First of all, the answer is yes. I continue to hold a core of gold miner stocks. The answer would also be yes to the question "Gary, do you feel pain right now?". Fortunately, the answer to the question "Did you see the potential for this severe correction and 'trade your traders' and manage risk to an acceptable degree?" is also yes although as usual I wish I had done more of it ;-).

I posted an ugly daily chart of HUI on the COW yesterday and want to follow it up with a look at gold. By now manic mainstream market participants are beginning to ask the question "could the worst be over?". It is a good story with would-be contrarians buying the Buffettesque "be brave when everyone else is frightened" theme.

As for gold, it remains in a real secular bull market but there are periods when your very soul will be tested and this may be one of those times. By now we all see the head and shoulders top forming in the metal and the breaking neckline in the HUI Gold Bugs Index. There are a few bullish divergences and deeply over sold conditions on the daily charts that argue for a short term rally, but that is the stuff of hope.

I want you to look at the monthly chart I posted on the Cow back in March. Regardless of whether or not you believe that evil entities are responsible for the price decline of gold (I do not), this market was ready to correct - and hard. The reason I am dredging this chart back up is that in a dispassionate view of the big picture I had to include "700-750 should provide strong support. If you don't think it can happen, think again" (as noted on the chart). Now that is a monthly chart and for more immediate action we look to the daily and weekly charts. The monthly comes into play if we break down here.

The complex is certainly burning off the high level of euphoria that got baked into the gold 1000+ cake in March. Commodity bulls, momos and hedge funds were all celebrating the demise of Bear Sterns, the destruction of the Dollar and the idea that we are all geniuses; smart enough to have sought refuge from the storm in gold. A fine recipe for reversal it was.

So we are now shaking out that element that thinks it is as easy as simply jumping into the hot plays no matter what the financial and economic backdrop. I believe there remain unknowable levels of rot in the global financial foundation so I remain big picture bullish the gold complex. The rest is noise until the monthly chart is broken down. Sober investors, who have been along for the ride since the high 200's or low 300's realize this is all just part of the journey to wherever we are going.

I am by no means declaring that 725 is in the cards and in fact, there is significant support including the 1980 highs around 850 well above there. This simply remains a "if you don't think it can happen, think again" message.