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


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.

Gold Seasonality

Gold Seasonality
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