Navigating The HUI (Gold Bugs
Index)
Joseph Russo
email: joe.russo@elliottwavetechnology.com
ElliottWaveTechnology.com
Apr 24, 2007
Introduction
Providing a consistently
accurate road map for traders and investors is both a rewarding
and challenging responsibility that we passionately embrace.
We approach our calling as though legally bound by the highest
of fiduciary standards.
Although it is clearly impossible
for one to know with any level of certainty how and when prices
will move within a given series, this article will provide testament
that it is indeed plausible to attain a distinct advantage, and
actionable level of foreknowledge relative to dynamic price evolution
in both time and amplitude.
Success in the two separate
endeavors of trading and analysis is by no means failsafe or
a sure thing. To the contrary, trading losses, and failed forecasting
signals generously populate the real life experience of the most
successful traders and analysts. In this business, no individual,
method, or system can get things right all of the time. Within
the chart archives below, we will provide such examples of real-world
challenges and triumphs.
The HUI's Long-Term Wave Structure:
| Our
monthly analysis plots the price action from the low in 2000
at 35.31, labeled as terminal to Primary 5 of
a larger degree bear market [C] wave
terminal. One must recognize that Elliott Wave Theory along with
the balance of technical analysis is mostly subjective, and open
to variant perceptions. For example, one can interpret the five
wave advance to our preferred (3)
terminal as a completed first wave. Doing so places the May '06
high as ALT: (3) Both views are valid. Although
continuously subject to changing dynamics, for the moment, our
preferred and first alternate views interpret the larger degree
HUI wave structures as labeled. Bare in mind, no single form
of analysis should take precedence over the price action itself. |
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The HUI's meteoric rise
From its Cycle Degree print low of 35.31 in November of 2000-
measured to its print high in May 2006 at 401.69, the HUI has
skyrocketed more than 1037% in 5_ years! In contrast, the Gold
price itself has only appreciated 192% in the same peak to trough
period. In our view, the HUI's meteoric rise has topped, or remains
in progress of terminating a first leg up of Primary dimension.
Consolidations to date have yet to correct the 1037% Primary
Degree advance in corresponding proportion. We suspect a proportionate
correction may either take place later this year, or out as far
as 2009 in confluence with a potential eight-year cycle low due
in Gold.
NAVIGATING THE HUI
Below is an archived
account of Elliott Wave Technology's real time analysis of the
HUI. The archived works will show how we have dynamically adjusted
to the evolving price action in arriving at our most current
interpretation as represented in the monthly chart above. As
the guidance will illustrate, "it matters not that
our current "wave count" is correct, or set in stone,
but
rather that we interpret the price action in such a way so that
our clients can profit as the count works itself out however
it so chooses."
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FROM ELLIOTT WAVE TECHNOLOGY'S
NEAR TERM OUTLOOK
MAY 11, 2006
We open the archives as the
HUI prints its terminal high of 401.60. Note the deep oversold
condition highlighted at the 4-wave
low of 278 the previous March 10.
Looking back to March of 2006,
our guidance suggested clients adopt a bullish bias toward the
HUI. By early April, we positioned an upside capture window above
the market between 369 and 398.
From our March 2006 guidance,
the HUI had advanced some 41% in two months time.
By May 11, price had surpassed
our upside capture window. By that time, we had already issued
our second sell probe-advising clients to adopt a bearish posture
against the fresh highs.
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FROM ELLIOTT WAVE TECHNOLOGY'S
NEAR TERM OUTLOOK
JUNE 13, 2006
The next chart from our archive
shows the devastating decline that took place in just over a
month.
From the 401.60 high in May,
the HUI had plummeted 131 points, losing more than 30% of its
value.
Chart highlights include the
capture of a smaller interim counter trend b
wave rally into early June. That rally terminated between 335-354
prior to the HUI succumbing to its next leg down.
