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Prognosis for the Labor Day Season
BY MARTIN
GOLDBERG, CMT
The recent correction in gold stocks has shot down the long term Elliott pattern proposed here several times. Wave 3 is not underway; but rather the chart suggests we are in a multi-year wave 2 pattern. Here is the chart of the $HUI in all its (now) mis-labeled glory. Whereas “proposed wave 3” looked to be in progress, unfortunately (for gold bulls), the chart is still somewhere in the wave 2 correction. By all logical accounts, Wave III is still in progress. Note that the low made last week has not breached the lows made throughout the wave 2 correction. A viscous correction? Yes. The end of the bull market? No. Remember, if the daily market action can spoil your day, your commitments are too great.
If you need confirmation that the bull market in gold stocks is not over, look at market leader Agnico Eagle Mines Ltd. (AEM). Here $45/share was and is a line of demarcation which was not breached. As the HUI bottomed last week, AEM actually gained in the weekly market action. Now there looks to be minor resistance around the $60/share level.
Here is a shorter term chart of the $HUI. Some resistance is expected around the 385 level.
The emerging market ETF may be worth a short term play on a correction of the in progress downtrend. Here $40/share is a line of demarcation, and $38.50 looks to be a good stop out point. Short term, the 40 September calls look like a good risk to reward ratio.
Recent history has shown the week before Labor Day to be a quiet one in terms of trading volumes and benign market action. With low volumes and a lot of hope still in the market, I expect the in-progress bounce to continue. But it would not be wise to forget that the S&P 500 is in a long term downtrend; and this is best illustrated by the following chart showing that since October, it has been a series of lower highs and lower lows.
Have a great end of summer week.
Martin Goldberg
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