"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Thursday, December 8, 2011

HUI range constricting

The mining sector, as evidenced by the HUI, remains mired within its now more-than-a-year long trading range which is bounded on the top by the 600 level and supported on the bottom by the 500 level. Going back into November of 2010, all rallies have eventually failed to hold for long above the top of this range. There were only two weeks in which the index was able to pull off that accomplishment but it then failed and failed very large at that. It collapsed over 85 points in a single week which dropped the index back down to the bottom of the range.

This needs to be kept in mind as we look at the daily chart which is detailing a pattern showing a tightening congestion as it moves into the end of the year. Normally one looks for a breakout of this type of coil and then a strong trending move in the direction of the breakout. However, before such a trending move could occur, we would need to see the breakout from the current constricting coil actually extend beyond the boundaries noted on the weekly chart. In other words, the breakout must have enough force behind it to not just take out the top of the downsloping trend line of the coiling pattern but push past the horizontal resistance line near 600 on the weekly chart if these mining shares are going to start a strong trending move higher.

The flip side of course is that a breakout of the lower upsloping trend line of the coil would have to extend deeply past the bottom of the larger trading range near the 500 level to suggest a trending move to the downside in these stocks.

The summary of all this is that we are still stuck in a very broad, year-long consolidation phase in the mining sector shares with some potential to resolve this stalemate depending on how the market views the efforts of the various Central Banks in dealing with the current sovereign debt crisis. Other than that, it is as much fun as watching paint dry.

1 comment:

  1. Dan,
    Could you explain to me what this means:
    Deutche Bank has released its physical Gold ETF holding: 1045200 oz with the details:
    db Physical Gold 111,057
    EUR 251,497
    Euro Hedged 680,712
    GBP Hedged 57
    SGD Hedged 1,878
    Does this mean that only 111 057 oz are physical gold and the rest is hedged "paper gold".
    Thank you for your explanation. here the link:


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