Resource Stocks Hammer Out a Bottom

Despite the tremendous volatility this last week, I think that gold and gold stocks held up very well. In particular, I thought gold's performance on Friday was outstanding. The metal was up almost 12 dollars, while everything else was in the red.

You may have read about this, but the Fed added about $38 billion of liquidity to the system on Friday, which was supposed to help stabilize the markets. So, imagine that, $38 billion of money just created out of thin air. That's more than $125 for every man, woman, and child in the United States. When the Fed adds liquidity to the system, it means that there is more paper money floating around to chase a limited amount of gold, and this is why gold rose yesterday.

Anyway, back to the charts. I feel that gold stocks have bottomed out, and I have made some annotations in the following daily chart of the HUI to support this argument.


Furthermore, I feel that the TSX has bottomed out. The chart below shows an ETF that I just recently became familiar with, and this ETF does twice the daily movement of the TSX. So, if the TSX goes down 2%, this ETF will go down 4%, and vice versa.


The main thing to notice is the text-book hammer candlestick pattern that formed on Friday. I think that this is a powerful piece of evidence that the TSX has bottomed. To be more specific, I expect much higher prices for gold stocks, and the TSX in the weeks ahead.

If you were curious about the ETF that I mentioned before, then this table might be of interest to you. There are many other ETFs that this company provides, and this table summarizes them. In my opinion, these ETFs are a great idea, as they can save you money on margin costs, and allow you to easily go short, which can be used to protect your portfolio.

HORIZONS BETAPRO ETFs	TICKER	INDEX	DAILY OBJECTIVE	INCEPTION DATE
HORIZONS BETAPRO S&P/TSX 60® BULL PLUS ETF	HXU	S&P/TSX 60 INDEX®	200% OF THE UNDERLYING INDEX	JANUARY 2007
HORIZONS BETAPRO S&P/TSX 60® BEAR PLUS ETF	HXD	S&P/TSX 60 INDEX®	200% OF THE INVERSE OF THE UNDERLYING INDEX	JANUARY 2007
HORIZONS BETAPRO S&P/TSX CAPPED FINANCIALS® BULL PLUS ETF	HFU	S&P/TSX CAPPED FINANCIALS INDEX®	200% OF THE UNDERLYING INDEX	JUNE 2007
HORIZONS BETAPRO S&P/TSX CAPPED FINANCIALS® BEAR PLUS ETF	HFD	S&P/TSX CAPPED FINANCIALS INDEX®	200% OF THE INVERSE OF THE UNDERLYING INDEX	JUNE 2007
HORIZONS BETAPRO S&P/TSX CAPPED ENERGY INDEX® BULL PLUS ETF	HEU	S&P/TSX CAPPED ENERGY INDEX®	200% OF THE UNDERLYING INDEX	JUNE 2007
HORIZONS BETAPRO S&P/TSX CAPPED ENERGY INDEX® BEAR PLUS ETF	HED	S&P/TSX CAPPED ENERGY INDEX®	200% OF THE INVERSE OF THE UNDERLYING INDEX	JUNE 2007
HORIZONS BETAPRO S&P/TSX GLOBAL GOLD BULL PLUS ETF	HGU	S&P/TSX GLOBAL GOLD INDEX®	200% OF THE UNDERLYING INDEX	JUNE 2007
HORIZONS BETAPRO S&P/TSX GLOBAL GOLD BEAR PLUS ETF	HGD	S&P/TSX GLOBAL GOLD INDEX®	200% OF THE INVERSE OF THE UNDERLYING INDEX	JUNE 2007