Richard Russell On HUI & Gold Stocks
Gold: HUI turns bullish. This is a fascinating chart which tracks HUI, the widely-followed Gold-Bug's Index. Note that last long column of 0s. That's what I call a "wipe out" column. It scared the hell out of all gold-share holders. It's also a "low pole" column, but I'll go into that another time.
I always think when a "wipe out" column or "tail" as I call it is reversed, and all the losses are recovered, this constitutes a very bullish situation (we see the same pattern in the Wilshire above). What it means is that a lot of share-holders have been frightened out, while the recovery means that stronger hands have taken their place.
Following the frightening column of 0s which knocked HUI down to the 288 box, we see the most recent action -- a long column of Xs reaching to the 360 box. When this latest column of Xs hit the 352 box, that was when HUI turned bullish. Why is that? Because at the 352 box, the rising column of Xs rose above three previous Xs. A bullish three-box reversal had occurred.
The next barrier is the 372 box. So far, gold shares have lagged behind the metal. Furthermore, gold shares are stocks, and they tend, to some extent, to be affected by the trend of the general market.
For those who want the leverage of gold shares on top of their bullion, this is probably a good time to pick up a few. ABX, GG and AEM come to mind as premium gold shares. NEM could be a takeover or a sleeper.
Richard Russell
Editor-in-chief - DOW THEORY LETTERS
http://ww2.dowtheoryletters.com
September 11, 2007
The inimitable and venerable Mr. Russell gained wide recognition via a series of over 30 Dow Theory and technical articles that he wrote for Barron's during the late-'50s through the '90s. Through Barron's and via word of mouth, he gained a wide following. Russell was the first (in 1960) to recommend gold stocks. He called the top of the 1949-'66 bull market. And almost to the day he called the bottom of the great 1972-'74 bear market, and the beginning of the great bull market which started in December 1974.
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