YeOldGoldNugget's Blog Spot: HUI

Friday, December 4, 2009

The Good, The Bad and The Ugly

By 79Atoms on Friday, December 04, 2009

Let me start off this article by introducing to you, Clint Eastwood as Blondie. The Good, a.k.a. the Man with No Name, a subdued, cocksure bounty hunter who competes with Tuco (The Ugly) and Angel Eyes (The Bad) to find the buried gold.

Blondie and Tuco have an ambivalent partnership. Tuco knows the name of the cemetery where the gold is hidden, but Blondie knows the name of the grave where it is buried, forcing them to work together to find the treasure. In spite of this greedy quest, Blondie's pity for the dying soldiers in the chaotic carnage of the War is evident. "I've never seen so many men wasted so badly," he laments.

Coincidentally in my story to drive the point home, Blondie aka The Good is represented by the HUI Index and the Gold Spot charts while Tuco aka The Ugly is represented by the Dollar. Blondie and Gold...that can't be a coincidence. Gold vs The Dollar. Anyway, beneath each chart I will try to explain why I believe the chart belongs in either The Good, The Bad 'or' The Ugly.

The Good

HUI Index Daily Chart

Chart is courtesy of marketclub.
Marketclub - HUI Index Trend Analysis

(What's this?)

Gold Spot Daily Chart

Chart is courtesy of marketclub.
Marketclub - Gold Spot Trend Analysis

(What's this?)

Why classified under The Good? Just take a look at the HUI Index chart, take a look at the steady rise never failing to break from beyond its original trend channel from where it started early on in January 2009. Not only that, this week we came $2 dollars short of reaching the all time high. I'd say that qualifies as strong performance. The failing to break the all time high is like I said, just that, stocks don't have to break all time highs in one straight move. Maybe one, two or three attempts.

At least that index managed to get back to earlier highs.

Now on to gold...do the terms 'historic gains' mean anything? I don't really mind the little bumps or a possible correction, what must be done must be done. Like with the HUI, this will just be a correction, not the start of golds downward march to 984.

The Bad

S&P Daily Chart

Chart is courtesy of marketclub.
Marketclub - S&P Index Trend Analysis

(What's this?)

Nasdaq Daily Chart

Chart is courtesy of marketclub.
Marketclub - Nasdaq Trend Analysis

(What's this?)

Dow Jones Daily Chart

Chart is courtesy of marketclub.
Marketclub - Dow Jones Index Trend Analysis

(What's this?)

So, The Bad! What do these charts have in common? They all to me at least, show choppy performance, failing to reach earlier highs is one. Second is, they are all showing signs of a market in disarray. A market in doubt. Will it go higher or will it go down? A market that is tiptoeing along...every leaf, twig or little pebble will set off the noise and release the evil bloodhounds...leaving everybody running for the exits...so to speak.

Methinks, the debt package and stimulus money is running out...nothing like an inflated job report to try to stave off any possible drop. However, there is more needed than an inflated job report to continue this path.

I'm not convinced. I'd be careful, that's all. The Dow Jones even has a rising wedge in there which if confirmed does not bode well.

The Ugly

US Dollar Daily Chart

Chart is courtesy of marketclub.
Marketclub - US Dollar Trend Analysis

(What's this?)

On to the almighty Dollar, the greenback, the world-currency, the safe-haven,...at least, that is what it once was known as.

Almighty? NOT compared to what I can see from other currencies!
Greenback? Last time I checked they were still green.
World-currency? NOT for long!
Safe-Haven? NOT what I can see from gold's chart.

Summary

Now, I'm not per definition saying the markets are going down but I'm just stating and showing you what is on the charts. If they break those resistances then fine, none the wiser and we move on. However, if there does seem to be a reversal going on, then people and investors will, like they did before, take the money off the table. Will that money then go to the dollar or the treasuries...or will that money flow into gold, silver and the commodities?

We all know who came out on top in the movie,...don't we?

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Friday, October 30, 2009

Gold and the Gold Bugs Index (HUI).

By 79Atoms on Friday, October 30, 2009

Gold Bugs Index (HUI)

Chart is courtesy of marketclub.
Marketclub - Gold Bugs Index (HUI) Trend Analysis.

Today we will be looking at the Gold Bugs Index, better known as the HUI Index. I assume most of my readers will know that there are two major gold indices, one of them is the HUI Index and the other is the Philadelphia Gold and Silver Sector Index or XAU Index. There are others of course but I will focus on these ones for now and in particular the HUI Index. The HUI Index is listed on the American Stock Exchange while the XAU Index is listed on the Philadelphia Stock Exchange. So, why two indexes? Well, the HUI Index is solely comprised of mining stocks that do not hedge their gold prices for more than a year-and-a-half into the future.

That is thus a very big difference and one which should be understood and remembered. Why? Well, because that makes a huge difference investment wise. If you think prices of gold are going to rise than I as an investor would rather be invested in the HUI Index than in the XAU Index. So, with a rise in gold prices you will see more gains on the HUI Index than on the XAU Index. Then again, you will also be hit harder when gold prices fall.

So, chart wise I'm sure most will have already looked at the trend lines I've placed upon the chart. Now, honestly, you tell me, ain't those two of the most beautiful trend lines you've ever seen?

Now, I will be the last person telling you that you should let a pair of simple trend lines guide you in your investment decisions! However, they are there! Aren't they? Right there on the chart, back from the lows of when the crisis was in full bloom until where we are now. Perfect trend line!

So, where does that leave us now? Well, I'd say at a critical juncture again. I'd say the fundamentals, real value wise, for the whole gold and silver market are far too great and far surpass every other sector out there, so based on that I can definitely understand why the HUI Index has held and traded around the 380 - 400 for the last three days.

I will make a wager that most every banker, analyst, chartist, broker, fund manager and practically all you can think that invest in gold are looking at those very same trend lines I've drawn. Only difference, all will draw their very own conclusions, some wrong, some right. Time will tell who got it right in the end.

So, I must conclude that yes indeed, those trend lines are just two plain lines on a chart, however, in this case they provide a very clear picture of where we are right now. I think most will agree if I call it standing at the bottom of our lower trend line. All agreed?

So, based on golds strong fundamentals as leading indicator for the HUI Index, the fact that we are at the low of our trend line, the fact that Stochastics is already in the overbought zone and turning back up, the fact that we have traded for 3 days with the same range of prices and not breaking down the trend line makes we wonder if this is not a bottom in the making?

Bad would be the downward trending MACD I'm looking at which is looking to go below zero which indicates a confirmed downtrend is in the works. But luckily, the MACD might very well turn back up from here. Worst case, the HUI Index will look up the 200 Moving Average at around 350 and will find support there.

Well, if we do turn up from here which I think we will, then we are looking at a long term target of around 480 and if it breaks the upper trend line then I'm even more bullish.

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