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

Gold Seasonality

Gold Seasonality
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