Advanced Technical Analysis - HUI
Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.
Once again, we are updating our technical analysis for the Amex Gold Bugs Index (HUI) (and by extension the Philly Gold/Silver Index (XAU)) as we believe that the complex corrective upward bounce off the May lows may be near a very important turning point and multiple Fibonacci resistances. As we have been insisting for the past few months, the bounce off the May lows has been very overlapped, strongly suggesting that it is a corrective bounce rather than an impulsive move to new annual highs. If so, then new lows beneath the May lows of 163 are pending with targets of at least the 140-150 area if not much lower.
For now we'll take it one step at a time. Specifically, the move off the May lows, as we stated in our last note (dated 8/19) has taken the form of an ABC upward zig-zag correction, with the "A" wave up from the May lows to the peak on May 27th. A complex "B" wave down then ensued to July's lows, with the C wave taking shape from the lows on July 27th. One can see a nearly complete "5" waves up in wave C from the 7/27 lows that needs but one more new peak above the 8/20 211 peak in order to be considered "complete". Most interesting to us on the short term chart (13 minutes from 9/2 to present) is the presence of a terminal minor degree 5th wave from the lows on 9/8. Terminal 5th waves appear in the final position of a trend reversal of larger degree, meaning that the presence of this terminal 5th wave strongly suggests that the entire move off the May lows is very near completion. A series of Fibonacci targets for the peak occur in the 212-217 area but the tightest cluster can be found in the 212-214 area (213.51 is a specific target).
Any new peak above the 211.21 peak is where a downtrend is likely to occur for a possible move to at least 140-150 and possibly quite lower. Should the trade power past 225 such action would negate our near-term bearish analysis and force us to stand aside. Hourly momentum is clearly diverging and hourly Demark indicators are close to registering (as are daily Demarks if the HUI does not breakdown in the next 4 days). These things, along with a bevy of important Fibonacci projections from the May lows, the July lows, and the September 8th lows strongly suggest the HUI (and XAU index) are set to reverse and re-start their bearish trend. The parameters for the XAU index are thus: a possible downturn at any new peak above 96.24 (the 8/20 peak) for a possible move to 70 +/- at least. Only if trade powers through 100 would we step aside and re-assess this conclusion.
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