At first sight the gold chart continues to look bullish. It has continued to make new highs in the recent past, and there are still only faint glimmerings of possible weakness. Actually it is in position to �go parabolic� - but how likely is this if everything else caves in? - the answer is it isn�t, so we must look for alternative more conservative scenarios that accord more with what we are seeing elsewhere. The 11-year chart shows the gold bull market in its entirety from the time of the �Brown Bottom�, when Gordon Brown famously sold half of Britain�s gold reserves at the bottom of the market, generously ending a 20-year bear market in gold, for which he is presumed to have been rewarded with the promise of becoming the Prime Minister of Britain.

The 15-month chart for the HUI index shows recent action in more detail. On this chart we can see that the index did not break down from its uptrend in force from last February on the recent severe drop in the broad market, which is actually quite impressive. However, this uptrend can be expected to fail in once the broad market breaks down from its H&S top, and given the tight bunching of the index with its moving averages, this would be expected to lead to a 2008 style plunge. In favorable market conditions may rally up towards 500 in coming days or weeks. Break of the uptrend shown will be viewed as a general sell signal for the sector.

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The 5-year chart for the HUI index shows an almost identical situation to that which exists in silver, with stocks Double Topping with their early 2008 highs and more recent December highs. What is expected to happen is that PM stocks rally feebly with the broad market, as it marks out the Right Shoulder of its H&S top, and then they crash once the market breaks down below the neckline of the H&S top, and as we can see on this chart, it�s a very long way down from here. PM stocks had been showing signs of breaking ranks with the broad market in recent weeks, but are likely to be overwhelmed by the ferocity of the decline in the broad market should it break down from its Head-and-Shoulders top.