Euro Index Breaks Support

Note: Edited at 18:30 CT to add the HUI chart at bottom. 

SOUTHEAST TEXAS – From the Chart Book.  The Euro Index reflects the wages of uncertainty.  Now below 126, instead of confidence the chart shows contempt for all things Europe – for good reason.  Wealth wants out of the Euro without delay – the only reason for USD strength.

Continued…

Euro Index, 3 years, weekly. 

Witness the slow motion train wreck underway across The Pond.  The Euro Index has broken obvious support and has reached the area of the chart which suggests an air pocket or trap door (to as low as 120 or so), unless the breakdown is immediately corrected.  Traders should be exceptionally careful, however.  Short Euro is a very crowded, one-way trade that could reverse explosively on even marginally “good” news for the Euro. 

While confusion rules gold and silver are merely easy sources for the rush to liquidity on right now, but ultimately the trouble indicated by the chart above just about has to be very supportive for gold and silver. 

Wealth will seek safe harbor and soon, we believe. 

We may be on hiatus at the moment, but we are keeping tabs on the markets and checking in from time to time. 

Hold down the fort; help is on the way, as evidenced by the relatively strong performance of the AMEX Gold Bugs Index as of mid-day today (GLD -1.4%, SLV -2.9% but the HUI is near flat at 405 and catching a bid).  

Edit at 18:30 CT to add the HUI chart to show the relative outperformance of the HUI to gold today.  The HUI turned in a daily outside reversal, trading first to a lower daily low, then reversing to close well above the previous day's high.  This, despite gold being in the red for the day, as shown. 

Action like that can cause a bout of short covering and sometimes, but not always, marks the beginning of a more important, longer term rally.  It has been a while since we have been able to point to such obvious strength in the Big Miners.