Back in November I posted up a chart of the Ratio of the $HUI to $GOLD that has been one of the more popular articles I've posted here (at least according to my RSS feed stats) and, honestly, I can't figure out why. My analysis of that chart was overly-bullish and as such exposed my relative inexperience in chart analysis/reading. I underestimated the amount of speculation in both the Gold and Gold Stock markets and my timing predictions now seem ludicrous in retrospect.
With the firming up of those markets, having waited out the Dead Cat Bounce of the the $USD, I felt it appropriate to try and take a another (more sober) stab at this kind of relational (1st derivative) kind of analysis. It's a lot simplistic this time. With the breakdown of the triangle drawn in the November chart, a new up-trend line needs to be drawn in, which, with the most recent low occuring just a few weeks ago and there is no third point available to confirm this as the new uptrend, I think it's safe to say that this line is questionable. The imminent MACD cross, recent breakouts of many stocks that make up the $HUI, and that this low is higher than the July 2004 low lend credence to this point being valid as the new uptrend.
Of course, there's also a formed Head and Shoulders pattern from July to today, that if the 0.45 level is breached means a move down to around 0.35.
It looks to me as the damage that was wrought on the Gold Juniors in Dec/Jan has not fully been worked through. This chart is suggesting that it will take a few more months for those wounds to fully heal. I would venture a guess that the breakout occur around June or July at a level of around 0.53. Then, maybe, we'll start to see more of the obscene leverage the stocks of the $HUI are supposed to have relative to the price of Gold.
I know my bank account would certainly welcome that eventuality.
Ta,
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