HUI Update Addendum
posted Dec 5, 2004 at 09:17PM
Actually I just wanted to reprint a section from a 13 Nov commentary...it is just a scenario to be on the watch for:
There is much of the current situation that reminds me of the situation in July 03. The previous 14 months were a pure swing trading environment...which suited me fine as I like trading stochastics cycles.
By summer 03 the HUI was heading back into massive resistance. The COT was at all time historic high and the dollar looked to be putting in a double bottom. Indeed the HUI has a few very bad days dropping sharply. At the time I was in cash so all seem fine. The HUI then suddenly reversed and put in the move to enforce the triple top break-out.
It is a hard trade for contrarians but the moral of the story is that triple top breakouts are significant technical events. The COT of course also went on to reach new all time highs. Again the moral here is that in this kind of environment let price be your final indicator..not technical condition.
Again in practical terms 240 on the HUI is a key number for me. If the sector reverses and moves above this point I would interpret it as a bullish sign.