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Sent to Subscribers this morning, pre-market...

Wednesday, April 27, 2011 20:30

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Just an example of what I do besides the weekly letter. No guru like predictions, just parameters parameters parameters… oh, and contingent game plans. Needless to say, post-Fed I have plucked a few more low hanging fruits while maintaining balance, cash-wise (for now).

IMO, too many people try to impose their will on charts; make ‘em say anything they want ‘em to say. That is a mistake. Just as it is for a fundamental analyst to believe all of his or her own bullshit. These are stocks… and markets. You balance and manage risk, keep your head screwed on straight and just maybe you get out alive… or alive and prosperous. Maybe.

But to do this, you need perspective on all relevant time frames, including technically on this big guy here to the left. It is all well and good to state how screwed up (or great and bullish for that matter) things are over and over again, but what good is it if people are not trying to incorporate methods for using what is in play to their advantage? You end up getting gridlocked with fear, greed and whatever other stuff crops up from the overwhelmed psyche.

“For bigger picture perspective, a monthly chart of premier gold producers index HUI is attached.

Think of consolidation or downside events as fuel, in a similar way to the Gold ‘Cups’ shown in this week’s letter provided bullish fuel for new up legs in the metal.

The monthly chart of HUI shows how the index would periodically become over bought by MACD and CCI, and then get corrected prior to new up legs. This, until finally a major downside event terminated phase 1 of the bull market in 2008.

That amazing event cleared the way for the most intense and sustained rise in the current gold stock bull market. Just as it should have.

Despite the angst of the moment, HUI monthly shows an over bought index taking a break and dealing with resistance that it has formed over the last few months, even as it is generally in bullish, all-time highs territory (blue sky).

A few notes: CCI is not to the extreme over bought that has terminated rallies into several consolidations and finally, the 2008 swan dive. MACD is and has been quite stretched, however. I am not going to consider the short term rally over until the daily chart breaks down per our parameters and we get the Fed out of the way. As a side note, if they decide to pull something rash with interest rate and QE talk (inflation expectations management), we could have an end to the rally here and now. But I have thought the Fed might do something like this at each meeting and it is generally not productive to try to out guess them, especially when they are talking out of both sides of their mouth.

The monthly chart says HUI is over bought, but maybe not critically so; not yet. It is pounding away at 575 resistance (which is ironically the area of critical DAILY support on which HUI rests this morning) and if it fails, we turn to downside management. This is where I become greedy with respect to the bull case on the gold stocks. The energy field (massive Cup that ultimately targets 888) built up from the crash of 2008 to the present should provide strong support per the noted green band, and per our long managed 475.

I have drawn the Cup a bit differently since it never really did make much of a handle before continuing higher [out] of the ‘flash crash’ sentiment adjustment and subsequent liquidity spigot in 2010. Perhaps Huey is going to make a handle now, working off the over bought in preparation for a massive new up leg several months down the road. Critical support is the green zone and I will probably reduce exposure to some degree if daily parameters (current levels) are lost and this scenario begins to look likely.

The good news by the way I view this (and the weekly) chart is that downside is limited by the dense support that was put in over the last few years. We are in a new stage of the bull market and it is not going to be all up all the time. I am going to hold core items and be ready to add short term if the current upside proves not yet complete, or raise cash and await intermediate buying op’s if a Cup’s ‘Handle’ begins to look likely. This would be the consolidation – with a downside bias – that would shake out enough unhealthy holders to provide some potentially explosive upside later in the year and beyond.

Regards, Gary”

http://www.biiwii.blogspot.com

http://www.biiwii.com

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