Le Metropole Members,
Mark Thompson has served commentary at The Toulouse-Lautrec
Table titled,
"THE HUI GOLD BUGS INDEX ELLIOT WAVE COUNT TO 2304." 
"Are hurricane force winds in the gold and silver
markets approaching the U.S. coastline?
If our Elliot Wave count of the HUI gold index is correct the hurricane
force winds are very close to landfall.
We believe that the HUI index is entering Big Wave 3 of Intermediate Wave 3 of Minor Wave 3 and should be the most explosive move
for the metal stocks."
Our assumptions are:
1. The move from 35 to 258 was Big Wave 1; it was 223 points and was a gain of 7.37 times.
2. Big Wave 2 corrected from 258 to 163 and that was a 36% correction.
3. We have assumed that Big Wave 1 was 7.37 times and that Big Wave 3 would be the same length in percentage terms. In Elliot theory Wave 1 cannot be the shortest wave.
4. For Big Wave 5 we used the Fibonacci number 3 as the length of the final wave from 768 to 2304.
OUR WAVE COUNT FOR THE HUI INDEX FROM NOV. 2000 TO NOV. 2010.
BIG WAVES 1 to 5:
1. 35 – 258 = 223 points 7.37 times gain (actual)
2. 258 – 163 = 95 points 36% correction (actual)
3. 163 – 1201 = 1038 points 7.37 times gain (assumption)
4. 1201 – 768 = 433 points 36% correction (assumption)
5. 768 – 2304 = 1536 points Fibonacci 3 times (assumption)
To clarify how we derived at these numbers we have broken down the individual waves.
BIG WAVE (1) 223 POINTS +/- 763 DAYS (SEE CHART)
INTERMEDIATE WAVES 1 to 5:
1. 35 – 79 = 44 points 127 days (+/- 1) 2.25 times
2. 79 – 59 = 20 points 127 days (+/- 1) 25% correction
3. 59 – 154 = 95 points 130 days 2.61 times
4. 154 – 92 = 62 points 195 days 40% correction
5. 92 – 258 = 166 points 184 days 2.80 times
BIG WAVE (2) 95 POINTS 36% CORRECTION 363 DAYS
A. 258 – 163 = 95 108 days
B. 163 – 250 = 87 133 days
C. 250 – 165 = 85 122 days
For Intermediate waves 3, 4 and 5 we have used the same percentage moves as the intermediate waves of Big Wave 1.
BIG WAVE (3) 1038 POINTS
INTERMEDIATE WAVES 1 to 5:
1. 165 – 401 = 236 2.43 times 246 days (actual)
2. 401 – 274 = 127 31% correction 101 days (actual)
3. 274 – 715 = 441 2.61 times (assumption)
4. 715 – 429 = 286 40% correction (assumption)
5. 429 – 1201 = 772 2.80 times (assumption)
BIG WAVE 4
1201 – 768 = 433 points 36% correction (assuming that big wave 2 and big wave 4 are the same in percentage terms).
BIG WAVE 5
768 – 2304 = 1536 points 3 times (assumption using the Fibonacci number of 3).
So if our Elliot wave count and assumptions are correct the HUI should approach the 2304 area in 2010. We have used a lot of assumptions but to project an Elliot Wave target assumptions are needed.
The other way we would like to look at our Elliot Wave target of 2304 is from a valuation basis i.e. what would it take for the HUI to get to 2304.
Currently the HUI index consists of 15 of the top gold producing companies that do not hedge their production.
With the HUI trading at 329 a move to 2304 would be seven fold. With the market capitalization of the HUI 15 gold stocks, trading at $90 billion, at 2304 the market cap on the HUI would be $630 billion. That would be the combined market cap of just two companies Exxon ($428 market cap) and Proctor & Gamble ($202 Market cap) for a total of $630 billion (See list of HUI 15).
We have enclosed a list of the HUI 15 stocks with the market caps. Lists of the top 20 U.S companies and the XOI oil index are enclosed as well.
The HUI has 15 stocks in it, the XOI oil index has 13 stocks in it and the oil index is 18 times bigger in market cap; $1622 versus $90 billion. The HUI market cap is still 20 billion less than the 20th largest company in the U.S. which is Coca Cola with a $110 billion market cap.
We have also included the GDM Gold Index which includes 41 of the main producing gold mines in the world with a total market cap of $149 billion.
So to conclude if our Elliot Wave count and our assumptions are correct the HUI should start accelerating soon. There is no fever like gold fever and if investors started moving money into the gold stocks, a $630 billion market value could be attainable. If the HUI broke the 200 to 220 mark we would have to reconsider our wave count.