The Bull Market is Off and Running - Again

Long time readers know that I'm pretty stubborn in that I hold on to my opinion unless incontrovertibly proven otherwise. Two views that I've expressed for a while are:

We made an interim bottom (basis the S&P) on March 17.

We're still in phase 3 of III of the Precious Metals [PM] bull market that should see much loftier heights.

In the S&P chart below I drew a potential inverse head and shoulder pattern. The most recent low came last Friday when, technically speaking, the market had a good reason to drop another 20 S&P points. Naturally short covering was a part of Tuesday's rally, but the materials/energy names were too strong to be dismissed. My read here is that for now the bulls are in control as money on the sidelines rushing in. I have 1475-1500 as my first upside target.

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I wish I have as specific an idea about the near term agenda of Precious Metals stocks as I gave above for the S&P. PM stocks have moved in tandem with the general market since the precipitous drop in March. As shown in the chart below, the uptrend channel was broken and the Amex Gold BUGS Index (HUI) have just made it back into this channel. Painful as it was, this kind of volatility was fairly typical for PMs as we're once again reminded that the bull market tries to throw off as many people as possible along the way. As previously observed, the HUI tends to take several tries before overcoming a significant demarcation line. Presently, I expect the 500-515 region to be such a battleground.

click to enlarge

Comments

[dieuwer:]

Would you call the HUI march drop a "bear trap"?

2008 Apr 17 08:09 AM

[Pauly B:]

I would be careful in the metals and commodities right now. I really dont like the look of the gold chart and what the dollar has been doing lately. Yes it is down now but the big question is what will the Fed do in the near term. A big spike of strength in the dollar will change everything.

As for Tuesday, I am still looking for stronger volume to confirm the S&P is starting to get out of this mess. Your right, likely it was short covering. What also goes in tandem with the market decline is comparing charts between the S&P and jobless and unemployment claims. Until that corrects II think we will trend for awhile.

2008 Apr 17 08:21 AM

[NOWHEREMAN:]

Hmmm......the HUI pattern I see is a 4 month H&S pattern which could theoretically, if it fulfills its downside movemement...cracking 425...could take it down to about 335.

Meanwhile the SPX has a similar pattern going for it..a small H&S bottom......

2008 Apr 17 09:06 AM

[The Silver ...:]

You may produce a bullish elliott count on gold, but one for the HUI?

Surely the two must correlate to a good degree?

2008 Apr 17 09:26 AM

[maher:]

This is a bunch of "HUI"

2008 Apr 20 12:41 PM