The HUI index: Young Woman or Old Hag??...
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Many of you will have seen, at some point in your lives, the classic optical illusion picture, shown below, in which you at first see either a young woman, or an old hag. Some might say that which you see first is a function of whether you are an optimist or a pessimist, in a similar way to whether you view a glass of water as being half full or half empty.
In a similar manner it is possible to see in the Gold stock indices at this time either a Head-and-Shoulders top, or a Head-and-Shoulders bottom, and correctly deciding which of the two it is will determine whether you lose or make money in this market.
Being naturally skeptical and suspicious types, at least as far as markets are concerned, we saw the old hag first, which is why we have maintained a rather cautious, bearish bias on the site as the correction in Precious Metals stocks has unfolded. However, we have the advantage that we study not just the price track and its derived indicators, but the volume pattern. This is very important as volume is the lifeblood of the market, and correct interpretation of it frequently gives us an edge over other investors - we are often able to predict breakouts and buy before them. The bearish volume pattern in stocks such as Goldcorp has been a deterrent, however, it has rapidly improved, and volume in many other stocks, particularly juniors, has dwindled to a level normally seen at the end of a corrective phase, when selling has been exhausted and the pendulum has swung to the other extreme. Thus, at the weekend, we came down off the fence and joined the bullish camp.
Being skeptical and suspicious has certain advantages, for it is surely better to start out thinking you are stuck with an old hag, and to find that she later morphs into a beautiful young woman, than the other way around.
Clive Maund, Diploma Technical Analysis
2 August 2006
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Clive P. Maund’s interest in markets started when, as an aimless youth searching for direction in his mid-20’s, he inherited some money. Unfortunately it was not enough to live a utopian lifestyle as a playboy or retire very young. Therefore on the advice of his brother, he bought a load of British Petroleum stock, which promptly went up 20% in the space of a few weeks. Clive sold them at the top…which really fired his imagination. The prospect of being able to buy securities and sell them later at a higher price, and make money for doing little or no work was most attractive – and so the quest began, especially as he had been further stoked up by watching from the sidelines with a mixture of fascination and envy as fortunes were made in the roaring gold and silver bull market of the late 70’s.
Clive furthered his education in Technical Analysis or charting by ordering various good books from the US and by applying what he learned at work on an everyday basis. He also obtained the UK Society of Technical Analysts’ Diploma.
The years following 2005 saw the boom phase of the Gold and Silver bull market, until they peaked in late 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat currency. The bear market since 2011 is viewed as being very similar to the 2-year reaction in the mid-70’s, which was preceded by a powerful advance and was followed by a gigantic parabolic price ramp. Moreover, Precious Metals should come back into their own when the various asset bubbles elsewhere burst, which looks set to happen anytime soon.
Visit Clive at his website: CliveMaund.com
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