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.
"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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