Wednesday, December 5, 2007

For the Dow Bulls


With all due respect to Richard Russell, is this count possible.

Tuesday, November 13, 2007

A Bullish Proposal

Tonight I submit a bullish wave count shown above. As you can see the pattern exhibits a expanding wave progression. This is the kind of pattern you would expect to show up in a sector experiencing parabolic moves. Of course the fear remains in place until the last moment of euphoria when the pattern tips over. My reading of the chart tonight suggest the pattern has not tipped over in spite of the near 60 point drop in the index. In fact If I'm right then the impulse wave in this set is just starting. It's a little hard to believe , I know, especially with some traditional indicators flashing sell right now. You have to think a little beyond the short term TA to see whats happening here. I think most followers of this sector can appreciate what it would mean for gold to surpass its all time nominal high. That would be a all out buy signal on the sector, and the public would finally start to get involved. Perhaps this wave pattern is telling us something about what gold wants to do.

S.M. Himes

Monday, November 5, 2007

Why 1050?


The greatest trend channel and fib expansion about the recent consolidation suggest 1050 will be the major battle. Jim Sinclair has suggest this figure for good reason.
S.M. Himes

Saturday, November 3, 2007

What Bothers This Bull


Actually it doesnt bother me at all. I have to admit that shares have been lagging the metal during this whole bull market. Historically, the xau/gold ratio has been much higher. Many shares were much higher relative to the metal during the bear market of the 90s. That has driven me nuts as I watched this thing develop. Ive come to the conclusion that this is typical bull market behaviour during the early stages of a bull market. Yes, you heard right. It's still very early. I think I see the setup on the chart above for a simple 123 wave count. Many wavers have attempted to apply typical TA methodologies to this bull market and are not getting the big picture. Wave progression in a gold bull market is geometric. Thats why the monthly macd on the xau chart is hooking higher on every phase. Even the log charts are rising in a nonlinear pattern. So what does it all mean? Well , we have recently had a multi decade breakout on the xau chart. This is a big deal despite the bears call for doom. Personally, my view is that the sector is on a momentum buy and it will not retrace until a momentum high is established. That will mark a significant time consolidation point which we need to pay attention to. The period between that point and the next major move will be one in which this chart I have posted tonight builds its base for the investment boom of the century. In other words it will be the accumulation phase of the real mccoy. I expect shares to outperform during the whole consolidation as this base builds for a massive breakout. Don't get too excited, Its going to take time to setup.
S.M. Himes

Sunday, October 28, 2007

Gold Impulsive


For the last several weeks the issue in the gold share trading has been in deciding if this move in gold is the real thing. In terms of wave theory I have been looking for clues such as we are getting right now. I submit the count above. If it is correct then gold will go much higher before a substantial correction. In fact , it seems to me we are in for a major move here. The gold waves are expanding. You can see my 1 of 5 count is pretty big itself running some 100 points. so you can imagine how far this can go if the fib extensions work out. Anyway, I know anything can happen, but I'm pretty much convinced this is a impulsive move and the 2006 corrective pattern is over.
S.M. Himes

Thursday, October 18, 2007

Never short a dull market


Why do they say that? Well I guess because the overbought indicators are relaxing on weak selling in a bullish phase. Is that what we have today? Could be. The bears have plenty to point to though. For one, we have record commercial short interest and rising lease rates. Ok, so they are borrowing to short. Fine, it still doesn't mean the commercials have control of it yet. Even if they do get control, now look at how much they have to cover. We also have a crashing dollar, and many expect that should cause gold to go ballistic. Since gold is up modestly that is considered bearish for gold. I do not believe that to be the case. A big move in gold is not bullish, its bearish. Thats how the commercials would get it to tip over. The fact gold is firming withing its well defined channel is bullish. Heres a chart of the HUI which shows a very parallel set of moving averages and so far price action holding well to the 13 day ema. Thats bullish. In fact, several more days in this 400 area may just confirm it as support and setup and even strong trend continuation. Judge your junior holdings by how well they firm up at support. Look for trend channels to develop. This is how a major move occurs. Major moves do not just "lift off". They take time to setup a solid investment trend.

Wednesday, October 17, 2007

1:30 pm et, XAU is at support

Xau is at support of the impulsive uptrend that has been in place for a few weeks now. Now we need to watch for a trendline break off the negative divergence on the daily macd. I see a couple of possibilities for the seasonal weak patch that is supposed to come here.

1) we now get a ending diaganol which would result in a very sharp and full retracement of the impulse pattern. This could take time to play out, but the good news is it would present a great opportunity to position.

2) We get a modest abc correction starting right now and the wave continues to propagate toward some hideous point and figure target over 230.

3) the ending diaganol pattern is not ending but leading. This goes to my post yesterday. It's wild to imagine such a thing, but a leading diaganol is the start of a major wave. If that were the case then this bull would officially be in runaway mode.



I might add, if this is an ending diaganol then it is going to really frustrate both bulls and bears. The patterns typically do not just end as soon as a "e" count is reached. Expect a drifting up pattern as xau stretches to a extreme.


S.M. Himes

note, blogger image upload is down, I will post the chart later.

Tuesday, October 16, 2007

The trend is your friend until the end

unless of course you are on the wrong side. So, have you been picking tops lately? Sure there will be one eventually. Do you think last week was it on HUI? We all have various forms of estimating the trend duration. It's good money management to know your limitations and trade the plan so to speak. Is that not true of this bull market? Well, I obviously have been doing some soul searching in an attempt to "know thyself". You see, all the technical analysis, cycle work, et al, boils down to the simple trend. So if we just focus on the trend and what the expectations are for the trend envelope we can probably do quite well in this sector. So why do many loose money in a gold bull market? I think its because of fear and possibly over analysis. The only gold bull I can reference is that of the 70s into 1980. My studies of that bull have shown that the tide rose on a geometric basis. That is, the successive rises were multiples of previous ones. Its not so evident that that is the case until you are multiplying big numbers. Anyway, it seems most probable this bull will do the same. So let me suggest a paradigm shift. It's been many years since gold traders had to deal with the concept of irregular corrective waves. Alf Field has done a great job of analyzing these waves of late. What you see is the corrective C waves not falling below the corrective A waves. In fact I would submit as the geometric rise continues the whole corrective patterns may trace out new highs. That may sound heretical to the wave theorists, but remember wave theory is just a labeling scheme. It has NO PREDICTIVE ABILITY! There , I said it. If you understand the structure of the pattern that is evolving , and that is a big IF, then of course it will appear your theory predicted the results. However, the wave does what it wants, you may be lucky enough to guess. So to make a long story short tonight I'll leave you with this. In a bull market that is going through puberty, understand the adolescent is going to show some adult traits. Also understand the adolescent is going to still act like a kid at times. However, this is the most important part, most of all understand that the adolescent is alot closer to becoming an adult than when you first were introduced to the little toddler. So in terms of risk / reward, it is now that time where its worth the stay to see this thing through. Accepting the bull market envelope and the geometric progression at this adolescent stage means to stop trading so much and start seeing the big picture. Most of you understand the big gains are made near the end. Well, you have the good fortune of being in the middle where shares are still kind of cheap and the big money is not that far off. I hope my little missive tonight has helped. I for one refuse to view this bull market pessimistically. You will remember the words of Jim Sinclair when it comes to how to survive and thrive in this sector. Go read him again. Sure , he may seem a bit of a nut, but the reality is the rest of the TA guys are going to get you out when they should keep you in. JS has the credentials in this sector, not to mention the genes.

