Sunday, June 30, 2013

The HUI Miners Index: Fibonacci Tells of Fortune

I don't know about you, but the Fibonacci mathematical series has always fascinated me. Who would ever have thought that adding 1+1 then 2+1 then 3+2 then 5+3 then 8+5, and so on would generate such a profound explanation of balance and symmetry in nature? I have found so many Fibonacci relationships while studying the price movement of gold over the years that I could not begin to count them all. 

Today I decided to apply my passionate appreciation and respect for Fibonacci by asking him to tell me what is going on with the Gold Bugs Mining Index (HUI). And by golly, he told me! 

Now you have to realize that Fibonacci speaks using words deeply shrouded  in mystery. As long as you understand this you will hear him talk to you. But if you need to have all your i's dotted and t's crossed so that even a 5 year old could understand what is written, don't expect to hear Fibonacci tell his secrets. He gets easily offended as he knows his mathematical series has explained many of the world's most treasured phenomenon (and he knows you have explained none of them).

Teasing aside, I have prepared 11 charts of the HUI to share with you. First we'll look at a weekly chart with nothing on it except "The Trend Line" (blue). Then we will consider 5 charts of HUI measuring price movement in terms of Fibonacci relationships followed by 5 more charts that look at the movement of time in Fibonacci relationships. 

So let's get started with this simple weekly chart dating from 1997 - 2013.

Here is the first chart measuring price movement:

Here we are using the HUI genesis at $35.31 and the 2008 high of $519.68. The 2011 high of $638.59 came in at the 123.6% measurement. The 2008 high at 100% was ever so slightly take out in 2012, as the 2008 low trend line was ever so slightly taken out just days ago. It is very common for large traders to push the crowd just past their nicely drawn trend lines, pick their pockets, then help things get reversed.

This next chart uses the 2002 high (which coincidentally is the 2008 low) as 0% and we measure up to the 2006 high to reach our 100%.

The things that show up on this chart are both interesting and surprising. The 2008 high (nearly) reached the 150% level, as did the 2012 high while the 2011 high (nearly) reached the 200% level. 

The following chart is similar in that it uses the same base point of the 2002 high / 2008 low but for the 100% measurement we travel up to the 2011 all-time high.

The next couple of charts will zoom in on the more recent action and see what is going on. First, this daily chart beginning in early 2011.

If we use the low price reached by HUI last week as our base (0%) and measure up to the all-time high attained in September of 2011 at $638.59 we find that the May 2012 low (which many including myself believe was the beginning of the C-wave save for the weird things that started happening in early December 2012) was a perfect 38.2% of the entire price distance.

And for the final Fibonacci price retracement chart, this uses the same May 2012 low as the basis for 100% and the recent low of last week as 0%.

It kinda goes to show you that even if the Fed, or whoever, manipulates the market, my friend Fibonacci always gets the last word.  :-)

Now let's look at some HUI charts where the Fibonacci relationships of time will be our focus.

Our first chart looks at the origin of the HUI bull and measures time out to the 2008 bottom.

Of particular note is the 38.2% 2003 high, the 50% 2004 high, the (nearly) 138.2% 2011 high and the 150% 2012 high.

Our second time chart considers the 2008 low as 0%, and uses the all-time high of 2011 as the 100% measurement. 

Of particular note here is the 38.2% nails the 2009 high and the 161.8% nails our current low.

I asked Fibonacci if he would mind showing off a little for the onlookers. He said that since they were still paying attention and being reverent he would show off, but just a little. I thanked him graciously and asked what he had in mind. So he told me to try this:

OK. Now that was definitely showing off.

Here is another:

By the way, if you think for one second I am making this stuff up you are dead wrong. I meticulously place these measurements on precisely the ultimate day or price point. What happens after that I get no credit for, believe me.

OK - one last chart:

Well, that's it. I asked Fibonacci if we have seen the bottom in the HUI miners index. I knew he wouldn't tell me flat out, but there was a twinkle in his eye that gave me the answer. There should be a twinkle in your eye, too!

Have a great week,


Thursday, June 27, 2013

Mirror, Mirror on the Wall .... Do Tell Us What Will Happen Next

Today I was tinkering around with some of the hundreds of indicators I have built  using the ThinkorSwim platform, and I came across this one using the Money Flow Index (MFI) as its primary engine. What caught my eye was one of the experiments I coded that plotted the MFI(10) divided by price. 

I have long believed that money flow into a security often precedes or 'foretells' a change in price trend direction. Having done more experiments than I care to admit, this premise is, at best, often absolutely true. But the more typical case is that money flow and price direction are aligned at the hip. That is, price and money flow move like mirror images of one another.

In any case, what I'd like to show you today using 6 charts are curious observations - tending to make the argument that miners are about to rebound skyward and the stock market is nearing failure.

The charts we will look at are weekly chart of the S&P 500 ETF (SPY), the Gold ETF (GLD), the Gold Miners ETF (GDX), then conclude with 3 specific miners - El Dorado Gold Corp (EGO), IAMGOLD Corp (IAG) and Royal Gold Inc (RGLD).

