HUI and XAU Divergences
Don Delavan
Market Waves Newsletter
Email: marketwaves@adelphia.net
Written Jul 15
Posted Jul 19, 2004
HUI and XAU have had an interesting pattern since their all-time
lows in 2000 if
HUI leads, buy; if HUI lags, sell.
Last Friday, July 9
was the third time in 2004 that XAU made a higher high while
HUI made a lower high. During the previous two times in 2004
look at what happened:
- On January 6, XAU made a higher
high above its December high while HUI made a lower high. Both
fell hard for the remainder of January
.
- On April 1, XAU made a higher
high above its February high while HUI made a lower high. Both
fell hard into May 10
.
- After a 2-month rally peaking
on July 9, XAU made a higher high above its May high while HUI
made a lower high. Will
both fall hard for the remainder of July?
 The
answer appears to be yes. The charts are pointing to a bottom around HUI
155-160 during the last week of July. XAU and NEM have old price
gaps at 74.88 and 33.40 that should be filled in late July. These
targets will be great buying opportunities for gold stocks because
of its Wave 5 up into September.
In the past, Wave 5 up for gold stocks has been a very strong
rally, and the targets are HUI 300-315 and XAU 140-150 by late
September. So gold stocks might be the most profitable investment
during the late summer months.
Inflation fears will  probably
return because the Fed is so far behind the curve, which will
cause gold stocks to skyrocket into September like they did before
the 1987 crash when NEM skyrocketed 122% in 12 weeks! Will we
see a repeat of history?
Along with the coming decline in gold stocks, the other major
stock indexes are also on schedule for a strong decline to their
summer 2003 levels into the last week of July with the current
cycle. But then the next cycle should rally into September and
peak with lower highs than the June highs, except for HUI and
XAU, which should make new highs in a blow-off wave 5 up. When you see SPX bottom
just above 1000 in late July, then this will be another buy signal
for gold stocks.
I will issue another article
when the late July bottoms are reached. For the big picture,
see Sell
on the Fed News.
15 July 2004
Don Delavan
Market Waves Newsletter
Email: marketwaves@adelphia.net
Don Delavan
is the editor of the Market Waves newsletter.
For subscriptions, contact marketwaves@adelphia.net
reprinted at 321gold
Inc
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