S.M. Himes

Sunday, October 14, 2007

Xau Chart updates



Here are xau charts for intermediate and long term. As you can see our bullish RST setup has confirmed to the upside and a trending move is underway. Momentum traders will want close stops in here since some kind of retracement is possible at any time. However, the trend is up and some targets as high as xau 240 are possible on this run. The more important chart is the long term chart. The implications of this chart breakout are simply huge. It seems to me that a multi decade line of resistance will take some time to become support even after the first stab through. Trading around this pivot line is likely to be difficult to say the least.
S.M. Himes

Friday, September 7, 2007

The bullish count



Here is the xau bullish count on the RST. It looks plausible. About all we can do here is wait for some bullish consilidation of these gains. In my opinion the gains are too much too fast for a breakout to occur on this daily run. So we will watch and be ready to act. If this count is correct then price will not return to the lows. Rather some modest fibonacci retracment will do.

S.M. Himes

Thursday, September 6, 2007

The dreaded megaphone



Well, the impulse down ended in spectacular fashion and a pattern has emerged. The pattern is one of expanding volatility, otherwise know as the Reverse Symmetrical Triangle (RST). What is fascinating about this pattern is how it has followed a traditional zig zag pattern which occured after last years peak. These patterns are pretty hard to trade. The best rule I can provide is to make sure you reverse at the extremes or go flat. Eventually the pattern completes and a stable trend emerges. That is the ultimate surity the pattern provides. As markets are guaranteed to return to the mean so is the RST pattern guaranteed to return to lower volatility. Im sure you all would like me to declare the direction this pattern will terminate in. I guess I really don't know. It seems likely to me that the direction will be up since its a bull market. The next big question is have the final lows printed. I would expect at least 5 waves in the RST pattern. You can see it all depends on how you count. If I had to guess right now i would say the landscape is set for a high in the 160 area, followed by another trip to the lows. It may or may not reach the lower rail this time. My guess is it wont and a bull market will emerge.

S.M. Himes

Tuesday, August 28, 2007

HUI is in impulsive down wave


My view is that the HUI chart is currently progressing in a impulsive down wave. All the action at the end of each stick down is essentially a bear flag. If you are a good trader you can take advantage of those flags volatility. I really don't know where this phase will terminate. It could be close in time. I have drawn some boxes showing a interesting factoid about the current correction and that of the previous cycle. You will note that price action has stayed in the upper half of the trading range for most of this cycle. The implication is that the action is distribution. It seems likely to this trader that there will be occasions to accumulate this sector in the lower box drawn on my chart. The more important question I have is whether there will be overlap with the previous trading range. Overlap suggests higher order wave action, which will get me to consider alternative wave counts.

S.M. Himes

Saturday, August 25, 2007

The Gold bull market will come into question




The gold bull market may come into question in the weeks ahead ironically as investors flee to the "safety" of U.S. treasuries. In a liquidty crisis cash is king. I do not intend to present any fundamental or geopolitical views of the credit crisis on this website. There are some very good analyses out there right now that will do that. However, every bull market needs one really good shakeout before the real action gets going. I think many of you will agree that there has not been a real full blown and euphoric bull market in the precious metals yet this cycle. Therefore it follows that the whole of the bull market thus far is only the opening act. In fact it could be argued that there is no bull market yet as prices have not really broken out above and held above the 1980 high.
It has been pointed out here and on other sites that gold has held its 65 week simple moving average during this entire bull market. It does not necessarily follow however, that that will always be the case. Paradigms do shift at times. These paradigm shifts or interruptions in trend are what define the waves of progress. If there was a time for such a "finger of instability" as Ty Andros puts it, then surely this is the time. I include today a chart of the xau/gold ratio as I have done before. A capitulation is clearly in progress. Some have pointed out that the capitulation may have already occured. Perhaps, but something tells me this bottom will require more work. Notice how the chart has made a lower low now. Also notice how the action is below a shallow uptrend that started in 2001. Perhaps derivative exposure is a issue in gold stocks and that is why there appears to be a bear market in gold stocks relative to the metal. I think we as gold stock investors may not fully appreciate what it takes to bring a sector out of a 20+ year bear market. No doubt some compromises and mistakes have been made by companies attempting to ressurect this industry.
In charting you often see price action return to the scene of the crime as they say. Sometimes that takes a long time. Well, I see this ratio returning to the scene of the crime. If the stocks are in a secular bull market then on a price relative basis they need to prove the 2001 low was THE low. When you see this ratio chart bottom near or above that area and the sector begin to move strongly ahead of gold then it's the real deal. This could occur very soon, but a imminent crash is a real possibility. The metal on the other hand is a bit tougher to figure out. I don't think I can predict what will happen with the metal in nominal terms. It seems possible that it will take a retest of its breakout near 500, but maybe not. Ultimately I have to conclude that this whole period of 2001 to 2007 has been a time that gold was sniffing out the underlying problems with our financial system. Now is the time for gold investors to come to terms with why they are involved with this sector in the first place. I find it most appropriate that the ultimate test of gold occurs at a time of its greatest relevance.


Other notes: I setup this blog initially to chart a variety of gold and silver stocks as I thought the next wave was approaching. Most of my charts and notations are now out of date. I think it's appropriate now to look at those charts and see what has happened in terms of conclusions or possibilities that I may have drawn on the charts. In retrospect it seems clear alot of these charts have broken key trend lines and that suggests bearish action in search of a solid bottom. It's natural to expect bullish action in a bull market. As a trader you can define risk best at trendlines so thats where you make your stand. Now that a bearish phase is in force it becomes natural to assume bearish action. That's where we can go wrong. What we have here is a long term cycle asserting its force. The long cycle is demanding resolution of this bull market in its entirety. We should therefore be considering each stock and corresponding chart in terms of what level represents its minimum bull market envelope. I will soon update all the charts. I can tell you from a quick review that many stocks have the potential to go to levels I would have not dreamed of a few months ago. I have to stress its just a potential. We trade with signals not hyperbole. However, if we get a huge washout and capitulation move with major blood in the streets then I will believe its time to just throw money at the sector. On some level risk is mitigated the lower you go.

S.M. Himes



Tuesday, August 21, 2007

Take a hard look at this chart



Theres alot of progress baked into that chart over the last century. Periodically investors should ask the question "is this realistic".

Thursday, August 16, 2007

Volatility Reigns!

Here's a few quick points tonight.

1) xau/gold ratio: It has dipped below .19 and some call that a buy. Maybe it is, maybe it's not. Clearly the chart failed the recent breakout and in classic fashion has started the capitulation run. That cannot be denied. I think I can say for sure now that when this run bottoms it will be THE bottom. At least we know what the market is up to now. Also note that the chart is now officially under trend from the 2001 low. I suspected that might happen and mentioned it in a old post about the ratio. My view is that this episode is analagous to the 2001 bottoming process. This should be our first higher low in the generational bull market. In other words it is the second wave bottom, to be followed by the third wave impulse where all the action will be.

