Gold Bugs Index

Someone in the chat room asked whether a bear market target at 185 proffered here in mid-June was still valid.  The Gold Bugs Index was trading around 261 at the time, so the forecast was quite bearish. Unfortunately, the picture looks pretty dismal at the moment, notwithstanding the presumptive dead-cat bounce that unfolded in July. That rally has very nearly been reversed by the steep fall of the last two weeks, generating a new downside target at 188.28 in the process. Yesterday's decisive breach of the target's midpoint sibling at 225.56 has shortened the odds that 188.28 will l be reached. Traders should therefore position from the short side, using a snap-back rally to the midpoint to get short.  This should be done via camouflage, since there's always a chance the rally will surprise us by blowing past the red line.

The Gold Bugs Index has been struggling to stay above the 239.44 midpoint pivot shown (red line), but if the support fails we could be looking at 185.41 as a minimum downside objective. More immediately, a downtrend on the hourly chart will need to hold above the 254.76 target (A= 283.19 on June 6 at 3:30 p.m.; B= 265.73 on 6/10 at 10:30 a.m.) to keep bullish hopes alive.

The rally has generated a modest impulse leg on the hourly chart, although not yet the buy signal that would come at 281.55.  The burden of proof will remain on bulls until they can close this vehicle above a midpoint resistance on the 60-minute, at least. At the moment, that implies 280.13, but that's only if the 273.98 point 'C' associated with that number survives.

Two technical factors augur a tradable bounce from these levels: 1) the presence of a major Hidden Pivot correction target at 263.95 on the very long-term chart, and 2) an obvious structural support at 254.95. Camo buyers should use the 15-minute chart to plot an entry strategy. The key 'external' peak to use for leverage is 284.40, recorded on April 16 at 9:45 a.m. EDT.  If you fill the order please let me know in the chat room so that I can establish tracking guidance. _______ UPDATE (April 24 at 11:04 a.m. EDT): With this morning's gap-up opening and 276.00 high, the Gold Bugs Index has taken flight after bottom a day earlier at 263.19,  less than a point from the major target given above. I am not establishing a tracking position, however, since the take-no-prisoners, short-squeeze gap provided no camo opportunity whatsoever to get on board.

The latest phase of HUI's collapse, now in its eighth month, has breached the lowest Hidden Pivot target that we could have projected using major patterns from the weekly chart. What now?  Shifting to a lesser-pattern 'extension' discernible within the C-D leg of the larger pattern, we find a 246.20 target not far beneath the so-far bear market low of 256.20. Camouflageurs take note: this looks like a high-odds spot for a tradable turn.

Three weeks of stairstepping has yet to produce a bullish impulse leg on the daily chart, not that it would have taken much.  A pop to 372.03, just five percent above current levels, would do it, but failing that, we should look for the Gold Bugs Index to ease lower to the 329.53 target shown. The midpoint support associated with that number lies at 346.89, and we'll infer that the trip down to the target is a done deal if HUI closes below the midpoint for two consecutive days.

I've reproduced a chart that shows why this vehicle will need to rally more sharply than Gold futures in order to turn the daily chart bullish.  The key external peak that bulls need to surpass lies at 372.02, and the move would of course need to be unpaused once it has exceeded internal peak #1 at 359.77.  This seems a bit of a stretch, but as long as physical looks poised for a breakout, we should be prepared to give mining shares the benefit of the doubt.

Last Friday's bounce from within less than a point of the midpoint support line (in red, at 343.00) confirms that the Gold Bugs Index will fall to exactly 325.63 if the support is decisively breached intraday or exceeded on a closing basis for two consecutive days. Alternatively, bulls can take encouragement if an unpaused rally exceeds  364.97, a somewhat obscure external peak that I've labeled in the accompanying chart.  (Note: By 'unpaused,' I mean to imply the segment of the rally above the 360.36 'external' peak.)

There have been murmurings in the chat room that the mining sector may have hit bottom, but there needn't be any uncertainty about this. To know for sure, let's stipulate that the Gold Bugs Index exceed two prior peaks on the hourly chart without pausing for breath.  In this case, I am implying that the stock must surpass peaks #1 and #2 in an uncorrected leap before we wax bullish.