The HUI: More Than Words

There is a song that was recently re-made by a famous female vocalist. The title of the song is "More Than Words", but it was originally sung by a group called Extreme. I love the warm feelings in the song, and I usually listen to the original version. Up until recently, we had talked at length about what the HUI might do during this time period. Now, we are into the "Verticalicious" portion of what were previously only expectations, or words, if you will.

I think it might be worthwhile to consider exactly what this more vertical portion of the HUI price movement might mean in relation to the PM stocks that an investor might own, or might consider trading. I have recently seen several PM stock investors express concern about "when to sell" as many PM stock investors are afraid that recent profits might go up in smoke. Different investors use different criteria to invest, and one of those criteria is the time-frame one is invested for. Still, one term from sports really seems to currently fit this issue, IMO, "Never leave a put short."

The goal in golf is, of course, to put the ball in the cup. Yet, there is nothing worse than hitting a green in regulation only to leave that big putt a few inches short of the cup. Since a big part of the price movement of many stocks tends to happen in vertical moves like the HUI is currently exhibiting, leaving "a putt short" in the investment game might cost you more than just a few inches.

Each investor must decide when to sell a stock, and I cannot help you with that decision. Yet, I can pass on my thoughts of what I expect might be happening as we approach our estimated target of HUI 390-ish. In a past article we suggested that the lag in the PM stocks by not following Gold so closely as Gold busted through "the line in the sand" was quite simple- nobody believed that Gold could trade above $500 for any appreciable time. We had suggested that a retrace back to between 470 and 490 would be natural, but Gold barely hit 490 before it was off again to the upside. Now, investors are starting to price in what the much higher price of Gold might do to the earnings of companies, along with the necessary upward revaluations to their reserves in the ground. All of that spells "Verticalicious", but the different PM stocks tend to rise in a bit of a disjointed manner. For instance, some of the large cap PM stocks were the first out of the gate, where the mid-cap producers with flat earnings are just now taking off. Many of the tiny explorers are just now beginning to rise off of the mat. If you are a very long-term holder of PM stocks, there is little to do but to smile and to watch the action. If you are one of the many different types of traders, though, it can be a scary time as you watch your PM stocks raise the worth of your trading accounts. Investors want to take profits, but selling too early is no fun, either.

The only real way to know where to sell a portion of your PM stocks is to follow your individual stocks and to understand the concepts of support and resistance. It is very difficult to trade "spike tops", but I suspect that this coming HUI top will be a fairly "sloppy" top which is broadened on the chart as individual PM stocks top at different times. Some of the laggards will be Silver stocks, but those PM stocks that are just breaking out might likely also top a little later than the ones that moved first.

If you make a mistake in selling the coming top in the HUI, this is one of those times when it might be much less important, though. I don't expect the next correction to last over 4 ½ to 5 months. In fact, I expect the HUI to trade above 500 toward the end of 2006. Of course, those are only words…….but for now, this current HUI run is real so we can go back to our song, "More Than Words."

You can see in the chart that there appears to be very little resistance above the current HUI price. In fact, only a "fib. resistance" point at around 332-ish seems to lie between the current HUI price and our wanton target of HUI 390-ish. Though it is possible for us to spend a few days around the current HUI level, I would not be surprised to see the HUI trade up to the 332 to 334 area this week. I have marked the similar area in fractal 1 on the lower left to indicate what similar point we might be at, today.

This is a little longer view of the HUI to give you some perspective of where the HUI index might trade over the next few years. What really strikes me is the beautiful symmetry of this LT chart.

The link for the Gold-Eagle Forum can be found, below

Again, I'd like to thank all of the posters at the Gold-Eagle Forum for their daily input. This thank you is especially extended to TQ and to Grininbarrett. Special thanks go to Dr. Vronsky and Westerman for creating the Gold-Eagle site and for editing my work. A very special "Congratulations" go out to Dr. Vronsky and Westerman after Gold-Eagle saw its hit counter ring up 206 million this last week.

Thanks also go out to CaptainHook and David Petch of TreasureChests since I have learned so much from them. They can be found at www.treasurechests.info/index.php

There are many great editorials that can be found on the Gold-Eagle site at the following link. www.gold-eagle.com/research/petchndx.html

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