2) VIX: Todays daily vix chart sports a classic gravestone topping candle. These typically appear at maximum fear points where the markets reverse. I am pretty confident a rally is coming off this fear drop today. However, I have a nagging feeling that we haven't really seen the 4 year cycle low let alone the decennial pattern nadir. In terms of timing I expect those in october. So we will just have to see how things develope with the VIX chart in the next two weeks. I will point out that when viewing the VIX chart you should look at daily, weekly, and monthly charts. A monthly outside reversal is a very good indication of a market breadth bottom. We do not have that right now, but it could appear by the end of this month. I do not believe it will however.

3) Wave set and gold stock bottom: Without getting into alot of wave counting, I will just say that I do not believe a full wave set exists yet in this capitulation move such that I can call a bottom. Today was a pretty strong capitulation, but it seems to me it was more of phase I of a cliff dive. I expect a snapback rally now along with the general market that fails in a couple weeks.


4) Get ready! Most important is that now is the time to prepare. The gold sector is near the beginning of the end of this correction. You should now decide how you will deploy your capital and be ready to pull the trigger when the rest of the world declares gold dead. I can't tell you to the day when a low will be, but I know a guy who can.

S.M. Himes

Friday, August 3, 2007

VIX Perspective

Tonight I wanted to put up this long term chart of the VIX. Unfortunately, the chart does not show the 1987 spike which was much higher than any recent levels. For now I think we have to assume a major market bottom will occur with a VIX level in the 40 to 45 area. This has been the pattern in recent years. If our assumption turns out to be wrong, then what clues might we look for in advance? That may be difficult to determine. From a chart standpoint I may be looking for base building in the VIX chart. Notice how that has been working on this current bottom formation. Second, is it possible that a "Bull Market" in volatility could be setting up. Clearly, the last several years have seen a disregard for risk. Perhaps ignorance is bliss , until it's not! Finally, I think its important to point out that a rising trend in volatility does not necessarily imply a declining stock market in terms of nominal price. This can be seen from the late 90s episode of exploding asset prices. From this traders view it's time to sharpen the pencil and be on the lookout for opportunity from the increased volatility.

S.M. Himes

Tuesday, July 31, 2007

What's Going On?


Today's action in the general market was pretty bearish to say the least. Im watching snp 1450 right now for a break. If that level goes expect some significant downside in the markets. It seems very likely to me that it will break soon. Im also watching the VIX pattern as it looks like a breakout. The one piece of good news in all this is that sharp selloffs generally get bottoms in place quickly that we can trade off of. Also a well know pattern called the decennial pattern may be playing out in the markets right now. That pattern suggests a sharp selloff into the fall followed by a rally to new highs next year. Now what does all this have to do with PM's? Well as we have seen the gold stocks seem to be tied to the hip with the general market. This makes sense because the rise in both is mostly tied to liquidity. At some point that may cease to be true. Above is a copy of the years ending in 7 pattern from ty andros, and below is a link to a lengthy discussion of the decennial pattern.



Saturday, July 21, 2007

Timing is Everything





Here are three charts all with similar patterns. So you have to ask yourself are these charts rolling over and overbought after such a strong few weeks in the gold market, or are they just getting started. Folks, differing opinions are what makes it a market. For sure something is going to happen. I have my opinion, but thats all it is. When it comes to trades like these I tend to try and find a contrarian twist in the chart paint job. For example; If you see a macd bearish cross, but its against a rising cycle, then consider the possibility that the chart is simply oversold in a uptrend. All timeframes must be considered simulataneously and momentum indicators used when appropriate.

S.M. Himes

Sunday, July 15, 2007

The XAU/GOLD Ratio, Update



Two strong weeks in the XAU have produced a breakout on the ratio chart. As I suggested in the previous analysis the Gold and Silver charts have both suffered technical damage such that it could have been construed a serious breakdown was in progress. The action in the ratio chart suggests this is not the case. This footprint has been present in this gold bull market from the start. The metal charts must look dangerous for the shares to put in a cyclical bottom. The real question now is are we about to enter a significant bull market impulsive wave, or is this move just another move to resistance that will ultimately fail. Of course I don’t have that answer, but I think the ratio chart has shown us that the 0.28 area is very tough resistance and provides a good guide for timed sales.

I do find the ADX indicator status very interesting at this juncture. The indicator was primarily designed to reveal trend strength, and it is clear that this ratio chart has had a very week trend for some time now. You will also note there was not a real capitulation move in the ratio value. That of course makes sense with this very flat ADX line. In my opinion this is a clue that pressures are building up and setting the stage for a large rise in trend strength. This time period seems analogous to the 2000 period prior to the launch of the bull market. I am not suggesting with certainty that the next move is another major wave set up. There very well could be a clearing event related to the USD short position prior to a significant rise in gold. The USD chart has broken the falling wedge to the downside. This classical throw-over often precedes reversals. In any case we are officially on a buy signal in gold shares now. Just watch the chart carefully and don’t get too greedy.

S.M. Himes

Saturday, July 14, 2007

When will this rally end?



I've got two charts for you today. As many of you know I am a proponent of wave and cycle theory and as such I would like to present a observation. A key element of wave theory is alternation. I have been watching a fractal simlarity develop for several weeks now. As you can see in both charts the 2002 fractal is similar in many respects. I havent taken the time to research the ski setup, but It wouldn't surprise me to find that it was on a intermediate "not bull market" buy signal as we are now. In both cases the correction had pretty much run its course and the bulls were back in charge. The problem was there was a bit too much enthusiasm and a rising triangle wall of worry needed to keep it in check. I think the situations are similar. Technically, however, the current triangle rate is higher and that suggests stronger underlying strength. I will point out we cannot be sure what the triangle rate is until the breakout is confirmed. I do think that major lows must not break though for the triangle to be valid. Therefore I will say the recent cluster of lows in the 640 gold area and 320 hui area are likely to hold. That doesnt mean a full retrace can't occur. For now the charts are bullish on a intermediate cycle and likely to continue to rise to the top of the range. Thats not to say the daily charts arent overbought and susceptible to a pullback.

These charts suggest to me that there will be a final drop prior to a breakout to new highs. If its anything like 2002 that drop is going to feel like the end to the bull market. It will of course be your best long entry.

S.M. Himes

Wednesday, July 11, 2007

Longs




I went long GFI and GSS today in the trading account. It may be a bit early, but I think nice swing trades are set up for both. GFIs first target is near 18, GSS near 5. The very long term charts on both stocks are very bullish as described on the charts.
S.M. Himes




Sunday, July 8, 2007


Here's a quick update on CDE tonight. Cde followers will note the recent breakout over the 3.80 pivot. Just how important is this move. Counter trend moves can often be deceiving and get you on board at just the wrong time. So is this one counter trend in a on going bear market for CDE or is it the real deal. Well I'll just let you check out this chart. Something new is definitely up as the ratio clearly suggests. Of course we have a new set of fundamentals with the recent merger plan that is to make CDE the largest silver producer in the world. I won't get into the details of the fundamentals and the value of CDE vs say SSRI. There are some obvious benefits that SSRI holders have had over CDE holders for the last 3 years. However, in a pursuit of undervalued stocks, this one may have finally hit its low. It remains to be seen if they can drive dollars to the bottom line and increase shareholder value however.

