Mr.Fat Head Returns to the HUI
Friday, 10/03/2014 09:02
Gold and silver mining stocks are setting up for a big fall. Maybe...
BACK in February of 2013 we noted the big fat head on the HUI Gold Gugs miner stock index's massive head and shoulders pattern,
writes Gary Tanashian in his Notes from the Rabbit Hole.
It was reviewed again in April of 2013 after it broke the neckline in a very bearish move. Mr.Fat Head's technical objective was and is 100 on the HUI (IndexNYSEGIS:HUI).
Why is this being revisited? Because I have gotten a couple emails noting that it is showing up again out there amidst the very bearish backdrop. If anything, if every gold bug on the planet is planning for 100, the ingredient is in place for this final indignity that they are so well prepared for, to maybe not happen.
But a target is a target and it is there for a reason; namely that its source – Mr.Fat Head in this case – has not been eliminated from the picture. Here he is updated...
There are other considerations...
- MACD is crossed up
- RSI is well below 50 and its EMA 50
- AROON is and has been trend down
- HUI is below thick resistance around 250
- It has notable support at current levels
- A higher low to 2008 is still in place
- A trend is a trend until it is broken, and it is down on all time frames.
A lot of people think technical analysis sucks because a lot of TA's try to baffle people with b/s, ascribing greater power to charting than it deserves.
Still, it is a handy tool as it irrefutably gave warning signals on the bear market. Signals 1, 2 (which is when
NFTRH went into full-risk management mode on gold and silver miners as HUI lost 460 in November of 2012) and 3.
Dial ahead to today. A final and terrible drop may indeed come about. But here again I remind you not to take anyone with just a chart and an overly bullish or overly bearish thesis too seriously. It stimulates the greed and fear response and right now everyone in the gold sector is well gripped in fear. There is much more to any given narrative.
For reference on why charting in a vacuum is not good, I trot out to you my one time 888 projection for HUI (I just love owning this one) based on a pattern that was every bit as bullish as Mr.Fat Head is bearish. Just as I ask you now to take 100 for what it's worth, I noted the same thing for the 3 Snowmen (888) back then.
Targets are just targets/measurements, not directives. For reference I offer my own screw up and the S&P 500's target off a very similar pattern that has happily gotten most of the way to target.
TA is a guide (subject to ongoing revision), not a director. HUI has a target of 100 and so many other potentials in play. Only week to week management of not only the technicals, but especially the macro fundamentals will see us through.
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