HUI

There are numerous bearish patterns we can use to project a potentially important low, but the one  that I like most has three single-bar coordinates, all sharply etched.  They produce a 358.38 'D' target, and although I cannot guarantee that will be where the carnage ends, it would most surely be worth bottom-fishing with a tight stop-loss.  My best-case scenario implies that the low was made yesterday at  390.63, just 0.59 points from the 'D' target shown in lavender. To take the offensive, bulls would need to push this vehicle to 422.47 by Thursday.  _______ UPDATE (May 17, 2:41 a.m. EDT): Bulls would need a print today at 402.85 to mount a credible offense into week's end. At that price, the hourly chart would turn quite constructive.

June Gold was showing some promise Monday night, but it remains to be seen how much strength it will take to pull mining-sector vehicles along with it. I've somewhat revised my outlook for HUI accordingly, but with some caveats that you should take note of.

Coy action in recent days prompted me to take another look, since I'd offered two downside targets for a possible turnaround, one of them somewhat lower.  As  you can see, a third at 441.66, hitherto undiscerned, has provided a technical rationale for the so-far weak consolidation that appears to be taking shape. But weakness is its problem, since an encounter with a Hidden Pivot support so remote from obvious structural supports should have engendered more of a bounce.  I am therefore skeptical, but we'll give this vehicle the benefit of the doubt for the moment nonetheless, since bullion itself looks like it's got the energy for an uptrending push in the days ahead.

It was only after I'd prepared the chart accompanying this tout that I realized HUI had breached the pattern's midpoint support at 486.57 by way of a gap-down opening. This very strongly implies that the 'D' target at 418.23 will be reached, notwithstanding the fact that we bought promising lows yesterday in GDX and GDXJ.  The only potential mitigating factor I can find in the chart is the prospect of a final low coming not from the point 'A' indicated, but from the one just beneath it at 605.37.  That pattern would play out to 427.48, somewhat better than the worst-case 418.23.  In any event, you should be ready to bottom-fish in both spots -- aggressively if by camouflage.

The heavy look of two gold vehicles analyzed in today's touts -- HUI and GDX -- strongly suggests that this selloff has further to go. Note as well in today's touts that May Silver could have farther to fall.  Under the circumstances, we'll hold off patting ourselves on the back after nailing some nice lows yesterday in GDX and GDXJ, lest we be distracted from managing risk if these vehicles should fall anew.

It doesn't take a rocket scientist to discern that HUI is likely to fall substantially to fulfill an all-too-clear 'D' target at 442.13.  This was practically ensured when sellers gapped HUI through the pattern's midpoint support late last week. Bulls will have a chance to get back in the game as always, but we should require nothing less of them this week than a print exceeding 523.87, a 'look-to-the-left' peak 'along the wall' from March 2 that is visible on the 60-minute chart. Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

The HUI's tiredness is too obvious to require explaining -- just look at the chart -- and last week's dispiriting price action did nothing to improve the outlook for the near term (i.e., 6-10 days).  If this vehicle were getting ready to launch, it likely would have done so from the lower red line shown in the chart. That's the 'p' midpoint of a bullish pattern (still) projecting to 565.37, but it became resistance again last Wednesday when HUI crashed it, nearly returning to the 25% line in the process. While this vehicle doesn't look like it's about to go to hell, we should be prepared for a tedious, trying stay in purgatory.   The outlook would swing in bulls' favor if they can end this week above the 534.32 midpoint.

Although yesterday’s Congressional testimony by “Helicopter Ben” Bernanke was fundamentally meaningless, it caused gold and silver prices to take a spectacular dive. They got hit after the ‘Nank, prevaricating as usual, said the central bank wasn’t rushing to crank up a QE3 stimulus.  While this may be true as far as it goes, it belies the fact that the money spigots have been wide open for years and will remain so, probably, until the financial system collapses. More on that below.  Concerning the savaging that precious metals received, they are all but certain to recover, since the forces that have been driving them steeply higher for more than a decade are still very much in place. Even so, it could take at least a few weeks for gold to build a new base for a shot at $2000, and silver for a push into the mid-$40s. In the throes of yesterday’s brutal, deftly engineered shakeout, Comex gold dropped $104, or nearly six percent, in just a few hours. The April contract hit an intraday low of $1688 after trading as high as $1793 the day before. As for Silver futures, they suffered their worst single-day loss since September, falling $3.76, or 10 percent, from intraday high to low. Mining stocks fell in sympathy, lopping three percent from the value of the Gold Bugs Index (HUI) and five percent from GDX, an index that tracks the shares of junior miners. Although Silver futures fell harder than gold in percentages terms, the technical damage was worse in the latter. Notice in the chart above that April Gold’s plunge exceeded two prior lows on the daily chart. This created a bearish “impulse leg” of daily-chart degree, according to our proprietary Hidden Pivot Method of analysis, and it is the worst such damage we’ve

Yesterday's thrust failed by a hair to surpass the 554.92 peak recorded on February 2, but bulls look capable of handling it, probably today or Monday. Regardless, a 567.31 rally target obtains for the near term, and a move to it became an odds-on bet when the HUI blasted out of the consolidation pattern highlighted in the chart.  We'll take the measure of buyers' mettle again after we've seen how well they handle hidden resistance at 567.31.