Saturday, July 7, 2007

Hui Count


The count I have on the HUI is shown in tonights chart. This is basically the same as Rosen's count and is a pattern I suggested on the ski board several months ago. It is a textbook pattern found in Prechters elliot wave book. The alternative pattern would have involved a five wave "C" pattern that broke to lower lows. This pattern appears to involve a ending triangle to finish the consolidation and is typical of stronger bull markets. You may notice that this bull market still have no overlap with previous wave sets. Eventually that cease to be true as the sector overheats and makes a significant or secondary high. I still cannot rule out that the next move will be up into a secondary high that completes a larger count. We'll just have to see how it plays out. Rosen has suggested this patter is wave 2 in the main third wave thrust of this HUI bull market. If he is right then all hell is about to break loose in this sector. It could be. Anything is possible. If follow the posts here and the ski signals you should already be long, or may be taking some profits now. It's pretty clear the impulsive move off the 320 low is just about to ram into big resistance at 360. Fridays action was significant enough to be considered breakout action. However, key resistance is still above, despite the massive volumes on some issues. So for me I'm just going to play it like any other breakout play and sell a little on strength and buy it back on down days. The key will be to stay long mostly until a higher order sell signal comes up. Most of you know we have a somewhat long run pattern going now. That will likely end by Tuesday, after which some buys can be made on the retrace. If you use Fib levels then use a 38.2% retrace from the 320 low to whatever the high is. That would be my view for the most its likely to retrace given the bullish structure of this pattern.

There are many individual stocks that are showing first breakouts after long downtrends. I have posted about some of them. Also, follow Mootdisputes comments and links and you can see a very good ranking system.

S.M. Himes

Thursday, July 5, 2007

When the Wave Hits

When a buying wave hits it tends to leave you stranded unless you are paying attention to key breakout points and volumes. The sector had a nice buy entry per the ski short term signal 6 sessions ago. It is therefore extended, but we all know the largest moves tend to occur on either side of oversold/overbought. I'm expecting a short term high in some issues in the next few days. Profit taking is a matter of individual charts. Suffice it to say, I think you can be a little picky right now about your sales. What we have now is a rush to get long by the initial late comers. My view at this point is it will all be about positioning but staying invested for what I think is going to be a cyclical bull market in the shares. Be advised there is no bull market signal yet, but things are looking good. I have been long rgld, gg, gfi, cde, bqi, gpxm, pmu, nsu, in my own trading account. The lesson I have already learned is that I sold trades too early. Its like that at bottoms. I see two very nice charts in gss and cde to name a few. gss has a strong pos D on the daily macd with room to run, and cde just made a monster break on heavy volume above the 3.81 pivot. The gss move would confirm yet another higher low in the extended saucer pattern is is working on. This is a huge pattern that has been developing for years now. Patterns like that tend to languish for a long time and then suddenly they take off. Cde is really a pretty ugly chart, but ugly can become pretty fast around here. My view is cde is setting up for yet another impulse to the 7 area. In simple terms cde is oversold in a uptrend on the monthly chart. In fact it has crossed key levels to the downside and stretched price about as far as a bull can without breaking. Thats the way it works in this sector. It looks broke, until it doesnt.

Thursday, June 28, 2007

Signs of the Times

There are two very nice analyses out there I want to link to tonight. They do a fantastic job of pointing out why the current landscape in the gold/silver sector is just right for a bottom. The links are show below. First, I want to remind everybody of a statement I made in the Xau/Gld ratio post several weeks ago. I quote


"It is important that sentiment return to a negative level for a lasting bottom to be in place. It has been my view that the gold chart continues to stay strong at this stage, but develops a sneaky divergence near the end of the correction that creates a fear of breakdown in the gold bugs hearts. It's this bogus chart footprint that leads to the final bottom in the ratio chart. The typical arguments tend to lay in the wave count interpretations and misinterpretations. It is my view that the wrong count will become likely in the view of analysts at precisely the time when we need a capitulation in the ratio chart. "


http://www.safehaven.com/article-7857.htm

http://www.decisionpoint.com/TAC/ORD.html


There can be no doubt that the silver chart has technically broken a significant trendline. The implications are a significant breakdown to the next trendline which is pretty far down. Gold is in a similar situation. Now checkout the link to Michael Kilbach's article. He has shown a comparison of the silver charts of today and 2005. Yes, they both were broke before the great run. This blog is called paint the charts for a reason. Namely, that traditional TA is only one of many tools to be used. Now look at Tim Ord's analysis. This is a very astute piece of work. I don't know what else you would need to be be convinced there is value in this sector right now. all thats left is to position properly. Readers of this blog are mostly traders that know how to do that. So I will leave you with a final thought. When sentiment is bearish (at bottoms) movements are generally not that great for daytraders. Volatility is low and the real action is setting up. Only in the impulsive waves that follow are there significant profits to deal with. So it's my view that this is a cyclical swing trade setup. Therefore the rewards are going to go to those that are not over trading their positions. There will be times to take profits, and thats ok. However, buy the dips is pretty much mandatory in a cyclical bull.

S.M. Himes

Tuesday, June 26, 2007

Buy yet?

This time of year is typically a time to be a buyer of gold/silver stocks. Of course after witnessing todays carnage many of you may be thinking it best to wait and see how bad this gets. Some key lines have been broken and that suggests caution. In terms of the ski patterns we are flying without stops by buying now. One thing I have consistently found to be true in this sector is that buying fear and selling greed almost always works, and buying a falling market without a stop is certainly fearful. Anyway, I've compiled a short list of trading vehicles that I am contemplating for the next cycle.

gg: it can still come down to 20ish, but the fundamentals have caught up with price so i like it, plus its a major part of userx so ski's signal applies here.

gfi : could still come under 15, but when it confirms a bottom it will rocket fast. might be a good option play, or not.

rgld: i really like this chart for a swing trade. it might have a 30% move in time.



Im trying to keep it simple for this trade and not go way out on the limb with risky penny stuff that may not go up on this wave. however, a few juniors do have my attention.

gss: tough call, but its at support right now and i see five waves down.

cde: everybody hates it now, so it must be close to a bottom. problem is the overhead supply is enormous

nsu: im seeing accumulation patterns, if it breaks out over 2.40 might run to 3.00, problem is its just as likely to crash to a new low so i will probably just go with short term trades off hourly charts on it.


i looked over all the charts of stuff i have listed on the blog tonight and i have to say for the most part they look terrible. so this bottom buying is likely to have some pain involved. my advice is to average in and keep it simple. if you throw a ton of money at 20 stocks you will probably be sorry.

Oh, dont forget pmpix, its leveraged and i think i like that chart better than gdx.