Here is the weekly S&P 500 ETF (SPY):

At present the True Strength Index (TSI) indicator is reading just below ZERO at -6.89. That is bearish, generally. But more interesting is the Money Flow Index indicator (divided by price each bar) which has made a series of lower highs as price has made a series of higher highs. It too has a negative reading of approximately -.05. My hunch is that despite price rising, fewer and fewer investors are believing the rally.....yet the big money is quietly sitting still and not selling - until someone yells FIRE! in the crowded room. Then there will be a massive run to get out and it won't be pretty.

Let's next look at the Gold ETF (GLD). 

It appears to be the case that when Money Flow is headed downwards towards ZERO, then submersed for a while, price is somewhere between flat and corrective. That Money Flow has now worked its way back up to ZERO is favorable for a rally, but no guarantee.

So how about we now look at the Gold Miners ETF (GDX).  

Does the chart look about as you expected? It definitely surprised me. Again, as with my earlier post using the OnBalanceVolume (OBV) indicator, something stealth seems to be going on here in a bullish fashion.

Finally, here are the 3 mining stock charts I promised. Any observation I could make is already on the chart for you to consider.

El Dorado Gold Corporation (EGO):

IAMGOLD Corporation (IAG):

And, Royal Gold Inc (RGLD):

Sunday, June 23, 2013

Final Results: 4 Week Daily Study Using the True Strength Index (TSI) Indicator

I have completed my analysis of the 10 ticker symbols traded during my 4 week long daily 'real-time' study using the True Strength Index (TSI) indicator along with a self-customized 200 ema indicator. 

This study concluded a couple of days ago at the open of trade - Friday June 21, 2013. The Trade Score Card is a spreadsheet detailing each trade and was used to update traders of trade changes to be executed on following morning's open. 

I will show you the trading skills I personally can improve on using charts detailing my 'real-time' trades and reveal my retrospectively observed errors in judgement. It is my hope that readers who invest the time to carefully consider the thoughts offered on each chart will benefit from the sharpening of their thinking process and trading skills. 

The 10 ticker symbols I attempted to trade in 'real-time' using imaginary money and the handicap of calling the trades based on my end of day analysis for entry/exit at the following morning's open included:

1. Boeing (BA)
2. Crude Oil ETN (OIL)
3. US Dollar Index ETF (UUP)
4. S&P 500 ETF (SPY
5. Gold bullion ETF (GLD)
6. Gold Miners ETF (GDX)
7. Goldman Sachs (GS)
8. Home Depot (HD)
9. Microsoft (MSFT)
10. Long Term Treasury ETF (TLO)

The link provided for each of the above ticker symbols will take you to a page that shows you (for each symbol individually) what I was looking at each day in 'real-time', what my thoughts and concerns were each day and what my trading decision was for that ticker symbol on the open of trade the following morning.

Before we look at the charts, here is an overview of how well I did (and did NOT do) in 'real-time'The column titled 'John's Real-Time' shows the outcome of the trades I made. The column 'Possible' details the ideal trade outcome with the benefit of hindsight - as you will be shown with explanation in the charts that follow.

Company, ETF 
or ETN
Crude Oil ETN
US Dollar Index ETF
S&P 500 ETF
Gold ETF

Subtotal (1-5)


Gold Miners ETF
Goldman Sachs
Home Depot
Long Term Treasury

Subtotal (6-10)


Grand Total


There were two of the ten symbols I did not trade (HD and TLO). If I throw out the 'possible' gains attributed to these two ticker symbols, the apples to apples possible score becomes +35.40% and most definitely humbles my +8.87% effort.

Briefly, there were two interesting things I (re)learned. 

First, the TSI and rules work exceptionally well. As you will see below in the charts, nearly all of the possible gains were given by following the TSI and its rules

And second, if there was a single error in my judgement that seemed to pop up repeatedly, it was my not trusting that when the TSI is below ZERO, the odds favor continued lower price. 

Anyway, here are the 10 ticker symbols as traded by me in 'real-time', then followed by the same chart but with the optimal outcome using the TSI rules and the benefit of hindsight. The shaded area represents the trading days available during the study.

1. Boeing (BAMy trades:

1. Boeing (BAOptimal:

2. Crude Oil ETN (OILMy trades:

2. Crude Oil ETN (OILOptimal:

3. US Dollar Index ETF (UUPMy trades:

3. US Dollar Index ETF (UUPOptimal:

4. S&P 500 ETF (SPYMy trades:

4. S&P 500 ETF (SPYOptimal:

5. Gold ETF (GLDMy trades:

5. Gold ETF (GLDOptimal:

6. Gold Miners ETF (GDXMy trades:

6. Gold Miners ETF (GDXOptimal:

7. Goldman Sachs (GSMy trades:

7. Goldman Sachs (GSOptimal:

8. Home Depot (HDMy trades:

8. Home Depot (HDOptimal:

9. Microsoft (MSFTMy trades:

9. Microsoft (MSFTOptimal:

10. Long Term Treasury (TLOMy trades:

10. Long Term Treasury (TLOOptimal:

So did you get anything out of this exercise? I hope so!

And what's next, you wonder? Good question. What would you like to see?

I've been tinkering with the idea of a spreadsheet with 30 - 50 ticker symbols from a diversity of market sectors. But no charts each day - that about drove me nuts.


Keep in touch!