HUI - No Buyers

The rate of descent in the mining shares is remarkable. Rarely does one witness a collapse of this magnitude and severity without some sort of period of consolidation. It speaks to me like a final washout is underway, even of the most die-hard, long term bulls.

In a period of only 9 months, the index has lost 60% of its value. As stated before, the damage inflicted on the owners of these shares, both financially and psychologically, has just about guaranteed that the vast majority of those who bought them as a hedge against expected inflation will never again in their lifetime come back as buyers in this sector. If they do come back to gold, it will be the ETF, GLD, or some other entity but it will not be mining shares unless management makes it attractive through dividends or some other novel method to own them.

In looking for a place on the chart where the POTENTIAL for a stem in the bleeding can occur, I have noted two different sets of Fibonacci retracement levels. The first set takes the entire decade long bull market and the second takes the rally off the 2008 low, prior to the inception of QEI.

Note how close the various Fibonacci lines from both sets (red and blue lines) come closely together at key areas. Notice also how both sets have failed to offer any support.

We are now down to a region where we are running out of support levels. I have noted the next one which starts below the 200 level and extends to 186. If that cannot hold, we are back to where the index was at the bottom in 2008, near 159 - 160.