It is not just that the gold complex is dropping - but more significantly that it is dropping even without the USD clearing any important price objectives. It is clear that the gold market is anticipating some kind of IT bottom for the USD.

This kind of price action reinforces the thesis that the impulsive leg up to 240 wan not the first impulse of a major new leg up, but was simply finishing off a B wave type counter-trend rally.

Until the HUI/Gold ratio reverses, that is the "big picture" scenario that I am currently using to describe the gold sector.

The charts below are meant to outline some potential reentry points of a strategic nature. Again the assumption is that we are in the process of an impulsive C wave decline designed to correct the entire gold bull move from late 2000.

HUI Trend-Line Study

HUI currently rests at long term trend-line support. Is this a potential slanted H&S pattern? Maybe...I am one of those that feel H&S is an overused pattern and without volume data it is impossible to say for sure. As well symmetry appears to be lacking. If this does turn out to be the defining structure of the HUI, then a break of the neck-line would give a measured move target of 100

HUI Fib Support Study

Some standard fib support levels. If the EWA count below is correct, then Wave I took 36 months to complete. Applying fib ratios (38%, 50%, 62%) we get corrective wave durations of:

13.7 months (which coincides quite nicely with the State of the Union address)

18 months which takes us to a mid summer bottom: and

22.3 months..which takes us to end Oct, early Nov 05 (ugh!)

A Potential HUI EWA count

Again the usual disclaimers on my use of EWA. It seems to fit so I am keeping it in the back of my mind.

HUI Weekly Chart

Bearish MACD cross is an IT sell signal. Usually when the HUI stochastics are getting to this bottoming range, the USD stochastics are getting topped out. Not this time, as the USD (see below) hasn't even gotten started. Therefore I am inclined to be cautious here and wait for a turn in the HUI/Gold ratio, vice bottom-picking.

HUI Daily

The 200 level, a key horizontal support line, makes an obvious swing line for aggressive short term traders.

USD Weekly

Technically you have some bullish divergences (RSI, MACD, ADX +DI), and, coming off oversold levels, there is definitely room to support any move up.

USD has yet to even clear moving average resistance. The gold market is, right now, saying that it will. Watch and shoot.

Good Trading,

5 January 2005

Thomas DeChastelain
Editor - QUASIMODOS
www.quasimodos.com

Disclaimer:

The above is written for educational/entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice. The commentary simply reflects the opinion of the authour on the current status of the market. It is prone to error and to change with no notice which itself is again prone to error.