Friday, June 1, 2007

Watch the comments

Here's a quick note today to thank poster mootdispute for his lengthy analysis posted in the comments section of this blog. Be sure to check out his links for stock rankings and other goodies. I've been out of town for awhile and unable to do much posting. So hopefully his posts have filled in the blank a bit. Anybody who follows this sector knows we have had a two day explosion in the gold stocks. Some are still wondering if they should get on now or wait. I'm just the same as any other market follower. All i can do is follow signals like the rest of you. My view is that this move so far is a momentum move and there is no evidence of anything other than that. so it will move until the momo is gone and then we will find out whats under the hood. I will put more time into the blog to get some charts updated. On first glance we have seen many breakdowns and technical support breaks that suggested another leg down. It is just like the gold sector to blow you away with moves like this just when you think the bottom is going to drop out. I have been watching that silver chart in particular at the great head and shoulders paint job. after the last few days its becoming clear its not really a head and shoulders. I'll be posting more soon so stay in touch.

S.M. Himes

Wednesday, May 16, 2007

HUI Update


The technical landscape for the HUI index is starting to deteriorate. As most traders are aware a neat trading range has been in effect for months now. Trading ranges eventually come to an end and this one will be no different. The 20, 50, and 100 week bollinger bands do a pretty good job of defining the swing parameters of this bull market on the key time frames. Since we are now getting some downside trendline penetration I would submit the trading range is shifting to a down bias. Support is strong at lower BB50. Therefore we will assume a breach of that support area is a very significant event. Until then the swing lows for trading purposes will be the 300 to 310 area. If you are paying attention you will also note that the multi year log uptrend line has been pierced as of today. This comes on a already oversold reading. Therefore you would expect a decent tradeable bounce on further weakness.
Finally, I think it's noteworthy to examine the BB100 bands and a fractal comparison between the current pattern and that of 2004. I have pointed out in the chart and in previous posts that the wide bands do not support a bull market advance. Now in this chart I am suggesting that that little fractal in 2004 may be similar to the whole trading range we have had for the last year. This would suggest a correction of one degree larger this time around and is consistent with the wide BB100 bands. Clearly there will be steps and trade setups both long and short in-between, but thats the way I see the big picture at this time.
In terms of wave count I see the october 2006 lows as a W in a compound zig zag or potential flat pattern. Unfortunately the shallow uptrending triangular pattern that followed does not satisfy me for a bullish ending pattern. The problem with the way the pattern progressed is that is was on a slow rise, which essentially got the index precariously overbought. A better setup would have been initial action to the downside with frequent trips to oversold during the pattern. So now my view is that the pattern looks more like distribution in a manner similar to the 2004 episode.
In the very short term I expect a tradeable rally to start at any time in the next few days. We'll just have to see how far it gets. If you are following the xau/gold ratio then you see we continue to bang against that .20 area. I continue to believe accumulation should not be a automatic habit at this level. I would start accumulation when gold is just under the 65 week moving average and the ratio is under .19.

Wednesday, April 25, 2007

Chart Updates

I updated the following charts tonight. As usual many stocks are on different cycles so be careful out there.


AZK
BMD
CGR
DROOY
MNG
PMU
CALVF
KRY
MRB

Thursday, April 19, 2007

The XAU/GOLD Ratio , a Lesson in Patience


The XAU/GOLD ratio chart has often been used and misused to find bottoms in the sector. I can understand the desire to call a bottom after a long correction. Somehow I think this desire is itself incompatible with the kind of sentiment marker we are looking for at a true bottom. The ratio trends down after a top is made and typically forms some kind of triangle as it falls. There are several characteristics worthy of consideration. First and most important, price will not reverse until its time. Time typically is up when there is no other choice for it to be up. Another way of saying this is that trends like to stay in place longer than we expect. Fortunately we usually have a triangle formation to help us understand when time is up (ie; near the apex of the triangle). That brings us to a second characteristic (the capitulation). Capitulations typically break the triangle in some fashion. This is the bulls in your face way of saying "no nellies allowed" . Capitulations in the ratio suggest the maximum share discount and mark the bottom of the correction. They print at the extreme of the correction and often look like a breakdown in the sector. With that background let's consider the current landscape as shown in the chart. The secular low was made in 2001. Since then a very shallow uptrend has been in place. The whole decade of price action has been very poor on a price relative basis compared to the whole of the bear market that preceded it. This is really amazing when you consider the potential for this bull market going forward. We essentially have 3 bottom formations and one additional one in the making. I like to use alternation in analyzing the bottoms. You can see that the alternate bottom has a series of hammers that ultimately formed the bottom. It is poor analysis to say a bottom is in place when you first see a .20 reading. What you need to see is a positive divergence (macd to price) and time to be up in the triangle formation or capitulation stage.
In terms of the current correction we have reached the bottom of the range and have been there for awhile. The problem with calling a bottom now is that the triangle formation is very shallow and thus there is no forcing function on the pattern yet. That doesn't mean we can't blast of now, it only suggests more time can elapse at this ratio level. This leads me to my next point. How do metal price, sentiment, and the ratio chart combine in the final phase of the correction. It is important that sentiment return to a negative level for a lasting bottom to be in place. It has been my view that the gold chart continues to stay strong at this stage, but develops a sneaky divergence near the end of the correction that creates a fear of breakdown in the gold bugs hearts. It's this bogus chart footprint that leads to the final bottom in the ratio chart. The typical arguments tend to lay in the wave count interpretations and misinterpretations. It is my view that the wrong count will become likely in the view of analysts at precisely the time when we need a capitulation in the ratio chart. Now considering the current pattern in the gold chart we have a powerful rising triangle, or do we. Absolutely nobody knows what will happen next. It is my opinion, however, that once the bulls are exhausted on the current run a negative pattern will present itself in the gold chart. This may have already started with the recent outside reversal. This will drive the ratio to its nadir as bulls prepare for the breakdown and get cashed up for the next great buy. I won't suggest a specific time and price level at this point where that might be, but I hope these fundamental concepts can help provide the tools to know when we are looking at the low.

S.M. Himes

HUI Bull Trap Possibilities


Heres my warning post. Troubles brewing in Asia and the dollar looks very close to some kind of tradeable bottom. A bull trap can come at any time, and a high may be in place. Alternatively we may have a final run to pog 730. The risks should be obvious.

S. M. Himes

Tuesday, April 17, 2007

Trading in the Groove



If you're a trader you are well aware that the current situation in the PM market is dicey. This is a point where we need to use some very simple tools and not get over complicated with cycles and counts. I wont begin to suggest I know if this is a valid breakout. All I know is price is rising and near significant resistance. Not knowing if there is sufficient power in the cycle to push through, all I can do is exercise trading discipline to navigate the waters. Thats pretty much what tonights chart is for. The chart is bullish until proven otherwise. To me it is clear that this hourly chart must stay in tact for long trades to remain open. I have no problem leaving money on the long side when its positioned from the swing lows. However, we are currently near swing highs so the risk has increased substantially. If resistance turns to support then we will be well positioned by using our tools and discipline.

S.M. Himes

Sunday, April 15, 2007

Watch This Sleeper

Every now and then I will mention a stock I think is on the verge of a move. I've had my eye on this one for a long time. There are some good fundamentals behind the company as well as a decent chart. Unfortunately I can't post a marked up chart tonight since stockcharts is acting up. So check it out for yourselves here. For what it's worth, some of the things I look for in a stock that is "ready" are summarized below.

