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Message: tsi trader...miners
Monday, April 18, 2011
Is It Too Late for the Miners?
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It has been annoying these past several days to watch gold and silver break to new highs while the miners have seemingly collapsed, unable to even hold up horizontally. So this got me to wondering - is it too late for the miners to make a big move? After doing some research my findings surprised me, and perhaps they will surprise you too.
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I have prepared 4 charts of the Amex Gold Bugs Index (HUI). First we will look at the huge consolidation and rallies of 2006 and 2008, then take a look at our current situation with a weekly and daily chart.
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Click on any chart to ENLARGE
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This is a weekly chart of HUI for the 2006 parabolic C wave conclusion. We note that the consolidation phase was 24 months, from the initial break above the consolidation line to the peak of the rally was 22 weeks, and gold appreciated from $430 to $730 during this chart's timeframe.
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9 or 10 weeks before the final rally began the HUI reached within 8% of the consolidation support line. What followed was a relentless string of green candles to the top, taking the HUI to 49% above its consolidation support line. We also notice that the True Strength Index (TSI) did an excellent job of locating the beginning of the final rally with both a trend line break and ZERO crossover.
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This is a weekly chart of the 2008 parabolic C wave conclusion. The consolidation period was shorter than that of the 2006 specimen, and came in at 17 months. The HUI bobbed and weaved for 23 weeks after initially clearing the consolidation line before reaching its top. During this time frame gold appreciated from $730 to $1030.
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This time around the HUI rally lasted just 4 weeks and curiously, its began it's final launch from a price just 8% above its consolidation line. When the top came it was 31% higher than the consolidation line. Clearly the 2006 HUI concluding rally was longer in terms of time, more powerful in terms of % gain, and was preceded by a consolidation period longer than this 2008 example. And once again, the TSI did an admirable job in locating the bottom of the final rally.
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Now we turn to our current HUI weekly chart for 2011. A couple of things are immediately obvious. First, the consolidation period of this C wave, at 30 months, is massive by comparison to the preceding two charts. 28 weeks have already passed since the consolidation line was initially broken to the upside.
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Gold has risen from $1030 to $1498 during this chart's timeframe. But look at where the HUI is in relation to its consolidation line! Today's closing price action brought the HUI to within 8.5% of its enormous consolidation line. Are you thinking what I am thinking? (The previous two HUI consolidations launched from 8% also - apparently what we are seeing now is not unusual at all).
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Ps - no buy signals on this weekly chart - yet.
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Finally, let's take a look at the current HUI daily chart. I've marked the TSI buy and sell signals of the past few months. Currently we are still on a sell signal..... but that just means that the buy signal comes next! Anyway, a final gain rivaling the 2008 4 week performance would take the HUI up over 100 points to around $681. Something resembling the 2006 C wave conclusion would bring the HUI up 200 points to around $775. And if the length of the consolidation has any relationship to the size of the final rally, the HUI should surpass $800.
*
So my question was, is it too late for the miners? And now the answer. No way!
*
It has been annoying these past several days to watch gold and silver break to new highs while the miners have seemingly collapsed, unable to even hold up horizontally. So this got me to wondering - is it too late for the miners to make a big move? After doing some research my findings surprised me, and perhaps they will surprise you too.
*
I have prepared 4 charts of the Amex Gold Bugs Index (HUI). First we will look at the huge consolidation and rallies of 2006 and 2008, then take a look at our current situation with a weekly and daily chart.
Click on any chart to ENLARGE
*
This is a weekly chart of HUI for the 2006 parabolic C wave conclusion. We note that the consolidation phase was 24 months, from the initial break above the consolidation line to the peak of the rally was 22 weeks, and gold appreciated from $430 to $730 during this chart's timeframe.
*
9 or 10 weeks before the final rally began the HUI reached within 8% of the consolidation support line. What followed was a relentless string of green candles to the top, taking the HUI to 49% above its consolidation support line. We also notice that the True Strength Index (TSI) did an excellent job of locating the beginning of the final rally with both a trend line break and ZERO crossover.
*
This is a weekly chart of the 2008 parabolic C wave conclusion. The consolidation period was shorter than that of the 2006 specimen, and came in at 17 months. The HUI bobbed and weaved for 23 weeks after initially clearing the consolidation line before reaching its top. During this time frame gold appreciated from $730 to $1030.
*
This time around the HUI rally lasted just 4 weeks and curiously, its began it's final launch from a price just 8% above its consolidation line. When the top came it was 31% higher than the consolidation line. Clearly the 2006 HUI concluding rally was longer in terms of time, more powerful in terms of % gain, and was preceded by a consolidation period longer than this 2008 example. And once again, the TSI did an admirable job in locating the bottom of the final rally.
*
Now we turn to our current HUI weekly chart for 2011. A couple of things are immediately obvious. First, the consolidation period of this C wave, at 30 months, is massive by comparison to the preceding two charts. 28 weeks have already passed since the consolidation line was initially broken to the upside.
*
Gold has risen from $1030 to $1498 during this chart's timeframe. But look at where the HUI is in relation to its consolidation line! Today's closing price action brought the HUI to within 8.5% of its enormous consolidation line. Are you thinking what I am thinking? (The previous two HUI consolidations launched from 8% also - apparently what we are seeing now is not unusual at all).
*
Ps - no buy signals on this weekly chart - yet.
Finally, let's take a look at the current HUI daily chart. I've marked the TSI buy and sell signals of the past few months. Currently we are still on a sell signal..... but that just means that the buy signal comes next! Anyway, a final gain rivaling the 2008 4 week performance would take the HUI up over 100 points to around $681. Something resembling the 2006 C wave conclusion would bring the HUI up 200 points to around $775. And if the length of the consolidation has any relationship to the size of the final rally, the HUI should surpass $800.
*
So my question was, is it too late for the miners? And now the answer. No way!
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Posted by John Townsend, The TSI Trader at 9:42 P
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