NFTRH Update 4.11.13, HUI Technicals

The bullish contrary indicators continue to flow in…

  • Societe Generale and Goldman Sachs run extremely bearish hatchet jobs at a time when the very financial industry apparatus they are a big part of is coming unwound and/or dependent upon huge doses of inflation. √
  • Large speculators are shorting the precious metals as if they were Yen. √
  • Public scared out of the metals? √
  • Hatred of gold stocks is palpable, with Barrick Gold the latest to be wood shedded. √
  • Metals still above major support (Au 1524, Ag 26). √

The list of reasons to be bullish on the precious metals complex goes on and on.  But for the gold stocks there remains nothing technically actionable and this week has thus far failed to prove anything other than a whipsaw and thus we return to the TA.

HUI daily chart

HUI has now formed another… you guessed it, bear flag.  It is almost so obvious I want to expect it to fail (i.e. the index to turn up) but I am trained to go by what I see, not what I think or what other people tell me.  What I see is a bear flag and it is threatening to break down today.

What I also know, given our other long-term work we have reviewed, is that HUI has a valid target down at 250.  The index is below massive resistance, which is the neckline to the big topping pattern.  This neckline is up at around 375.  Thus far HUI has not even managed to stop bear flagging and dropping let alone make a counter-trend try for that resistance.

I have used a combination of selling, cash raising and bear positions to squeeze out a small gain thus far this week.  But it gets tiring compared to the comfort of simply sitting in cash, which has been the recommended risk management position for most people.  If the HUI continues to look as bad as it does now my goal is to sit this one out as long as necessary.  We will keep tabs on what I think is going to be a great contrary play, but we will not force it.  We should let the technicals guide.

So wearing an unbiased technical analyst’s hat, we have a bear flag in the making.  If it breaks down, HUI would lose the 50% secular bull retrace level, which is also the 62% cyclical retrace out of 2008.  250 could easily be next up, as there is notable support there, just below the 62% secular retrace level.

Bottom Line

The gold stocks are in a cyclical bear market with no sign of the downtrend being broken.  Some gold bugs tend to set themselves up as fighters against evil.  NFTRH will not play that game.  We will remain intact, enjoy life and be ready for opportunity.  With respect to the gold stocks, that could come this afternoon on a hard bull reversal that smashes the bear flag or it could come in May from HUI 250 (or lower).

There are myriad other possibilities, but managing risk first and being ready to speculate second has proven the correct method for over a half a year now.  So we should keep doing it that way until something gets proven from the bull side.  As noted in a previous update, HUI’s first job would be to simply break above the first level of resistance noted on the chart at 340.  It has thus far not even been able to do that in a sign of incredible weakness.  Watch for that level as the first bullish indicator.  Absent that, we remain bearish.