Although our downside targets
failed to elect, the severity of decline, level of oversold readings,
and the prospect of a 4th
wave down basing, prompted us to begin guiding clients to reversing
trading bias from bearish to bullish by mid-June.
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FROM ELLIOTT WAVE TECHNOLOGY'S
NEAR TERM OUTLOOK
JUNE 30, 2006
By the end of June, our previous
mid-month guidance reversing bias to the bullish side was paying
off brilliantly. The HUI was now trading 24% above its lows from
just two weeks prior.
This chart highlights the evolution
of our dynamic wave interpretation as it unfolds against the
price action.
At that time, our preferred
view was that the HUI was in process of topping a smaller degree
a wave en-route toward a larger b wave terminal.
Our first alternate view suggested
that the b wave was already in process of topping.
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FROM ELLIOTT WAVE TECHNOLOGY'S
NEAR TERM OUTLOOK
SEPT 5, 2006
Our next archived chart fast-forwards
two months from the previous. Much had transpired in these two
months. We successfully guided traders to fade the a- wave high and protect profits appropriately
upon the basing of b- in July. After that, the environment
became extremely challenging, and we made some bad calls. On
August 23rd (see black arrows) we incorrectly, and prematurely
assumed that the larger b wave
had terminated upon the 354.16 high. Our premature August 23rd
guidance toward a bearish stance provided immediate, but very
short lived results. After falling nearly 20 pts in four days,
price action whipsawed, and the August guidance was in drawdown
of nearly 4% by the time this b
wave finally topped some 15 points above our bearish call. Despite
that adversity, we issued a secondary sell probe against the
September 5th 366 high. The HUI topped one day later at 369.68
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FROM ELLIOTT WAVE TECHNOLOGY'S
NEAR TERM OUTLOOK
MAR 16, 2007
Our last chart in this presentation
shows guidance reversing from a bearish to a bullish posture
on March 14th against the 312 low.
This brings us to the present.
Prior to pulling back last week, the HUI recently registered
prints just north of 369. The HUI closed out last week's trade
at 356.16, some 44 points or 14% above our mid-March bullish
guidance.
Since posting this chart on
March 16, the count and labeling has changed significantly.
One can attain our latest updates
by becoming a Near Term Outlook client.
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It is readily apparent that
our approach to forecasting is by no means arcane. We do not
"predict prices;" nor become reliant upon previously
stated predictions coming true; instead, we adapt to the dynamic
price action as it unfolds, and do so in such a way that no black
box algorithm could possibly match. Doing this impartially, allows
us to anticipate direction and formulate astute and measured
guidance based on the daily evolution of price. As evidenced
in this fair and balanced real-world presentation, the resultant
competitive advantages remain abundantly clear.
Trade Better / Invest
Smarter...
Joseph Russo
Publisher & Chief Market Analyst
ELLIOTT WAVE TECHNOLOGY
website: www.elliottwavetechnology.com
email: joe.russo@elliottwavetechnology.com
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Coming
Soon from Elliott Wave Technology "Rules
of Engagement, Strategies for Traders"
Position
Traders :: Swing Traders :: Short-Term Traders
The traders'
series will soon be available FREE to all Near
Term Outlook
clients, or by special purchase at our website.
It is our hope
that this short series has provided prudent and actionable guidance
for self-directed index investors.
We trust that
with such guidance, many will now be able to navigate the markets
more confidently in applying some of the basic rules we have
outlined.
For those who
prefer the convenience and assurances derived from delegating
such duties, Elliott Wave Technology's Interim
Monthly Forecast
is now covering the following markets:
- The U.S Dollar
- Gold
- The CRB Index
- S&P 500
- Dow Jones Industrial
Average
- MSCI Emerging
Markets Index
- NYSE Composite
Index
In addition to
covering the indices above, the Interim Monthly Forecast also
weighs in on correlating, or inverse ETFs and funds, relative
to each of the specific indices under watch.
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