Monday, November 10, 2008

It will take time

I posted the above chart and a discussion about the trend continuation theme on recently. My theory is that the recent wipeout in the HUI index is part of a wave II correction in a secular bull market progression. If this is true then I think we should be prepared for this to take some time for the bottom to form. We do need to see strength in the price action however. I would view a move above the breakdown pivot near 253 as a first step in the bottom formation. Eventually I expect to see some type of double bottom or similar chart setup. It will take many weeks for it to form.
S.M. Himes

Saturday, September 27, 2008

The Credit Crisis

This site is about technical analysis of charts and trends. So you won't find me writing new material about the fundamentals of this crisis. I did however just read John Mauldin's "Outside the Box" letter, which contains a very direct letter to his congressman about the saliency of this "non bailout bill". John's letter is free. I have been a reading him for a few years now and he is excellent on fundamentals. All you need to do is give him your email address and you will get access. What more can you ask for. Follow this link to access his letter.

A few weeks ago I detailed how I saw a major low in our gold sector occuring on many charts. The initial impulse off those lows has occured. Many are still in doubt about the lows and that may lead to some kind of retest. These are buying opportunities. In the weeks to come confirmation will appear. Confirmation is what starts the markup phase of a new trend. Expect it to begin very soon on the ratio charts.

S.M. Himes

Friday, September 19, 2008

What a week!

Here's a little chart for you to chew on while I work up some other goodies this weekend. If the gold/silver sector is near the big power wave some are talking about then we should soon start to see a return of the speculators. I think the events of this past week, and especially today suggest that our markets will see the return of speculators.
S.M. Himes

Wednesday, September 17, 2008

Major Changes Are Occuring Folks

I speak with respect to our gold and silver sector when I say major changes are in effect. This is obviously true for all financial markets, but it's gold and silver that I care about. For many months I neglected our chart updates as it was just clear to me that I was charting the noise of low breadth moves in the sector. If you followed some of my older chart work you would see that many of my bullish assumptions proved to be incorrect. I suppose it's just the nature of the bull market to break the key lines and give the bear market paint job just before lift off. In more recent months when the three peaks pattern became evident I got pretty excited at the possibility of a resolution to this mediocre relative performance of our gold and silver stocks. Well we finally have a significant turning point. The low on the HUI index suggested on this blog has come to pass. More importantly the confluence of factors outlined here have provided confirming evidence that this was a major low. Due to proprietary concerns I have not mentioned Dr. Jeffrey Kern and his most excellent cycle analysis, which confirmed the turn to the day. Sign up at if you care to fully understand and participate in this unique system.

Fear is in the streets right now and some folks may consider that this recent move in gold and to some extent silver is nothing more than a temporary reaction to the recent credit crises events. This is absolutely not true. Investors will soon realize that this is the only game in town. Remember this is a very small and heavily shorted sector. Recent rule changes with regards to shorting are likely to light a fire under many of the stocks in this group. It is now my plan to update the charts in my lists below in an objective manner. I will summarize each chart concisely and bring some of the ones I like to the front page for detailed analysis. This will take a few days at least. Be advised things are moving fast. We may see some outrageous moves in this sector very soon.

S.M. Himes

Saturday, September 13, 2008

Pattern Completion

I have four charts for you this weekend. All of these charts are suggesting to me we have reach a point of pattern completion. I would like to draw conclusions about what's next, but the data is not there yet. There are clues as is typical at junctures like this. Lets have a look at each chart.

THREE PEAKS chart: The pattern has played out as expected. The final point of the pattern appears to have occured last week just as spot gold tested its key fib level in the 735 area. The HUI index reached lows not seen since 2005 and in doing so created a wave overlap. Some may view this overlap as suggestive of trend change. However, It could also be viewed as the bull market meeting a requirement for retracement before a new leg can commence. Either way the three peaks pattern is complete and it no longer provides us with a meaningful measure of this markets progression.

HUI:$GOLD ratio chart: This is a fascinating chart. As you can see the ratio completed a 61.8% retracement, which seems to fit the 80 month bollinger band extremes. This move by itself does not suggest we are going to get a new bull market impulse here. However, it is worth paying attention to as that is certainly a possibility.

XAU:$GOLD ratio chart: This ratio actually made new all time lows! I know of many traders that used this ratio religiously to go long in the .18 area. That was a big mistake this cycle. The lesson in retrospect was to pay attention to those long term negative divergences. This post is about pattern completion and the xau/gold ratio chart appears to have a capitulation. If this low holds then we will also have a positive divergence on the RSI. I have drawn the secular downtrend line on the chart as I think it is very important for judging this sector as we go forward. A spike through that line would be a strong early warning that a new paradigm is setting up for the bulls.