1) A change of hands from sellers to buyers on at least a intermediate term timeframe.
2) A clear set of higher lows preferrably rising into a resistance band.
3) A compression of intermediate term bollinger bands.
4) Confirming technical indicators, aroon, macd, adx, williams%R. At least 3 should confirm.

Wednesday, April 11, 2007

HUI is About to Declare a Winner


Here's some closeup ramblings for tommorow. This is a sneaky chart. Sneaky is what the bulls do best. I don't want to spoil the party, but the more I consider the chart the more bullish it looks. I guess we'll soon see. You make the call.

S.M. Himes

Tuesday, April 10, 2007

Was That a Major High We Just Saw Today?

Daily charts can keep you guessing. Thats why I prefer the monthly charts to keep me on track. I have posted above yet another monthly chart of the HUI index with tonights thoughts in lieu of the bearish overtones of todays possible 8 run high in userx. It's still early in the month, but the current monthly candle does not look bearish. Of course that can change by the end of the month. I will not suggest any outcome is certain based on TA. Jack Chan is absolutely correct in that technical analysis is nothing more than a educated guess. So all the pretty charts are no more than an attempt to understand what IS happening, not what will happen. Anyway, in terms of cycles, Elliott wave rules suggest that patterns tend to alternate. This is quite intuitive as the market participants become expectant of the previous landscape and therefore tend to get on that side of the trade. We all know the crowd is wrong, so the alternate pattern often plays out. Applying this to the HUI index we have to go all the way back to the 2002-2003 fractal. What strikes me about this pattern is that the price action was really pretty close to the power uptrend line in control. Failures to breakout were frequent, right up until the very last bull trap. I had some trades going on that one and was really frustrated by the action. The pattern now is similar. Price action does not want to get much extended past the power uptrend line in control. Of course it's a different line this time, but the action is the same. Ultimately, it took a failed double top to get the action going. The final whipsaw involved a run from the highs directly to trendline support. The large rise followed. IMO , the current pattern is in the double top approach stage. If price stays firm and breaks the 360 barrier soon, then I expect a bull trap near the high followed by a sharp decline to a suitable buy. That buy should be the main trendline support, which is now somewhere near 325. Of course this is just a educated guess based on some rules I pay attention to, but it is certainly plausible. Of course I will have a trading plan for a breakdown here or a breakout here. Key support for a triple top breakout near 360 appears to be about 345. I'll be watching.
S.M. Himes

Thursday, April 5, 2007

HUI Big Picture Thoughts


Now that we have a long weekend some of us can take some needed time off and others who just can't stay away from this stuff will contemplate investment themes going forward. I guess you figured out which category I fit into. I'll kick the show off with this HUI cycle diagram. The metals have been very strong in recent days, but many of us smell a rat. Are we deluding ourselves into missing the boat or does the correction really need more time. Well, my view is that this market will tend to take you to extremes before showing you whats really going on. It's pretty clear to me that the HUI index wants to break out of that little rising triangle. We've been through this before with a smaller version of the rising triangle. Now we have a longer pattern, which I think will indeed breakout. That should be the hook or bull trap if you will. The HUI needs an extreme print to seal the deal for the next corrective wave down. Some of you think that happened today. My opinion is that we have a rising triangle and it will breakout and make a run for the old highs. It's probably a moot point as the end result should be a move to the bottom of the range.


I'm convinced the meaningful channel in this bull market is the one I've drawn. What truely defines a structural bull market are the support lines or "ice" created by previous consolidations and breakouts. It's important that these zones do not overlap to ensure the integrity of the structure. Therefore, I do not get too excited about a break of the log trendline off the 2001 lows. Yes it's a multi year trendline. Now overlap into the previous trading range under 250 would get me concerned that a new channel would be required. Anyway, you see my point.


So in conclusion, when analyzing a market look for something for both the bulls and bears. There usually is food for both.
S.M. Himes

Monday, March 26, 2007

The Divergence Continues


Today, certain stocks made significant gains. GSS broke above the upper diaganol line suggesting that this formation is a leading formation. I still expect it to pull back and consolidate, but it appears that 4.00 is being turned into support. When the market conditions are right to reposition GSS will be the first place I go. RNO, also listed here, made a massive breakout over 4.00 indicating a new impulse leg may be at hand. I reviewed several Canadian listed gold and silver stocks tonight and noted some breakouts and new impulse legs. I will update those charts by the weekend in the section below. Some technicians have pointed out that conditions are not appropriate for the start of a new bull market impulse leg in the PM sector. Ski subscribers in particular await proper alignment of index signals and in fact anticipate a sell signal setup very soon. I am currently in a waiting pattern and will continue to mark up charts and consider the implications of a Ski sell signal and the subsequent resolution of the large symmetrical triangle in the HUI index. Clearly, the .20 xau/gold ratio has generated some interest. I have also seen some insider action in GSS and CDE to name a few. Oh, by the way, one other chart that is getting my interest lately is CGR. We'll post a update on the chart soon.

Here's a chart to ponder for a bit. Consider the pennant and primary trendline as seen on a linear scale version of the HUI index. In my opinion the internals are not setup for a sustained move to new highs. The question in my mind is presented on the chart. Which way will the pennant break. Of course nobody can say, but we can contemplate what happens thereafter.


Sunday, March 25, 2007

The xau/gold ratio


Much has been written lately about this ratio and its ability to call bottoms in the sector. While I agree with the methods I also am mindful that paradigms tend to shift just about the time when they become widely adopted. Therefore, I believe it is prudent to examine the long term montly charts of this ratio and see where we are in terms of historical trends in this ratio. As you can see by the chart shown, shares as represented by the xau have drastically underperformed the metals. This should be of no surprise as the index is comprised of companies that were essentially short their own product as prices were beginning a massive bull market. Much of this has been unwound and I wont get into those details here. The chart clearly shows that the ratio has spent the entire 6 year bull market under the 50% retracement level. The paradigm for swing trading this bull has been to go long around .2 and sell around .28. That has worked well, except now I think the method may be a bit too widely accepted. So what would it take to catch the crowd off sides here. I cannot really provide evidence other than a gut feeling, but it is my contention that the market at some point soon will do the unthinkable and break support of the lower boundary. A test of the long term lower bollinger band would setup a very strong buy in the sector. Maybe it's wishful thinking, but thats what I'm watching for.

Tuesday, March 20, 2007

More Chart Updates

The charts listed below have been updated as of tonight. I still see a mix in the sector. I like the way Steve Swink put it right here. Steve has a level approach to this sector. Many expect a flush now, and some are already loaded with long positions. The reality is that there are both good and bad charts showing up in my analysis. What's really amazing is that some charts have just enterred what appears to be long term consolidation cycles while others have just completed long term consolidation cycles. What gives? Somehow I think the resolution to this divergence holds the key to the future of the sector. I do see room for a flush to occur without invalidating the positive cycles I see in the good charts. The character of this bull to date has been to punish the longs near the end of major corrections. Maybe thats what's in store now. I do believe the best place to position will be the technical frontrunners we are identifying now. However, there may be a place for some strategically placed calls in severly oversold shares that have a history of volatile reactions.

