The daily chart of HUI is about as bearish as you can get. Recall that we had noted previously that it was concerning that the HUI daily chart was not particularly over sold. The index then plunged and over sold is what it became.
But the lack of follow through then manifested in a lame looking Bear Flag, which is breaking down today. This could be a prelude another hard plunge. I want to be as contrarian as the next guy, but the technicals are always the technicals and this thing just looks bad and so now that the over sold has been reset to a degree, HUI is set up for further decline.
The next target is the low 300’s. Will it stop there? I’ll tell you what, I won’t be buying anything there either if I do not see some signs that the sector is not slipping into crash mode.
Bigger picture, considering USD strength and commodity weakness, we need to be working on a deflationary case that is still stuck in a transitory Goldilocks mode. We will continue with that going forward. But the gold stock sector is broken, no ifs ands or buts. There has been enough time for HUI to negate the breakdown and it has not. A whole host of downside possibilities is in play and should be respected.
The recommendation continues to be to let the bull case prove something, anything before commitment. Otherwise, bottom calls prove hollow and just sound like hope.
