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The Gold Bugs Index Gets Caught in the Downdraft

The HUI continues to plummet, to crash, exactly as we have projected. I left the blue arrow for Micro degree wave 3 in the exact spot we drew it last Friday. The HUI got spanked for another 20 points this week. But its MACD is still nowhere near oversold.

Three weeks ago, with the $HUI Gold Bugs Index at 217, we warned that this index was about to begin Minuette degree wave iii down, was about to plummet. Since then $HUI dropped exactly as expected, crashing 37 points to a closing low of 180.6 today, Friday April 15th, or 17 percent. In doing so, it broke through the neckline of a Bearish Head & Shoulders pattern. With the Bearish Head & Shoulders pattern confirmed, the odds are high that more significant downside is coming, with a minimum downside target driving prices to as low as 152ish.

Waves iii through v should carry prices much lower to their wave C bottom. Where might C of 2 bottom? Based upon the Elliott Wave count, a 38.2 percent retrace of Intermediate degree wave 1's rally from 35.31 on November 16th, 2000 to 258.02 on January 6th, 2004 suggests a bottom for the current Intermediate degree wave 2 decline of 172.94 (almost there). A 50 percent retrace takes prices to 146.67. Interestingly, should Minor degree C end up equal to Minor degree A, that would suggest a bottom of 154, very near the H&S target. After the carnage, we should be at the bottom of Minor degree C of 2, to be followed by a powerful rally for several months or even years, Intermediate degree wave 3, probably in response to more Dollar devaluation.

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