Tuesday, August 21, 2007

The SOX, Suncor and the HUI

I mentioned the Semiconductor Index ($SOX) above a few days ago as it was testing the trend line (purple). We have broken said trend line and are now in a weak rally and testing it from underneath. The 50 day ma is toast and the 200 is putting up a fight. For more evidence have a glance at the volume, via the Semi holders (SMH), for this rally of the last 3 days. Very light which is what we would expect in a weak bear market rally.

The above is a daily chart of Canadian outfit Suncor. This is a play on the Tar Sands of Alberta. We look to be putting in a head and shoulders interim top with the neckline broken we can envision a target of $74. This may give us a good entry into the long term energy bull market via a reliable producer.

The Golds have fallen off every one's radar screen with the exception of the gold bugs out there. I have chosen the Amex Gold Bugs index ($HUI) to focus on. The above weekly chart shows a hi-lited long term support zone around 260. This margin related flush out could take us to the 240 area very quickly. You can visit the Amex web site and get the component issues of the index for some ideas to add to your shopping list so you can be ready when the flush happens.
The Gold Bugs daily chart above shows a close up picture of the most recent action we are well below the 50 and 200 day which is very negative. You must remember that if the Fed is going to cut rates and flood the markets with liquidity in an attempt to reflate, the dollar with absolutely be crucified. The central banks must get out of dollar holdings and gold will be the vehicle thru which they accomplish this. Few vehicles offer the liquidity of gold with a bid always available. That liquidity currently being taken advantage of by fund valets besieged with margin calls and unable to sell their toxic waste. We must wait and watch the charts for clues that the game is on, for now we watch. The $HUI in addtion to the price of bullion(GLD) is a great 1-2 punch to help us. Good trading to you all.

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