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Gary Tanashian
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Gary Tanashian is proprietor of Biiwii.com. Actionable, hype-free technical, macro economic and sentiment analysis is provided in the premium market report 'Notes From the Rabbit Hole' (http://biiwii.com/wordpress/about-nftrh/). Complimentary analysis and commentary is available at the public... More
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  • HUI-Gold Ratio; 3 Views, 1 Conclusion 0 comments
    Nov 20, 2012 6:23 AM | about stocks: GDX, GDXJ, GLD, IAU

    Here is a little snippet from NFTRH 213 that showed the important indicator of gold sector health, the HUI-Gold Ratio (NYSE:HGR) from three different views; daily, weekly and monthly. As you can see, daily must hold to keep the weekly intact, which in turn must hold to keep the monthly big picture of the secular bull (for the HUI, not this sad looking ratio) intact.

    This is a difficult sector to own and indeed these charts say it is best to trade the stocks regardless of what one does or does not do with the bullion. But the conclusion is that until the HGR breaks down to a lower low, the current situation is viewed as a buying opportunity. On the other hand, HGR will serve as a handy risk management indicator if it should unexpectedly collapse. From #213:

    (click to enlarge)

    Daily HUI-Gold Ratio (HGR) needs to hold a higher low to both the May and July lows here or else the story is bearish…

    That is because a new low here would threaten the higher low from Armageddon '08, highlighted in yellow, per the chart directly below…

    Which would in turn threaten 2008's higher low to the one from the beginning of the bull market in 2000.

    (click to enlarge)

    (click to enlarge)

    So you can see that it is kind of important that the daily HGR hold its parameter.

    It is a simple conclusion; HGR must hold a higher low on the daily to avoid a threat to the July and May lows so that the weekly view can remain intact and not threaten the 2008 low and eventually, the secular low of 2000. Meanwhile, higher low status across all time frames means the indicator is not broken, despite the formerly "normal" correction that become somewhat intense last week.

    http://www.biiwii.com, Twitter, Free eLetter

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: No positions mentioned.

    Themes: gold stocks, gold Stocks: GDX, GDXJ, GLD, IAU
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