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Some are calling the bottom for gold mining stocks. One popular measure
for the gold miners is the NYSE Arca Gold BUGS
Index, trading on AMEX under the symbol HUI. The HUI Index was developed with
a base value of 200.00 as of March 15, 1996. The AMEX Gold BUGS Index
currently consists of 15 of the largest and most widely held public gold
production companies. Other gold miner indices include the Philadelphia Gold
and Silver Index (symbol XAU) comprised of sixteen precious metal mining
companies. The HUI and the XAU each contain several of the same mining
companies, so the indices tend to move together. The HUI and the XAU are the
two most watched gold indices on the market. Let’s look at
the HUI from a technical standpoint to see if the gold mining stocks have bottomed.
 
Some analysts rely on crosses of the 50-day and 200-day moving averages
as indicators of a trend reversals. We can see the bearish cross back in
early December on the daily basis chart and the subsequent bearish price
action in the HUI then and later in March. The daily chart gives no sign of
change to the bearish trend. According to this indicator, the HUI looks to be
headed lower yet.
The monthly basis chart is not so bearish. In fact, according to the
50-day and 200-day cross, the HUI has been in bull trend since November 2009.
The March 2012 decline seems to have halted 440, precisely at the 200-day
moving average support level. A break below 440 on the weekly chart would be
significant, indicating a further decline to the 375 support level. So, the
daily chart and the weekly chart yield conflicting views of likely future
price action for HUI.
This is not uncommon for the 50-day and 200-day moving average
indictors, which is why many
traders use Ichimoku Kinko Hyo
technical indicators to guide their trading decisions. As you have read in
these pages before, Ichimoku analysis gives the
trader a more accurate view of trends and momentum of any traded security
than other technical trading tools. We use Ichimoku
indicators combined with other technical tools to make trading
recommendations for the Model Conservative Portfolio in The Gold Speculator investment newsletter. So what does Ichimoku
tell us about the HUI?
We can see from the “one look, equilibrium chart” above,
all Ichimoku indicators for HUI on the daily basis
are bearish. The index has been driven down to support levels four
times this year, with the most recent decline in March and April.
The Ichimoku indicators for the HUI are bearish on the daily
basis chart above and bearish also on the weekly chart. Price action is below
the cloud, which is bearish. The projected cloud is bearish. The Tenkan Sen made a bearish
crossover of the Kijun Sen
March 3rd. And the Chikou Span is below price
action and below the cloud which is bearish. The separate MACD oscillator
made a bearish crossover on April 4th.
For the conservative
investor, selecting specific gold stocks has been more effective than buying
the index this year. Shorting the index, on the other hand, has proved
effective for the more aggressive speculator. Bottom feeder speculators may
see an opportunity at current price levels, but the technical trend is
bearish, and there is no technical sign of a reversal in the established
bearish trend for this broad gold stock index.
Responsible citizens and prudent investors protect
themselves and their wealth against the ambitions of over-reaching government
authority and debasement of the currency by owning gold. Gold is honest
money. Investors from around the world benefit
from timely market analysis on gold and silver and portfolio recommendations
contained in The Gold Speculator investment newsletter, which is based on the
principles of free markets, private property, sound money and Austrian School
economics.
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