HUI-Gold Ratio

February 5, 2009

 

Let's take a look at one of the more popular gold market indicators, the HUI-Gold ratio, which is often a leading indicator for the gold sector. Because it is so popular, there are lots of people looking at it, which of course means that you and I are not the only geniuses trying to gain an edge in this market. We all see the same thing, but do we all interpret it the same?

Luckily, HUI-Gold has some mixed signals going on that are likely to fake out the nervous Nellies, weaklings and people with Deflationitis. They will look at the bullish consolidation handle, the downtrend and the news headlines and they will sell. That is what corrections are for.

I sold some too, but not because of fundamental or technical weakness. I sold because I was loaded up off of 'no brainer' buy levels and need to come back to my usual stance of 50% (+/-) cash after HUI (and my speculative portfolio) doubled off the bottom. Risk management is always in style.

On balance I see bullish here in the ratio. In particular, the consolidation 'handle' off of the successful 'W' bottom is meandering down to support defined as the breakout line at the top of the 'W'. Momo indicators, if you don't know how to look at them, appear to be just what will drain out the hangers on but remain bullish or at least, have not gone particularly bearish. AROON shows a daily downtrend and ADX says that momentum to the downside is trying to tick up a bit. But I will believe it when I see it. The handle, supported by the 'W' breakout line and the SMA 50, with its beautifully down-tilted alignment, is the very definition of bullish consolidation. Check out Notes From the Rabbit Hole for weekly analysis with interim updates.

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

 

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Gary Tanashian of biiwii.com successfully owned and operated a progressive medical component manufacturing company for 21 years, keeping the company’s fundamentals in alignment with global economic realities through various economic cycles.  The natural progression from this experience is an understanding of and appreciation for global macro-economics as it relates to individual markets and sectors.

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