GSS, AEM, EGO, HL
HMY, PAAS, KGC, SSRI
MDG, FCX, AUY, IAG, NEM

S.M. Himes

Friday, March 16, 2007

GSS Under the Hood


As we have seen several juniors have been outperforming. This post considers if its time to commit some money in that portion of the sector. First, It is unclear to this trader if the recent hammer on the HUI is a significant bottom or just another corrective bottom. On first observation the fear generated that day in the sector did not seem strong enough to spark a lasting rally. Although the xau/gold ratio did dip below .20, we are not quite satisfied that all conditions are set for a sustained rally. Additionally, it is not in character for the metal to lead the shares into a major impulsive move. Of course this time could be different, but we will have to use history as our guide until proven otherwise. Second, as Steven Jon Kaplan has pointed out, insider action is not exactly typical of a major bottom. Third, I submit a short term chart of GSS. As I stated a few days ago, these types of momentum moves can be subject to a quick reversal. So lets take a look under the hood and see if that is about to happen with GSS. GSS has been in a long basing pattern. These patterns typically set the stage for major rallys. The short term chart shown is building a diaganol from which direction will be determined. I have shown wave counts for a leading and ending diaganol. If the pattern turns out to be a ending diaganol then I expect a correction back to the 3 dollar base that GSS has so well established. It's not hard to see how a reaction like this could occur when you look at the weekly chart. On the other hand if price breaks north of this formation, then it will be a confirmed leading diaganol. The first target would be 6. Looking at some internals we see that there is a negative divergence on the macd and rsi. These are warning signs. As GSS is one of the sector leaders currently, we can use the outcome to help formulate an investment opinion going forward. P.S. Disclosure: I bought a little gss Friday for a short term trade.

S.M. Himes


Thursday, March 15, 2007

Watch Those Trendlines


The last major HUI correction occured in 2004 when the monthly macd topped out. If we compare the current cycle to that of 2004 we can see that the correction either is very early in its cycle or there is a major bullish impulse coiling. The Andrews pitchfork diagram shown depicts the likely bullish and bearish price progressions and the "lines in the sand" for such trends. I am the first to admit charts are not crystal balls and anything is possible. So lets consider the possibilities.

1) The current trendline (now at 310) holds, and price enters a parabolic blowoff stage. The monthly macd bottoms and hooks up hard at yet another higher low. In retrospect a wave five impulse will be evident from the then completed chart. 2) At some point of exhaustion (perhaps on a monthly macd histogram kiss) price fails to attain a higher high and the primary trendline fails allowing prices to fall into the mid band of the pitchfork. Since this is the mean of the trend (provided a parabolic blowoff didn't precede the break) it seems likely that prices will gyrate around the dashed line as the bull phase gets back in sync. 3) A bearish phase occurs after the support break outlined above in which price actually enters a bear market and trends in the lower half of the pitchfork. I can only see this if the USD begins a 1 year plus bull market. The bearish phase would represent a capitulation of sorts to negate the SKI-style death run of May 2006. This could be a drawn out process that would be a painful death by a thousand cuts, at least until the final capitulation. In technical terms it would involve a bearish crossing of the monthly macd. This sort of action would also suggest that our 50 month sma bull market envelope analyses would come into question.

Perhaps Occam's Razor would provide the best solution here. To me the simplest solution is that price tends to follow the mean of the trend, and the trend is your friend. That may not be much help for those holding longs from hui 300+ if the lower channel is visited in the next several months. Personally, I rarely hold trades long enough for this picture to disturb me. So we'll just go with the flow, buy when good values appear, and sell when the froth comes back.

S.M. Himes

Wednesday, March 14, 2007

Chart Updates

A total of (7) xau/hui charts have been updated with my annotations. These are for the most part monthly charts. The point of this exercise is to gather some facts about the envelope of this bull market. In my opinion long term charts tell you the most about what is reliable about the trend. The links are near the end of the page under the xau/hui component heading. The following charts are now updated. By the way, I keep coming back to a common theme regarding the 50 month moving average. Most all of these charts show similar trends guided by the 50 month sma. I guess thats not a surprise.

ABX
AU
GG
CDE
RGLD
GFI
GOLD

Todays chart of the HUI shows that price is very close to a major turn. Its basically boxed in. The batwings pattern shown (some call it a head and shoulders) might just be a great "painthecharts" rendering. Of course we don't have the luxury of knowing the outcome yet, but we do have a nice hammer candle on the daily to sleep with tonight. I have to say I'm not sure the current price to MA gap is narrow enough to support a sustained impulse leg in the HUI. The charts of the major components of this index seem to support that notion. I guess I'm not going to get too excited yet, but its nice to have a positive day.

S.M. Himes

Tuesday, March 13, 2007

Other shoe is dropping

Yesterdays caution is warranted. As expected though the strong list continues to be stronger than the rest that are tanking. I just want to note that the breakout retracement on the strong list from yesterday can still feel quite painful as these are weekly charts and could fall 25% or more. They still are the strongest and will remain in uptrends. Here is one we have followed alot in recent years. It's in the weak list as it has not exceeded its high of 2004. I like to contrast the weak and the strong to get a feel for the boundaries of the landscape. So expect a little of everything here. Maybe we'll take a look at drooy next , not.


S.M. Himes

Monday, March 12, 2007

Some Juniors are Outperforming

The action on some juniors is really driving me nuts. While the sector as a whole drifts downward to long term support some stocks have or are breaking out and embarking on impulse runs. Take a look at a few of them below. RNO (shown) has broken out of a head and shoulders bottom. In previous waves these formations have preceded major moves in stocks like cde and gss to name a few. I have not taken the time to annotate these charts. I just wanted to collect and present a few of the ones that are on my radar now due to the impulsive nature of the moves. Assuming the sector has more bottoming to do these moves are likely the end of the beginning type moves, with retests of the breakouts to occur with the rest of the sector bottoming. MRB is a example of a stock that is right at the upper trendline for a sinclair style 1/3 sell. I can't help but think these stocks will be on our leader board when the next wave is in full force. I have to issue a word of caution here as these are currently momentum trades. They can end quickly and start retracements back to the breakout points. I suspect thats what will happen provided the sector makes a move back under the current primary weekly bull market trendline shown in a previous post. If on the other hand support holds here I expect these stocks to go ballistic. The point of the post today is to show some strong stocks that are leading in spite of some of the bearish developments in the sector.


follow these links for the others on my mind.

GBN CGR GSS AZK OZN NAK





S.M. Himes

Sunday, March 11, 2007

Gold Investors Worried about General Market?

For those gold and silver traders that are worried about the general market taking down the gold and silver stocks I suggest you spend some time here. Matt Fraileys excellent set of charts depicts the overall market landscape quite well. You will find various sectors charted including gold and oil as well as the dow and nasdaq. The general theme I get is that the recent selling action is not the beginning of a bear market, but simply a correction into the four year cycle low. There are some good bottoming indicators in these charts which can be watched for our positioning entries. I particularly like the price relative data for the hui, xau, and component charts. Time spent with these charts will be well worth it.

