HUI is coming to 205, as anticipated. That is the key support zone to a big picture bottoming stance.
Now the new question is whether or not to buy when it hits the target zone. Personally, I have not decided what I am going to do (other than go out for a run).
HUI is getting over sold on RSI to the degree that spawned previous rallies so I would say that if you are a buyer for your own well-researched fundamental reasons or the big picture bottom scenario then giving it a try in the noted support zone may be worth a shot. Stops can be used to suit risk tolerance. A new low below December’s low kills the bottoming scenario, but as noted 205 (+/-) remains the preferred support level.
Our macro fundamentals have not come in yet and it may well be the case that they will not fully come in before the sector bottoms. I am not sure that a slow and steady analysis of the situation will yield a nice, neat no-brainer of a buying opportunity like for example, when in Q4 2008 gold stocks dropped to last ditch support with screaming positive fundamentals.
This time it is different and as you know, ‘the Fed is printing’ and ‘the strong economy is going to drive up employment costs and hence, inflation’ are not the kind of fundamentals we value in this cycle. So it is difficult to make a call because speaking personally, I could only do that when firmed by actual fundamentals in hand (they’re not) with technicals offering a potential support point (they are).
This update is simply meant to note that HUI has come to an important support level. Here is a weekly view for reference. A right side shoulder needs to start forming for this to resolve in a bullish way.
Aside from any action one might take, letting the market prove itself with other peoples’ money has consistently worked for us through the bear market. So in the context of the last 2 years I’d remind you that any real bottom that comes about would likely yield plenty of opportunity for people to get aboard, even having missed the first 10% or so of a new bull run.
At the first sign of fundamental improvement – whether in the stock market cracking or gold rising vs. commodities or in the yield spreads, we will of course update the situation.
