"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

Trader Dan's free work will soon be available at www.traderdan.biz

Friday, December 14, 2012

HUI Weekly Chart still looks heavy

One month ago, the HUI managed a nice bounce off of an important chart level of support coming in near the 440 level. The following two weeks it then respected that support with the market finding buyers on any approach towards the region. Last week that all changed with those former buyers apparently on strike as they did not show up in sufficient size to offset the selling pressure on the sector. The result was a downside close below 440 last week. This week the market looked as if it was going to finally get something going to the upside on Wednesday but by the close of the week it appears that those buyers on the back of the QE4 news had wavering convictions.

So where are we for now? While the market did hold above the previous week's low it still did not manage to regain that former support level of 440 as it ended the week at 437. Next week therefore will be critical for the sector. If it cannot attract enough value based buying to take the index back above 440 to end the week, it is likely to drift lower to close out the year with the very real possibility that we might see a move to 420. That would basically move the index down to revisit the downsloping trendline, which the index did manage to breach this summer. Ideally, if it were to move this low, the index would then bounce from this line (near 420) and go on to recapture 440. That would be a pretty reliable sign that the selling is exhausted.

For this index to have any chance of actually improving the technical posture, it would need to push above 460 to end a week.

One has to hope, for the sake of the long suffering share bulls, that 420 can stem the bleeding if last week's low does give way.


  1. Dan,

    Thanks for the post. Everybody can definitely see the awful performance of these shares. I'd like to point out the performance of the SIL (silver miner etf) versus the performance of silver, and also the performance versus gold and gold miners. AG, SLW, SSRI, among others, are holding up pretty strong.

    Normally I'd give the torch to gold and miners in terms of leading the move up or down, but I feel that the daily charts of copper, palladium and platinum cannot be ignored. Couple those with the performance of the emerging markets (EEM FXI INP EWY EZA) and it provides evidence of a possibly recovery there. Wouldn't that be bullish for silver as well, dragging gold up kicking and screaming?

    1. Bradley;

      Very good point as those base metals are all showing positive charts. I mentioned on this week's KWN Metals Wrap that I am a bit surprised to have seen the ferocity of the selling in silver late in the week especially as those base metals were all firm.

      If the mentality does indeed shift away from deflation towards inflation, it is going to be difficult for the silver bears to press the metal significantly lower.

      Thanks for a insightful post

    2. I'd like to point out one more thing about silver and silver stocks. If you look at the daily chart of gold and silver back in early to mid August, while they were churning back and forth, AG and SLW had already broken out of some key resistance before the second week of August.

      It took over a week and a half for silver to acknowledge them, and the next day gold finally began its move.

  2. HUI has a gap at 424.something that needs to close. I know it's an index, but historically, its gaps tend to close up just like any singular equity. Ive got capital I put aside just for this occasion, it would appear that 420 will be when i move back in. Dont know why more people dont just play the gaps? It requires patience, but almost always works out.


Note: Only a member of this blog may post a comment.