re: the HUI and Goldstocks:
Concerning Professor Kern and the Ski method:
It is NOT what he is saying....it's HOW he says it.
I fell out of my chair laughing on the "I am calm - I know what I am doing" comment on his near breathless emergency update....along with his Professorial consult regarding his emotionality and most of all his "today" is the day for the BIG ONE, no make that tomorrow... hold on - make it Tuesday, but only if "x" but, not if "y" and then dependant on x:y not being above "z", but then yes, if z = x + y > Z then do not buy options, just stocks and it's okay, because we make 148% vs. 150% .... I am sure, I am not alone in having to wipe the tears from my eye's from laughing...
Sadly, there is a valid message in his apparent madness.
Actually, if you look at the Charts; regardless of whether one is using very basic, standard TA; or is from the Elliot Wave school of thought, or has developed some proprietary mathematical based system such as the SKI system of Professor Kern... the Charts on their most basic level are showing that both Gold and the HUI have reached a major inflection point for volatility:
stockcharts.com[d,a]daclynay[d20041201,20050808][pb10!b50!b200!f][iut!lj[$hui]][J56603508,Y]&listNum=2
The HUI has moved in 40-60 +/- point legs - re:
stockcharts.com[d,a]daclynay[d20041115,20050803][pf][iut!lj[$gold]][J54037815,Y]&listNum=2
There has been no better swing-trading sector than the HUI. If one avoids the major downdrafts and is able to capture 2/3rd's to 3/4 th's of the up legs... there has been some attractive returns.
What makes the sector so "tradeable" is that unlike any other commodity, the supression of Gold has followed a pattern that is clearly reflected via the charts and has been somewhat predictable...and has the benefit of creating a potential "coiled spring" of epic proportion - once Gold breaks thru it's upper resistance.
Those trading Gold and Goldstocks must anticipate the Gold moves to be continually intervened upon via everything from Central Bank selling, to the obvious need for Central Bankers to silence, or at the least, to control Gold's message on Inflation, or China's move away from Bretton Woods "II" and the US Dollar Standard, to overall Market Risk and volatility.
In no other sector, is it more important to - take what the market gives you...and to manage profits and money very carefully and conservatively at key technical inflection points.
The recent near predictability of when and where the Commercials will step in with a massive SHORT move... has allowed very attractive RISK:REWARD entry & exit points.
Given that we've just had an explosive "V-Bottom" move that gave us a +40 point Index move in just 20 trading days...only to stall into a now 8 week old narrow trading band that has both Gold and the HUI sitting right on their respective resistance lines... this was as much of a no-brainer inflection point to safely bank and protect profits - as ever exists.
Waiting for confirmation of the sustainability and the continuation of the move is a pretty elementary call here... unless one is of the "casino-Mad Money" mentality and wants to put it "all on red" and spin the wheel one more time...
I posted this chart a week ago regarding the Pivot Point that the HUI was now sitting at...vis a vis Putting Profits from this Run - safely in the Cash Register vs. the "double down" mentality found elsewhere - here's an update of what resulted:
stockcharts.com[d,a]daclynay[d20041101,20050809][pb10!b50!b200!f][iut][J56381408,Y]&pref=G
For those individuals trading goldstocks - I believe that you need to put yourself in the position and the mindset of the Fund Managers that really move the Goldstock sector.
Why would they push the HUI back thru the 220's and anywhere near the former highs in the HUI 250's...untill GOLD breaks thru this overhead wall of resistance at $443, $447 and $456 ?
There is simply no reason for the stocks to be pushed out front of Gold in this environment, untill Gold breaks thru that resistance.
In my opinion, Gold must lead the HUI thru that 227-258 level.
When it does...and I firmly believe that it is still "when" and not "if" proposition -> then the stocks should explode and make an extended run well thru HUI 320+ to even HUI 370.
That is where the seemingly "Mad Professor" and his "SKI" system is NOT wrong in predicting that the move will be the largest of this Cycle... I think it ultimately will be.
I posted on this some time ago, regarding if the HUI 165 level held, it would establish a strong "double bottom" and keep the Cyclical Uptrend intact for the HUI and the mathematical progression of the size of each cooresponding leg, indicated that this emerging leg would target HUI 350ish:
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Message 21355442
["Technically; we've had 3 Major Legs to this HUI Bull Cycle so far.
Leg #1 commenced when the HUI moved from its HUI 35 bottom in Q4 '00 up to HUI 80 resistance in Q2 '01.
= total move of 44 points.
It then pulled back and formed another multi-support bottom at HUI 60 in Q3 to Q4 '02 and then rallied in Leg #2 during Q1 to Q2 of 2003, running to an interim top of HUI 154.
