HUI Daily Technicals
HUI got above the 50 day averages and changed the daily trend by gapping up January. It then made a consolidation handle, which found support at the EMA 50 in early February. It then became gappy as aggressive buyers chased it up to its over bought state (as of yesterday).
Two new support areas were created by this activity. As noted previously, 220 +/- has replaced 210 +/- as critical support. That is one we should keep our eye on.
But HUI remains in a sharp (and ultimately unsustainable) short term uptrend channel. Yesterday was a hard enough reaction (GDXJ was down nearly 7%!) that HUI and many individual stocks came to the first level of potential support. The very short term EMA 10 and the long term EMA 200 are converged at 232+. Also a gap was filled.
It is possible that the short term steep uptrend is not over and that the over bought was cured on a very short term basis to a degree sufficient for another burst higher. But there is resistance beginning at 250 up to 260, which was the September high.
Yesterday was healthy and a drop to 220 +/- would be healthy as well. This update is as much a note to be prepared for one more up burst as it is to make note of potential test of support in the 220 to 225 area.
Broad Market
Certain commodities continue to blast upward (natural gas, agriculture and until yesterday, silver come to mind), doing this to the CCI index:
CCI is keeping with the theme of taking a rally in one big, over bought gulp. It causes me concern. Put it this way, if this were the HUI I’d have probably sold everything (as opposed to holding most things, with a little hedging).
Per some public posts yesterday, I am short and got shorter on the stock market. That must mean I think there is a better than even chance that the ‘bounce’ after the January correction is going to fail. The parameters are very tight and if the Dow and S&P 500 break resistance and NDX (QQQ) breaks above the Reverse Symmetrical Triangle I will have to admit defeat. If not, I expect a new downturn.
So while CCI has made a great move and fixed its weekly chart (opening the prospect of an extended bull phase), one might envision a hard correction in the ‘inflatables’ in tandem with a new down phase for the stock market, if applicable. In other words, the prospect is in play that we could have a market liquidation sooner rather than later with the best part of any ‘inflation bull’ rally coming after said would-be stock market correction.
The precious metals rallied before the CCI and if their corrective activity continues here it would be a warning on the very over bought commodity complex. So one scenario is that the CCI can correct and later try to establish the 525 to 530 area as support to a new bull phase. The 50 and 200 day moving averages are meeting and turning up in that zone.
The precious metals, commodities and stock market have been spending more time in positive correlation than not on the current stock market bounce.
Bottom Line
The update is not meant to give directions because there is a lot of speculating going on above. What we do know for sure is that HUI has established a lot of support built of hard bottoming work, CCI is way over bought but made a bull signal on a bigger picture and the stock market is at a decision point between ‘melt up’ or resumed correction.
Caution is advisable until directions become clear. Janet Yellen may yet be tested by the market.
