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,