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THE HUI - XAU INDICES

The index has broken above 2 resistance lines and it is getting ready to challenge the third one at 220, while both the ADX, and, the Aroon Indicator are on a "BUY" signal. If the pattern continues to hold, we out to see a pullback  lasting between 2-6 days, and then another push to the upside.

 Gold could easily come down to test support at $440, which would facilitate a pullback in the HUI.

The  XAU closed the gap at 100.51, and if the pattern continues to hold, then we ought to see a pullback to the 97-96 zone to be followed by another  rally up to the 102.5-103.5  zone.

The Gold/XAU ratio suggests that a pullback in the XAU ought to be expected.

The SI25 has confirmed the latest advance.

Momentum has confirmed the latest advance.

The minor divergence implies that a pullback can be expected at this point.

The minor divergence implies that a pullback can be expected at this point.

The McClellan A-D Oscillator has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

The A-D Summation Index has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

Notice that the A-D line has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

The McClellan Volume Oscillator has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

The Volume Summation Index has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

Notice that the Cumulative Volume has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

The Volume Thrust Oscillator  has formed a very similar pattern to the one that accompanied the rally in late July-early August of last year.

CONCLUSION:

All the indicators have formed patterns that three out of five times turn out to have a bullish resolution. In fact the very same patterns were observed last year  between late July and early August as the HUI, and the XAU  embarked  on a 20% rally. In addition, the price action of both the HUI and the XAU is defined by rising channels and predictable  oscillation between channel support, and channel resistance. The advance has been confirmed by the Summation Indexes, the A/D line, and the Cumulative Volume. All in all, up-to-now, it is quite difficult to find  rational reasons to be bearish about. Could  this "perfect picture" possibly turn out to be a fake-out and a bull-trap? Yes it is possible, anything can happen in the markets, however, it is not very probable. As long as the XAU, and the HUI are making higher lows, and higher highs, we ought to be bullish and continue to add t our positions during  pullbacks near support.

Given the price action of late, the odds are better than even that gold will pullback to $440, the XAU will pull back to 97-96, and the HUI will pullback to 212-210. There is a chance that the XAU may pull back to channel support at 94, but ideally that shouldn't happen. If it is embarking on a multi-week rally, it should be moving away from channel support, and staying towards the mid-point, which is in the 97-96 zone.

If the XAU pulls back to the 97-96 level and then it reverses back to the upside, we would expect it to rally up to 102.5-103.5, before it pauses again. We would use  any pullback to the 97-96 zone and a subsequent reversal to the upside as  an opportunity to add to our long positions.

Ike Iossif

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