HUI Amex Gold Bugs Index Buy and Sell Signals

By: Robert McHugh | Sun, Jul 17, 2005
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Our subscribers gain a unique advantage with analysis like this, along with a host of other technical analysis research, charts, and data. At the time being, we are offering a special introductory offer at a 39 percent discount below our regular rate of $295. For a limited time only, for just $179, you can have regular access to our proprietary buy/sell signal indicators in the HUI Amex Gold Bugs Index, the NASDAQ 100, and the DJIA/S&P 500 for the next twelve months. These are unique proprietary indicators that are not available anywhere else. You can access a free sample of our newsletter by clicking on the Sample button at www.technicalindicatorindex.com. To subscribe, simply go to our site, and click on the Subscribe Today! Button.

We are excited to present the following charts for our Gold Bugs friends. The first is a 30 Day Stochastic indicator that measures price momentum in the HUI Amex Gold Bugs Index. It compares the percent of HUI stocks above their 30 day moving average with a slower 9 day moving average of same. Whenever the Fast measure rises decisively above the Slow, it generates a "buy" signal. Whenever the Fast drops decisively below the Slow, it generates a "sell." The last four signals are annotated with arrows, blue for "buy" and red for "sell." These signals have demonstrated terrific correlation with price movement, and offer a terrific opportunity for investors and speculators to profit. The latest signal was a "sell" given off on July 5th.

We are also excited to present a second independent indicator for the HUI Gold Bugs Index that also throws off reliable "buy" and "sell" signals. At the top of this page, in green, is the HUI Gold Bugs Purchasing Power Indicator ™. This indicator includes several momentum measures in addition to price, and identifies not only when trend changes have occurred, but when multi-week tradable trends are occurring. This second indicator is a confirming tool of the 30 Day Stochastic signals. When both are on "buys," the probability that the HUI is headed up for an extended period of time is high. The reverse is true also. Whenever both signal "sell," the probability of an extended decline is high. If they are not in sync, which usually only occurs for a few days, a more cautious sidelines approach may be the best strategy until the conflict resolves itself.

The HUI Gold Bugs Purchasing Power Indicator ™ is a power measure. It really takes the pulse of the buying and selling enthusiasm behind a move. While it is not as likely to hit the tops or bottoms on the nose, the good news is that once triggered, signals identify a high probability multi-week trend with enough power built in to profit from a late-entry trade even though the first part of the move was missed. Should the trend reverse prematurely, this indicator is smart enough to recognize the change and quickly reverse course before much damage can occur.

What you'll note is that these buy and sell signals do not point out every minor up and down gyration. They ignore the insignificant moves and stick with the primary multi-week trend. In the chart above, we have placed yellow arrows where prices have moved as expected by these signals. The correlation has been terrific. We present the 30 day Stochastic and Purchasing Power Indicator charts and signals several times per week as a regular feature of our subscription newsletter.

These signals also supplement our Elliott Wave analysis for the HUI, helping shed light on when major waves are starting and concluding. The next chart shows the Elliott Wave count which we believe to be most accurate at this time. Here we are seeing an Elliott Wave Double Zigzag decline in formation from the wave B top on January 6th, 2004. Our belief is that it is only two-thirds complete and there is one more a-b-c decline into a wave C of 2 bottom. If correct, that suggests prices should drop substantially lower from here.

Targets for the bottom of Intermediate 2 are 150ish and below. Here's how we get there: First, we take note this week that a larger Head & Shoulders Top pattern is forming. The (X) wave carved out the top of the right shoulder. Once prices break below 170, the neckline, there will be a confirmed pattern with a downside target of 130ish. Using a second tool, the Elliott Wave analysis, it looks as if corrective wave (X) completed, meaning wave (Y) should carry prices lower to their wave C bottom. Where might C of 2 bottom? Based upon the Elliott Wave count, a 50 percent retrace of Intermediate degree wave 1's rally from 35.31 on November 16th, 2000 to 258.02 on January 6th, 2004 suggests a bottom for the current Intermediate degree wave 2 decline of 146.67. A 61.8 percent correction would take the HUI down to 120ish. We already blew past the 38.2 percent retrace with May 16th's 165 low.

The other pattern that gives us a downside price target is the Gartley pattern shown in Issue no. 184. This pattern's downside target is a more benign 150ish. Ironically, this pattern is a Bullish pattern. So once the HUI hits its wave 2 bottom, a powerful wave 3 rally that takes the Gold stocks far above 258 will commence.

So the Gold Bugs are right to be excited about the $HUI stocks. And we agree, Gold stocks should enjoy a terrific rally, starting at some point over the next year. We just believe we have a bit more turbulence over the next several months before prices take off.

The alternate possibility is that we bottomed May 16th at 165.71, and what we have labeled (W) is really 2's bottom. That means the Gartley pattern failed to hit its target (but came close), and the large unconfirmed Head & Shoulders pattern is not going to complete. It suggests what we have labeled as (X) is really four/fifths of a five-wave impulse that is likely Minuette degree wave i of Minor 1 of Intermediate degree 3 higher. But the MACD is rolling over, and the RSI is falling from overbought, and we don't see any Bullish Flag patterns, and we don't think a possible Bullish Head & Shoulders bottom from March 2005 through now is textbook enough to be reliable. The shoulders do not retrace a sufficient depth of the Head to Neckline, and they seem too small and narrow.

Here's the key. If the HUI busts out higher and breaks above the falling trend-channel from November (marked by purple boundary lines), then the alternate scenario is likely in place and intermediate 2 down completed last month. Otherwise, we hold to the analysis presented, that one more leg lower is necessary. But why guess? Our Buy/Sell Signal Indicators will tell us where the HUI is headed.

Our subscribers gain a unique advantage with analysis like this, along with a host of other technical analysis research, charts, and data. At the time being, we are offering a special introductory offer at a 39 percent discount below our regular rate of $295. For a limited time only, for just $179, you can have regular access to our proprietary buy/sell signal indicators in the HUI Amex Gold Bugs Index, the NASDAQ 100, and the DJIA/S&P 500 for the next twelve months. These are unique proprietary indicators that are not available anywhere else. You can access a free sample of our newsletter by clicking on the Sample button at www.technicalindicatorindex.com. To subscribe, simply go to our site, and click on the Subscribe Today! Button.

In addition to these buy/sell signal indicators, a subscription will gain you access to our technical analysis newsletters that cover the major U.S. Equity, Bond, Commodity, Precious Metal, and Currency markets, using multiple tools simultaneously, including Elliott Wave Theory, Supply and Demand, Momentum Measures, Dow Theory, Chart Patterns, Cycles, Sentiment Measures, Fibonacci Ratio Measures for Price and Time turn-date targets, and Analogs of Current Price Behavior with the Past to name a few. Check us out today and start making money.

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The Lord Jesus Christ, who gave Himself for our sins,
That He might deliver us out of this present evil age
According to the will of our God and Father
To whom be the glory forevermore."

Galatians 1: 3-5


 

Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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