= total move of 94 points.
The HUI then pulled back and formed another multi-support bottom in Q4 '03 to Q1 '04 with 3 higher lows from 92, to 102 and then lifted off from the 112 level for a run to HUI 258 forming Leg #3
= total move of 146 points.
We now appear to have now based for Leg #4 here, with another bottom formation drawing from the HUI 163.82 low in May '04, to our closing low of HUI 166.46 here this May.
Each of the 3 prior HUI legs have increased the move of the prior leg by approx 50 points.
The 1st HUI Bull Cycle Leg was approx 40 points, the 2nd leg was approx 90 points and the 3rd Leg was approx 140 points up off of the bottom.
It the pattern holds; this leg should run approx 190 points off of the HUI 166 bottom here, for an ultimate upside target on this leg of HUI 350
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Elliot Waves, the Ski Professor's System and the simple mathematical progression of each successive HUI leg - all point towards this move being the largest and most significant to date.
But in my opinion; all TA does is show us extrapolations based upon past market behavior.
Traders should use TA as a "guide" in conjunction with interpretations of the fundamental underpinnings of the Sector as well as Sector Sentiment.
All 3 components are "dynamic" and not "static".
TA is a roadmap....with many stops & starts and many forks in the road.
Traders negotiate that "road" on a DYNAMIC basis... NEVER tied to a STATIC Technical Interpretation. TA gives us targets, clues and identifies key inflection points... what it does NOT do - is GUARANTEE ANYTING !
That is why TA used in CONJUNCTION with Market/Sector FUNDAMENTALS and SENTIMENT - indicated that this was a near no-brainer Profit Taking point on the very profitable trade off of the recent complete washout in sentiment and shareprices.
The 10 point window of opportunity that the HUI offered from 175 down to the 2 days that it closed below 170, with HUI 165 being the ultimate low...was a very rare opportunity for Traders to enter at a max divergence between the valuation relationship between gold stocks and the metal - ie:
stockcharts.com[d,a]daclynay[pf][iut][J56407865,Y]&listNum=2
That little "blue square" showed where savvy traders lever their portfolio's to a sector:
(1) When there is a cyclical max divergence between the price of the stocks versus the price of gold.
(2) When that max divergence is accompanied by a cooresponding washout of Investor Sentiment (remember the Hulbert Digest posts) and shareprices.
(3)When the Technicals support a bottom formation (HUI 165ish double bottom).
...that Environment is what offers the most attractive Risk:Reward trades.
Risk:Reward ratio's have exponentially reversed here as both the HUI and Gold have hit walls of technical resistance.
This is NOT where Traders lever their Portfolio's....gamblers, or internet wannabe's ? - yes. Traders who want to remain traders ? - No.
Traders should wait for the sustainability and the continuation of this move to be CONFIRMED.
Technical Confirmation allows one to avoid the continual downdrafts that both the HUI and Gold have endured at key technical points of resistance.
Re-entering, ONLY upon confirmation and the penetration of these key resistance levels for both the HUI and Gold...is using Risk:Reward - versus letting Risk:Reward use you.
To me, that is what separates a Trader versus a gambler.
Gambler's live and die by luck, Traders live and die by being "good" versus being "lucky", by using Risk:Reward verus letting Risk:Reward using them and by leveraging discrepancies between price and risk - as windows of opportunity to enter - as well as recognizing when Risk:Reward environments reverse and using those environments as exit & profit taking opportunities.
This move up off of HUI 165 has been unusual in that we have not really had any re-test, or retracement of the move. I really thought we'd re-test at least half of the move, retesting perhaps the HUI 185ish level, but so far we have not.
- we may do that here if the Commercials apply their SMACKDOWN to Gold once again, as they have 3 consecutive times along this trendline.
Risk is ramping here and "significant" Reward only awaits confirmation and a break out thru resistance.
Locking in profits here and waiting on the sidelines for the market to resolve this HIGH RISK battle at the dual resistance lines for Gold and the HUI...seems almost as much as a no-brainer....as did leveraging up the Portfolio at HUI 175-165.
Longerterm, the future remains bright for Gold and the Goldstocks.
The US Deficits, the Unfunded liabilities of Social Security and Medicare, the costs of the War on Terrorism and China throwing off the shackles of Bretton Woods "II" and moving away from "The Dollar Standard"... paints a very bright future for the Price of Gold.
Presently RISK is high and rewards are minimal - as we have now traded within a very narrow trading band for nearly 8 weeks.
Let's wait for confirmation and the cooresponding reversal of Risk:Reward.
...on SMACKDOWN vs.CONFIRMATION Watch,
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