Risk Aversion Money Flows Drop the HUI [Trader Dan]
May 16, 2012 Leave a comment
he mining sector was weak to start the session even as some larger entities were attempting to force the S&P futures above the 1350 level. The problem was that gold could not move into the plus column, the Dollar was not buying the concerted push nor were the bond and note markets which refused to go negative on the day even with stocks initially rallying.
Once the S&P dropped back below the unchanged level, that was it for the mining sector shares which are now getting what looks to me like the BEGINNING of a final washout in this sector.
Note that the critical 50% Fibonacci retracement level could not stem the bleeding as the index has not yet even registered a mere bounce higher. One can almost sense the disgust and dismay that pervades this sector at the time being. While the economic world is being rocked, the proverbial safe haven of gold is being shunned in favor of…. Yep – US Treasuries here and German Bunds over in Europe. Apparently promises to pay by overstrained governments are more valuable than the ancient metal of kings in this Brave New World.
I am sending up a monthly chart once again to provide a long term view of this sector with some key technical regions noted. If we base our analysis PURELY on Technical factors, there does not seem to be anything in the way of downside support until one nears the 340 level which is the 61.8% Fibonacci retracement level of the entire rally from the low hit in 2008. if that cannot stop this rout, then the upsloping trend line (in blue) drawn off the pitchfork is the next target – that is currently near the 300 level.