The end of summer meant the return of more serious trading action and it didn't disappoint so far. The HUI staged a clear break out yesterday as has been anticipated for some time. Some back testing seems to be underway but as long as the 353 level holds it should be clear sailing to challenge the old highs at 401. It's not too early to put a target on this move. The price target of a triangular break out can usually be arrived at by adding the height of the open side to the point of break out/apex of the triangle. Eyeballing the chart below, I put the open side at around 150. Adding that to the tip of the triangle at about 325, one gets 475 as a rough target. This is not too far from what the TA gurus on Gold-Eagle have bee calling. In particular, 468 has been brandied as the near term target from HUI fractals.
Of course the main development of today was the retreat (finally) of the major indices. The up/down volume was almost 1:10 on the Nasdaq which led the way down, along with the usual suspects: semis, housing, transports, small/mid cap stocks. Could this be the beginning of something nasty? Only time will tell. But my readers know where I stand. After my post titled Unobvious obviousness las Friday, I couldn't resist picking up some IWM Jan 75 puts. So far they have worked out well.
Not investment advice; please do your own due diligence. Good luck and be safe!
update 10:30 pm, September 7, 2006
If it were a person, the HUI is got to be feeling like Michael Corleone in Godfather III, "Just as I thought I've gotten out, they pull me back in." A little pull back was anticipated but a 3.9% whack was a bit too much, won't you say? For now I'm attributing it to the momentum players who are prime pickings for the market makers. It will take quite a bit more downside for me to be selling here.