Tuesday, April 19, 2011

04.19.2011



To enlarge any image click on the photo


END OF THE DAY REPORT - The market again making new highs and because it has only had around one percent gains from its previous highs I think the most likely scenario is some more gains before it tops. The $43.25 level pointed out this week has worked very big as a resistance point and this means the 261.8% level is next. This target is set at $45.32 and that means the $43.25 which used to be resistance is now that of support. This and the five day moving average are the key levels that I want to see hold for this rally to continue. For now bulls are in charge.

The trend lines in this photo have parallel lines showing the current uptrend and in the short term a consolidation period at the one day average (blue line) would be a good and healthy thing. I don't think we need to test the five day moving average yet but when it does test it will be the third test of this current rising trend. At some point the intermediate term trend will need to revert back to the downside but we might have to patient for this the way this market is holding up. I am surprised people are calling tops this early in this move to $50.00 as it seems it is easier to play a bull market to the long side. Hardly anyone is ahead in shorts now as that would only be those whom short the last couple hours of trading or have active shorts from 1980 above $44 and for some reason have not taken any profits yet. Therefore as the market goes higher anyone speculating on these shorts are going to be forced to cover or take the heat of possible large losses.



GOLD versus HUI


I had someone mention to me previously about the difference on the ETF of HUI and the actual spot price and the ETF goes back a little ways away as you can see here. On June 10, 1996 the HUI was set at $194.74 and the spot price of Gold was $386.25. That was roughly a two to one ratio and therefore that is why the chart has two shares of the Gold ETF to one ounce of physical. Interestingly enough at the start of this chart it crashed big on the HUI side of things. It managed to get back to the two to one ratio and when the 2008 market crash had occurred we seen the same thing again. Gold moves from $1029 to $700 and the HUI index from $520 to $160. Therefore it topped at its two to one ratio and then when it crashed to the bottom it ended up worked out to be over a four to one ratio. It has since came close to matching with it's previous high as the last couple years have made me adjust this chart to a three to one ratio and it has been over performing gold and if the trend continues then I would expect the rally in gold to continue and HUI to creep back to the 2 to 1 ratio. However, its two for two in crashing pretty hard and if we have another correction gold it may only take a 20% down move for HUI to lose half its value. If you play any of these stocks, I'd like to remind you that you are essential risking fiat digital or paper dollars to win digital dollars that can be turned over for fiat paper dollars. Your wager is based on price action of the gold price and is thus a calculated gamble. Thank you and later on in the blog either tonight or tomorrow is a Palladium update.

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