"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


Friday, January 27, 2012

HUI notes

We are seeing a definite reversal in the price action of the gold miners in comparison to the action in the broader equity markets in today's session. I am not sure of the reason but whatever it is, the result is that the mining shares are finally seeing a strong bid in comparison to the broader equity markets.

As most gold mining shareholders have been all too painfully aware of by now, the mining shares have been lagging the broader market for the last 6 months or so now. Notice the peak last summer and the progression lower, particularly at the end of last year.

Trying to decipher at what level the analysts have pencilled in the gold price when valuing these things is an exercise in futility seeing that the Fed threw everyone an enormous curve ball this week when they gave the green light to another two years of zero interest rates. Obviously, that is strongly bullish for both gold and silver which are poised to go out on a very strong note this week.

The problem has been the mining shares in general which kept underperforming. After yesterday's lackluster showing, I was cautious about the HUI failing to gain any ground after making its high on the open. Today however, those bulls which seemed so hesitant to push them any higher, are obviously having second thoughts and have stepped in much heavier with the result that they took out the previous day's high and are keeping these miners well bid through the session. Apparently we are seeing a revaluation of the shares now that the FOMC has changed the playground rules.

If this sort of buying continues heading into the close ( and I am closely watching to see whether it does or not - so far it is very strong), the HUI will close at its best level in 6 weeks. It has even managed to turn the short term moving averages (10 day and 20 day) higher while it remains well above the 50 day. That is a nice turnaround from yesterday. The buying has taken the index exactly to the 100 day moving average. That will keep the index on a strongly bullish footing if it succumbs to the bulls.


  1. Thank you Dan,
    Very good work!
    If keeping people's money away from gold stocks is the game, your charts show that gold stocks do have good value versus the SP 500 at these levels. The fly in the ointment comes with the feeling that the SP500 is topping out - stimulus or not. A never-ending shell game, and nightmare for asset managers.
    It was not so long ago that it looked like the DXY might build on its momentum - give Jim Sinclair a high five for his savvy from me.

  2. Hi Dan. It "feels" like short covering to me. I've been using your T/A as a guide for my trading decidions. I jumped into some CDE and SLW, but jumped back out because I simply don't have faith in the miners, other than on technicals.

    As of trading right now, Silver seems to have hit a brick wall at 33.90. Looks like gold will outperform next few days and play catch up would be my guess, unless the DXY shits the bed completely. I'm out of both for the weekend, because they seem setup for some short term consolidation should some bullish dollar news come out over the weekend.


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