Sunday, May 11, 2008

Views on the current PM market

It's been a while since I showed a chart on the HUI. The correction from the peak of 519.68 achieved in March has been nothing short of devastating. In the chart below, the HUI is examined in the weekly time frame that smooth out the higher frequency wiggles. The journey from 285 to 520 is labeled wave i of 3 of III, a clear upward 5-wave impulse wave. The 3-wave down correction to the 50 week MA is equally recognizable. This wave assignment implies that the most powerful iii of 3 of III will arrive shortly, if not already.

I have to admit that I have sounded this alarm before -- using earlier counts on the daily graph that in retrospect was totally off the mark (385 couldn't have occurred using under the previous counts). It does highlight the difficulty with labeling EW in real time. It's also a reminder that EW needs to be employed in conjunction with other indicators along with a rigid stop-loss discipline for successful trading. I do have a high degree of confidence of the current wave count, however, since it's on a longer time-scale and the waves are more "classic" looking. I'm also heartened by the fact that gold spot made a bottom just below $850, it's nominal high in the 80's. One positive for the patient gold investor is that the current bull phase now looks to extend in time at lest till the end of 08.