S.M. Himes

Saturday, March 10, 2007

A quick look at the HUI monthly

Sometimes its best to step back and take a look at big pictures before considering the shorter time frames. The big picture cycles are in charge. Clearly the HUI index has been in a strong bull market for several years as this chart shows. There are a few issues worthing of considering about this chart.

click here for chart closeup



1) Price is and has remained close to the primary bull market log uptrend line for some time now. Price volatilities seem to be decreasing.

2) The 50 month simple moving average seems to be a key technical for the rising tide of the HUI bull market. Notice the rate of change is pretty much parallel to a regression channel for the HUI price itself in the last few years.

3) A comparison to the 2004 support break reveals that the 2004 "price to ma gap" was much larger on a percentage basis than exists with the current monthly candles opening price. This must be a feature of a logarithmic progression in a bull market.

estimated 2004 = (241 - 112) / 241 X 100% = 53.5%
estimated 2006 = (362 - 240) / 362 X 100% = 33.7%

4) The 402 high marked a failure to progress all the way to a trend line top of the parallel to the current log bull market support line.

5) There are negative divergences showing up in the RSI and the ADX. There is also a peculiar footprint on the monthly stochastics in which the time at overbought is significantly shorter than the period leading up to the 2004 support break.

6) A monthly macd warning was given at the end of 2006. In 2004 this signal preceded the major support break.

These are just observations. My first take is that they are a bit bearish. However, there are some bullish things happening too. The big question everbody is asking is whether that primary trendline will break. I've considered that question so much that I finally decided I don't like the question anymore. No chart is capable of predicting the future with any certainty. So why not just change the question.

The way I see it this bull market has some warning signs in the internals, but it also has a clearly defined rising tide. The 2004 picture was one of extreme optimism in a new bull market. Note the gap comparison, not to mention the peak in the hui/gold ratio, which still hasn't been exceeded. The current picture is that of more of a adolescent bull market. Fundamentals have caught up to the 2004 price levels (note the 50 month ma has risen to the breakdown point in 2004) and we are working off some of the excessive valuation from the first "public" impulse in the sector. I call it public because of the events such as the new gld and slv etf's and promotion on cnbc and the like.

Ok, so what is the new question to ask? I think I want to consider the meaning of either scenerio. First what does it mean if support holds at the bull market trendline in question. Second, what does it mean if support breaks? If support were to hold then we would have to consider the upside limitations of the diaganol present from the previous high that failed to reach the upper trendline. If the support breaks then we consider the validity of the dashed line channel as our new bull market channel. Consider a couple TA rules on this.

a) A market tends to progress as long as the three fan rule holds. This was recently popularized on a public forum. Its a general rule of thumb that the break of the third fibonacci fan results in a reversal. The HUI application here is that the chart I submitted today has two in tact lines unbroken one of which is not even drawn yet. My point is that a break of support here is not a break of the bull market.

b) In a bull market previous broken resistance acts as current support. Another way to say this is that overlaps are warning signs of a new Elliott progression. The application to our chart is that price can actually break the primary support trend line without overlapping the previous support price.

So whats a trader to do? Well remember the point of this blog is to identify the landscape and then apply that understanding to position in individual stocks that can give us the most beta. IMO the controlling trendline here is the 50 month simple moving average. It's as simple as that. The closer you can position to that line the better off you will be. My gut tells me HUI is going to trade in the dashed channel. I beleive HUI is now topheavy due to overvaluation of GG and the lackluster performance of NEM. Maybe that will change suddenly at some nadir. Other stocks in the HUI may take up the slack. I think I'll leave it at that for tonight. On another note I plan to post component charts of the HUI and XAU in the next 2-5 days.

S.M. Himes

Friday, March 9, 2007

The Details

Please be patient as I am currently working to get this blog populated with some decent charts. The charts are static and therefore do not automatically update with the market close. The charts are prepared with stockcharts.com tools and are hosted by imageshack.com. After going to the link you can click on the image to resize for your screen. For this first set of analyses I will be doing long term charts only. I feel we need a big picture view right now to catch the next wave properly. The big picture is not likely to change with a few weeks or even months elapsed. However, do pay attention to the date on each chart you view. Analysis can become dated. I will try to update charts as I see fit or remove them after they become obsolete. My expectation is that many of my picks for the next wave will indeed breakout and start major moves. At such time I will post a shorter term chart showing the breakout metrics.

P.S. When hyperlinking to charts and/or other links on this site I suggest you right click on the link and select open in new window or new tab better yet to provide easier navigation. On a final note for this post please check out the amazon book links. I will only promote this in a post once. I am only promoting books that I personally consider to have great value for our trading profession.

S.M. Himes

Wednesday, March 7, 2007

Blogscope

The idea behind the name of this blog is that the PM sector cannot be traded through traditional chart speak techniques. It's natural for traders and investors to attempt to find a investment theme. In fact its paramount to have a theme you can commit to , or there is little chance you will ever make money. The daily whipsaws will see to that. This sector is replete with deceptive chart patterns. Often you must look under the hood of the chart and consider all the factors that give rise to the chart condition. The PM sector is probably the hardest of all sectors to trade. In my travels in this sector I have often found that the chart pattern on face value is often telling the opposite story. I also find that the truth of the matter can often be determined by careful consideration all timeframes and cycles for the current patterns. Very often the short term time frame may start to look very bullish just as the intermediate time frame is topping. So you have the risk of getting sucked in at the worst possible moment. The reverse can hold true at bottoms. The point is that multiple time frame analysis is often the best way to discern this.

A second technique is Elliott wave analysis. Elliott is no panacea. It is a labeling scheme that can be used to present structure after it has occured. Elliott is not a predictor in the true sense of the technique. Many E-wavers attempt to predict based on what they assume is the valid count. A better approach is to consider all possible counts and make trading decisions based on crossing of key pivots which corroborate the valid count. Shortly I will present my ideas of the two possible counts involved with the PM sector at this juncture. The current picture is widely debated and that provides opportunity to those with the courage to take a stand and be on the right side of the trade. It is not the goal of this trader to pick the bottom. Jeff Kern is the best at that. Rather it is my goal to correctly survey the landscape and provide positioning advice for myself and my friends so that we will be on that right side of the trade and leverage as confirmation occurs.

S.M. Himes

Welcome Post

I am setting up this blog to provide a periodic free charting service to my friends and family and anyone else who has any desire to follow my thoughts in the PM sector. I cannot promise to update this site daily or even weekly. However, I do intend to make important analysis at key turning points in the sector. As we are approaching one such event, my thoughts are now to gather a list of gold and silver stocks and provide long term chart TA for each. Feel free to submit candidates, but please include a reason for your submission. The objective is to identify likely front runners in the next leg of the PM bull market. This should be an on-going effort over the next several weeks. I will post my sector view and methodology in the next few days so you can see where im coming from. Cheers, and thanks for stopping by.

S.M. Himes

Gold Seasonality

Gold Seasonality
Thanks for stopping by. You will find frequent analysis of precious metal index and stock charts on this site. Please feel free to comment on my views or email me directly at

stacyhimes@aol.com

Please Checkout the Chart Links Below the Posts.