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Matthew Cowie
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Financial Analyst for Mutual Fund Investor Guide; currently living in Beijing, China. Previously worked as a financial analyst for for Fidelity Independent Adviser Dion Money Management. Articles written have appeared on CNBC.com, Yahoo Finance, theStreet.com and Seeking Alpha.
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Investing in Chinese Stocks
  • Time To Buy DUST? 0 comments
    Feb 19, 2013 11:35 AM | about stocks: GDX, GDXJ, DUST

    Is that a massive H&S in gold miners with a target at the 2008 lows?!

    (click to enlarge)

    Are miners signaling a major correction in stocks? WHAT WILL HAPPEN TO THE PM SECTOR IF THE BROAD MARKET TANKS...

    In the light of all this, how do the PM stock index charts look right now? - in a word they look terrible. Our 6-year chart for the HUI index shows a massive completing Head-and-Shoulders top. We have observed this menacing pattern for some considerable time, but for a while thought it would abort because of the negative extremes of sentiment already afflicting the sector. However, we should recall from 2008 that sentiment can get even worse as prices plunge precipitously. The relative strength of the sector against the broad market in the recent past has been appalling, and this does not bode at all well for it in the event that the broad market goes into reverse as expected. While we are aware that the sector could go contra-cyclical at any point, as it has traditionally done in the past, and we will always be on the lookout for signs of this happening, at this point it looks like it will be subject to a similar cycle of forced liquidation as in 2008. If the broad stockmarket reverses hard it looks likely that the HUI index will crash the crucial support at the lower boundary of the Head-and-Shoulders top pattern and plunge, with a probable downside target in the vicinity of the 2008 lows, and possibly lower. We have a general stop at 358 on this index and will be out of all remaining holdings in the sector if this fails - we are not going to be caught napping like the unfortunate folks in 2008.

    Click the link for much more on the current market technicals, including some Elliot Wave analysis.

    Themes: gold, gold miners Stocks: GDX, GDXJ, DUST
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