Gary Tanashian's  Instablog

The attached daily chart once again reviews the critical support levels for HUI and the broad SPX.

The HUI support level of 580, noted in a recent update remains the key.  There is more support at 550 around the EMA 200 as noted in that update, but if the SPX loses critical support at 1220, it could signal much more broad market downside.  Unfortunately, the gold stocks are in a general positive correlation with broad stocks.  HUI can decline all the way to below 500 and still remain on plan and big picture bullish.

Huey did fulfill the first upside objective after all, by filling the 610 gap.  While today looks to be a down open for the broad market, we should also note that the SPX' support is not lost until it is lost.  So the index can take another down day or two and remain within the potentially bullish structure to upside target of 1360.  This would probably see HUI resume a drive to 630 or better.

This is where the NFTRH view that the rally out of the 'October Pivot' is simply a bear market rally comes in.  I for one, do not wish to be caught speculating or trying to milk upside in a doomed rally.  Functionally, what this means is that I will be prepared to reduce the portfolios to critical core gold stocks, increase cash and consider bearish positions to add to the current ones in junk bonds and base metals.

Try not to let the noise of any given day or week tell you what to do.  Noise has driven markets up and down in an impressive whipsaw of late.  SPX 1220 is critical and HUI 580 is important if the gold stocks are to remain short term bullish. 

Do whatever it is you need to do to be a strong player in this situation.  Ask yourself 'how will I feel about my positioning if these indexes rally to target and how would I feel if they continue to lose momentum and eventually, support?' and then prepare to be in alignment with your answers.  The markets will state their intentions before too long.

As a side note, one of my favorite 'bad cops', Richard Fisher is out this morning with this headline:  Fisher Sees Lower Odds of US Easing.  It makes me think of this blog article written on October 3:  Inviting the Vampire

The European monetary panic did the trick at the 'October Pivot'.  One wonders if the US Fed is saving its bullets for the next downside panic.

"Now we have a different atmosphere - expected by this writer and indicated by the chart above [long term 30 year yield] so many months ago - with deflation and systemic collapse at the forefront of the collective financial and economic mindset.  Austerity?  Please, give me a break.  The Vampire has already received his invitation, but having been scorned so soundly earlier this year, he sits back and lets the call become louder by the week.

The balance of current NFTRH analysis holds that he may await a final capitulation to be sure that the invitation is near unanimous."

Regards,

Gary

http://www.biiwii.blogspot.com
http://www.biiwii.com