomaly we are in, I will provide signals going
forward for tops on the weekly charts for those that wish to trade in and out
of positions. For resistance, a move above 450 would signal a move out of the
parabolic arc congestion zone would signal a strong move to the upside.
The US Dollar Index has been going sideways for months, which has been
difficult in establishing a definable pattern...one comes to an end and it
extends further. Based upon current positioning, it could extend into late
March, but stochastics suggest 2-3 weeks at
best...a move to late March would create an overbought condition. As such,
the sideways price action in the Dollar has affected the price of gold, which
in turn has affected the precious metal stocks, which is the primary cause of
HUI having an extended decline.
The next parabolas that intersect are the upper blue and lower blue
lines that intersect in mid 2014. Based upon the
Contracting Fibonacci Spiral, a top in gold is expected now between August
and October 2013, given the fact a turn around has
not occurred so this will translate into a limited period of time for an
upside move in precious metal stocks. Given the HUI declined to 380, the
upside is likely to be capped at 520-525. This may sound like a move with
limited upside or positive intonations, but one thing that this chart does
indicate however, is that a decline to the 2008 lows has a lower degree of
probability for occurring, given the length of the present decline What the
chart does suggest however, is a continuation of a narrow trading range in
the HUI until late 2014.
Two different cycle waves, one in purple and one in green denote two
potential start points for the HUI back in 2001. I personally go with the
purple starting point, which ties into the Elliott Wave counts illustrated at
the top. By chance, the purple line terminates around mid
2014, which illustrates an equivalent period of time between waves a
(2008 high) and the expected termination point of wave b currently forming.
Wave b should be at least equivalent or longer in time compared to wave a for
the proposed Elliott Wave count to be accurate. One other point to consider
is if two waves are equivalent in price, then the subsequent wave should be
equal to both segments. Although gold is set top peak in 2020ish, precious
metal stocks may have their huge moves after and extend into 2025-2026.
To zoom back into the current time frame of present, I highlighted a green
circle that illustrates the lower 21 MA Bollinger band falling beneath the 34
MA Bollinger band. This observation has been in effect for two months
now...back in 2008, this lasted for around the same period of time before the
index reversed to the upside. This suggests that a bottom is due within the
next 3-4 weeks and although not shown on the chart below, refer back to the
HUI update that shows the weekly chart has a bottom no later than the end of
March.
If things go as expected, there should be a bounce up to around the
515-525 level to complete wave [D]...not that it could go higher, but this
will that will be dependent upon how far the US Dollar declines. Wave [D] can not be shorter than wave [A] (from 2008, which was
4-5 months, depending upon how it is counted), so the upward move that is
pending should be over 4.5 months. Once a top is reached in this coming move,
it will be suggested to lighten up, as the coming Contracting Fibonacci
Spiral top of the broad stock market indices is due no later than May 21st,
2013 (A comprehensive article will be published in the April 2013 issue of Technical
Analysis of Stocks and Commodities that provides the most recent findings
for this cycle). The CFS cycle has been in effect since it started in 1932,
so there is highly probable to remain in force until proven otherwise.
Following the wave [D] top later this year, expect wave [E] to see a
sideways trending pattern within the parabolas until mid to late 2014. What
this indicates is a very sharp upward trend occurring between late 2014 and
2020ish, that should have a trajectory much like 2001 until 2008, only much
higher in price. The only way to be in the game is to be invested in the
game. Continue to be invested in high quality gold and silver stocks in politically
secure locations around the globe that pay dividends. Only 20% or less of a
precious metals portfolio should be allocated to exploration companies or
emerging producers in order to minimize risk.
I will update oil, gold and the XOI later on today, as this article
took significantly longer than anticipated. Also, I will update health care
companies we are following, that still do not indicate tops until sometime
between May and June 2013, which happens to coincide with the Contracting
Fibonacci Spiral top.
Ownership of gold and silver bullion should be accumulated and held
until the expected 2020 top, which will be an aid to capital preservation. I
do want to again stress that the CFS cycle is pointing for a very sharp
inflationary spike that tops out no later than August to October of this year
(maybe November if the US Dollar Index continues to avoid correcting) which
subsequently ties into the CFS cycle. If the HUI takes out 525, then it
raises the possibility of a doubling from current levels, or 700-720, but
again, this will be dependent upon market conditions at that point in time.
The main theme of this article is to illustrate where the HUI is
within its pattern and how it remains confined to the parabolic arcs. A break
below 340 would have bearish implications, but as noted from analysis on the
monthly chart or daily and weekly charts, a bottom is expected within 2-4
weeks. An over extension of the downside move is only increasing the upside
target.
One final Elliott Wave count not shown due to scale is that wave [C]
completed in May 2012 and wave (B).[D] down is nearing completion before wave
(C).[D] rises to complete a flat (3-3-5)...this count has as much of a
probability for being correct as the current labelling
scheme, so please keep this in mind.
One final item to address are stochastics 1, 2 and 3 shown below in order of descent.
The %K in stochastics 1 and 2 have
been in a down trend for nearly two years, which has created an oversold
condition. There is no indication of a reversal in trend based upon stochastics from the monthly chart, but the daily and
weekly charts do indicate a bottom within 2-4 weeks.
Only time will tell if we get a very sharp spike of inflation as
expected before events unfold as expected as defined within the CFS cycles...that
is all for now..back later
on tonight, with an update of oil, natural gas and the AMEX Oil Index.
This article was posted one week
ago with analysis of the AMEX Gold BUGS Index (HUI), except the chart has
been updated.