USERX Monthly chart: I think I like this chart the most. Just look at the 80 month sma. This is the first test of the bullish aligned sma in this bull market! I think this chart is more evidence that we may be early in price (maybe not time) with this bull market.

S.M. Himes

Saturday, September 6, 2008

Close in time is not always close in price!

Gold and commodity markets have experienced some severe declines. We are just starting to see some posts that these bull markets may be ending. Although we are not contrarian for contrarians sake it seems likely that these musings are indeed indications of a impending sentiment low.
The three peaks pattern has finally enterred the final leg of is wave to a measured move. Since we have not had a confirmed reversal we dont know if this fifth wave will extend. I could give you some potential minute wave counts. I think that would not be productive as its clear we are attempting to break down or capitulate. Momentum indicators are usually the best way to pick bottoms in a capitulation. I still stand by my prediction that 276 must be hit as a minimum. Now that the 307 area has failed I feel confident we are going to 276 and probably lower. There are several pivots that support a final low. ive mentioned the 263 area. theres another at 248 that has manifested itself from a fib expansion of the recent wave.
In terms of cycle times the fnm/fre news this weekend is going to cause some fireworks monday. Its unclear whether is sell the news or not just yet. I know what I want to see, but the market will do what it wants. I will say this. If gold and silver continue the selloff next week and selloff hard then its time to buy. If they take off to the upside early next week, then we may have a bottom as well. either way we are about there in time , maybe not price.

S.M. Himes

Friday, August 15, 2008

Three peaks pattern and fat pitch update

The HUI index has finally confirmed a Three peaks and a domed house top pattern. This is a less well known pattern documented here. There are a few important points to make about teh current configuration of the HUI chart. First, the three peaks pattern says price always returns to point 10. Well, this pattern showing on my chart is pretty tough to interpret with respect to the troughs. The peaks are pretty clear, but the troughs are subject to interpretation. My feeling is that point 10 is best defined by the August 2007 low of 276. That is also just a point away from two very important confluences. The best fit head and shoulders neckline show has a measured move to that point. Also the 50% fibonacci retracement level of the entire bull market to date is at that level. This is strong evidence that that level is a attractor. In strongly trending markets levels of this importance can be breached significantly. The key is that they are attractors and their supports are often only bent temporarily. So I therefore have to consider what hidden pivots may be within reach in a crash scenerio. The chart shows a neat fibonacci expansion and a pivot I think is meaningful. Lets face it. If this market is crashing stops at the most convenient fib level are going to get blown out. Lets see what happens next week.

Once these measured moves are completed and this capitulation of sorts runs its course the HUI weekly chart will sport a 3-3-5 corrective wave. These are usually part of flats. To me this suggests a strong wave up followed by another likely correction and retest of the lows. This could take place over many months.

Where do we stand on the xau/gold ratio? I suggested many months ago that this ratio could be continuing its secular downtrend. Well that has been confirmed and we are in crash mode in the xau/gold ratio. The stocks are acting like calls on the price of gold where they are not just out of the money but are near expiration. This is a tough position to be in, but it also suggests we are near in time to the end of the old game and beginning of the new game.

S.M. Himes

Wednesday, August 6, 2008

The fat pitch of the century

Well considering I haven't posted for so long I have to wonder who is still reading my blog. Honestly lifes many demands have kept me from doing the proper service to this forum. For that I apologize. The time has come which I consider so important I must post some comments. I hope to provide some analysis in the days ahead to backup what I think is happening in this sector. There are some well known facts now in this sector. 1) We have a clear and defined top for gold coincident with the Bear Sterns fear culmination. 2) A low breadth rally occured in the PM shares generating the HUI 519 highs. A failed secondary rally occured, a head and shoulders pattern setup on the daily , and the neckline has been breached. 3) The junior sector has been in a terrible bear market now for many months. 4) Shares are trading at a severe discount to gold suggesting that either the shares are undervalued or the bull is just over. These are just some of the facts and they all sound very bearish dont they? Would you say we are in the opening act or the closing act? These are serious questions. I think this market will take us to some crazy extremes. In my opinion we are in one of those extreme events right now. I think we are getting a fat pitch in the shares. We'll have to see how this month progresses, but I think there is a decent chance that the time is now. I have my targets for the downside and they are quite low and soon. The good news of course is what happens thereafter. Im not sure many fathom what we are looking at.

more to follow soon

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

Please Checkout the Chart Links Below the Posts.