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October 05, 2009

AMEX Gold BUGS Index
by David Petch

The daily chart of the HUI is shown below, with the lower 21 MA Bollinger band near the index, suggestive that further downside in the HUI. Upper 34 and 55 MA Bollinger bands are still going sideways, suggestive that a top was put in place. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K beneath the %D in 2 and 3. Based upon extrapolation of the %K in stochastics 1 and 2, expect another 2-3 weeks of downside at a minimum before a bottom is put in place. The anticipated level of support is at 340-345.

Figure 1

The weekly chart of the HUI is shown below, with the lower 55 MA Bollinger band starting to curl up, suggestive that a top is in place or is looming. Upper 21 and 34 MA BB's are at the top of the index, so if further downside occurs, an Orthodox top would have been put in place (An Orthodox top refers to the highest value for the top). Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in all three instances. Although stochastics 1 and 2 are set for a decline, watch for the %K in stochastic 3 to fall beneath the %D as this will indicate that a top has been put in place. As Figure 4 suggests, the topping action of the HUI is likely to persist for a longer period of time.

Figure 2

The monthly chart of the HUI is shown below, with the lower 21 and 34 MA Bollinger bands well beneath the index, suggestive that the 2008 lows will hold. Full stochastics 1, 2 and 3 are shown below in order of descent, with the %K above the %D in stochastic 1 and beneath the %D in 2 and 3. All three upper Bollinger bands continue to go sideways between 490 and 515, indicating strong overhead resistance. Based upon the spacing between the upper and lower BB's, the corrective sequence likely has another 8-12 months at a minimum.

Figure 3

The mid-term Elliott Wave count of the HUI is shown below (updated count), with the thought pattern forming denoted in green. T he former count extended beyond allowable timelines so a change was required. The thought pattern forming, with a diametric triangle thought to be forming for wave (B). If the pattern holds true, expect a decline to around 350 to 360 before bouncing higher in wave G. Wave G should at least test the former high from wave E, but it is important to note that should the HUI close for two days below 350, expect the decline phase to continue to the 300 level.

Figure 4

The long-term Elliott Wave count of the HUI is shown below, with the thought pattern forming denoted in green (added back in May 2009). Although the decline is about 3 to 4 weeks behind from what is shown in the chart, expect upside to last into December before topping out.

Figure 5

When the HUI bottoms towards the end of this month, a potential trade exists, which will be followed over the course of the coming weeks.

That is all for today. I will update the Horizon Beta funds tomorrow AM, including the HMU and HMD at the request of someone.

Have a great day.

David Petch
TreasureChests.info

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