These sentiment-driven HUI upleg cycles are extremely important and relevant today because the long grating drift since May 2006 is probably ending. Today's immense levels of negative and bearish HUI sentiment, not to mention how tired and irritated traders are getting with a 300 to 350 HUI, really suggest we are due for another surge. There is even a good chance it already started at the August lows!
Another way to consider the giant surge-drift fractals is to divide them into two distinct uplegs. The surge stages see "massive uplegs", truly legendary gains in the HUI that earn traders fortunes in just 6 to 12 months. But the drift stages, even within long consolidations, also hide "consolidation uplegs". They are much smaller than the massive uplegs since sentiment is rebalancing and traders are getting comfortable with new higher price norms, but they are still plenty profitable to trade.
So the HUI upleg cycles can be considered in terms of surge drift surge drift, or else in terms of massive uplegs followed by consolidation uplegs. By measuring from one major interim extreme to the next, we can gain an empirical idea of how big the various uplegs have been and are likely to be in the future. Using the same system above derived from numbering interim extremes, we can number individual uplegs and their subsequent corrections. Upleg 2, for example, is the upleg that culminates in major interim high 2.
By this designation, uplegs 2, 4, and 6 were massive uplegs while 3 and 5 were consolidation uplegs. And the recent provisional 7th upleg was also likely a consolidation upleg. If this proves to be the case, then we are now due for the next massive upleg. And if the upcoming upleg 8 is indeed massive, PM-stock investors and speculators have the opportunity to reap absolutely enormous gains in the next 6 to 12 months.>>>>>
If major low 7 of August 16th, 300 on the HUI, holds, then it marks the start of the next HUI upleg. Assuming this coming upleg 8 is merely average, we can expect a rally in the neighborhood of 94%. This yields a potential HUI target for major high 8 around 580! Anyone who owns quality gold and silver miners and explorers would see tremendous gains, doubles or higher, by the time the HUI approached these levels.
And if upleg 8 proves to be another massive upleg in the surge stage of the next surge-drift fractal, then the upleg target is even more impressive. With 136% average gains in massive uplegs, the HUI target off the major low 7 exceeds 700! And with all uplegs tending to run 8 months on average, such a doubling or tripling of quality PM stocks could very well happen before next summer!
So as the US dollar enters uncharted territory, dollar selling by foreign investors ranging from individuals to central banks should accelerate considerably. Some of this flight capital will naturally migrate into the ironclad safety of gold, the only currency that has survived all of human history. The current dollar slide is so technically ominous and important that it could very well drive the biggest gold upleg of this entire bull.>>>
And while mainstream commentators will claim $700+ gold is really expensive, this isn't really true in light of history. If you adjust the gold price for inflation by using the watered-down CPI, gold's real 1980 highs in today's 2007 dollars are now near $2300 per ounce. So going north of $700 or even $850 today isn't a big deal and is highly likely given gold's fundamentals and the dollar's troubles.
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