Daily Archives: June 13, 2017

HUI Gold Stock Index Review

Gold stocks have not performed as well as gold itself, but notice that gold stocks never corrected as much as gold did recently.  

The HUI bottomed in early 2016, and then blasted up, in what can be counted as a single wave 1-2 as well. Markets have a tendency to fool as many wave counters as they can and the same wave pattern could turn into a diagonal zigzag 5th wave.  Could a zigzag carry gold stocks to new record highs? They sure can but generally they end up being rather weak overall. 

The Gold/Hui ratio, which the contrarians use will help us decide when the time is near. Bull markets don’t end when they are pointing down, as they always end with a last euphoric move to the upside. Will it be an even zigzag once it becomes more obvious? I doubt it as even zigzags are a rarity and not the norm.  Sometimes they come out even but then the zigzag will alternate, between the A5 and C5 waves.   They will change in physical size as well, which at times is hard to imagine when counting waves. 

In the case of the HUI index, the C5 wave has a much bigger physical wave structure than the A5 wave, so this fits into a bigger zigzag as well. 

With a potential 4th wave bottom in early 2016, it will give the bullish phase lots of room to travel higher, but we also have to be aware that a “D” wave may also still be in effect. Again, we have lots of time for this to happen and my favorite contrarian would have to turn very bearish on gold stocks as well. 

Intraday Crude Oil Crash Review

In late May, crude oil started a bearish phase, which saw a bottom on the 4th of June.  Oil is now struggling higher, which I can count as the start of another potential diagonal. This rally can also fit well as a potential small degree 4th wave rally so until that clears up, any bottom may not be stable enough to hold.   We are still on the borderline of making or breaking a return to a potential bullish phase, so in the short term anything can still happen.

On the bearish outlook this move would eventually have to roll over, as the bigger bearish phase may not be finished.  

In the long run, oil is still in a big bullish phase that is far from over, but presently has a hard time in showing it.  The media have proclaimed that the world oil glut is back. When they seemed to be in consensus agreement about any return to a world glut situation, then it must be time for oil to soar in the opposite direction. Consensus is voting, but since when is forecasting a voting exercise?  

In the end, fundamental news means very little as markets do the exact opposite of what the majority thinks will happen. In late 2015 we were in a historic bearish phase and an extreme oil glut, yet oil started to soar right when the world glut stories were at their most bearish.  The majority will always find this hard to understand, but any seasoned contrarians know that the exact opposite will happen.

Bear market bottoms are the breeding grounds for bull markets in stocks and commodities so the more intense the bearish news becomes the higher the subsequent bullish phase will go.

The Gold/Oil ratio is important as gold is a good asset class to use as money,  when calculating to see if oil is expensive or not.

Today the Gold/Oil ratio is about 27.5:1 which is sort of neutral at this time. Now if this Gold/Oil ratio was to compress dramatically like 10-17:1 or lower than the oil bull market will be in trouble.   We should catch this indicator well before the public clues in, and at this time I see no reason for any alarm bells to go off.   

Gold Intraday Crash Review

In June gold has seen a significant decline, which sure looks like it can continue. Many may think that this gold bull market is over, but I think the opposite is true.  Sure, we can always go lower, but gold has not retraced the Minor degree  “ABC” crash that took place in 2016. Complete retracement will not be confirmed until gold exceeds that $1375 price level again. $1375 has been my short term price target, but ultimately gold should go much higher.

When stocks roar back up, then gold can always be in the position to go the opposite way, as they can have an inverse relationship. The way gold declined this June sure shows that stock mania is still alive.  I believe gold has shown us an “ABC” decline which could have ended already.

It could still take gold the rest of the week  to confirm a bottom, but if a change of direction is due, then gold can make some pretty wild moves in both directions, before the return of its bullish phase.

Mini DJIA Intraday New Record High Update

This morning the Mini DOW 30 pushed to a new record high, breaking the 21,315 price level. The SP500 is lagging a bit with the Russell 2000 also toying with new record highs.  The Nasdaq is the only index which is far away from hitting a new record high, so once again the Nasdaq is walking to a different drummer, at least in the short term. 

The Nasdaq may play catch up, but then the other indices would still have to roar much higher.  A clean top may be too much to wish for, but maybe we’ll get lucky this time.   Early last week the pattern started to change again, as very choppy waves have returned.

When this happens, it is usually a sign of a diagonal wave, or an ending diagonal. When a new record high is established, we want to see this major top hold its position, as another correction should not be too far away. 

The majority is always focused on how high this market can go, but maybe they should have thought about that when the DOW was at 6500 in early 2009.  Investors are oblivious to what this top can be, as all they are only concerned that it keeps going up.

Logic has nothing to do with this market, as emotions tend to push any market to the extremes, and the expert analysts will find all sorts of reasons to justify this stock bubble.