|
Financial Sense Home l Market Monitor l Market WrapUp l Storm Watch l About Us l Contact Us |
|||||
This is a follow-up report to the one we issued on 3-29-05 (see archives). At that time, we expressed the belief that gold/gold stocks would bottom out sometime between late April and early June, and we added:
So far the metal itself has held its ground, while the XAU did have one weekly close below 84. From a cyclical point of view, we can see that we have entered the period between late April and early-June, which for the past four consecutive years has given us an intermediate term bottom.
The chart pattern for the metal looks quite similar to the triangle formation we had in late 2002, which resulted in a spectacular straight-up move. Keep in mind just because the pattern looks similar, it doesn't automatically imply that the ultimate resolution will be similar as well. However, we do know that the first weekly close above $440 would validate the pattern, and the second would confirm the break-out. By the same token, the first weekly close below 420 would negate the pattern, and the second would provide confirmation of the break-down. Therefore, the 420-440 zone is the zone where our entry/exit points ought to be with regard to the metal.
Next, we want to look at the ratio between gold and the XAU. As you can see, it is pretty close to the 6.5 level which has represented excellent entry points in the XAU since 1998.
So, cyclically speaking, the window of opportunity is open from a chartist's point of view. We have got a formation with a historically bullish resolution, and from a fundamental point of view, gold stocks are becoming relatively cheap compared to the metal. Things are definitely falling in place, but it is far from certain that the ultimate outcome will favor the bullish side. We like to see "homogeneity;" we are not happy with the under-performance exhibited by the stocks themselves. We want to see the stocks beginning to out-perform the metal relatively soon. We are skeptics by nature; we do not buy the idea that somehow it is a "good thing" that the XAU is trading as if gold was at 390, although it is holding at 430. Maybe it is a bad thing and it means that gold will eventually break down. Moreover, if somehow the XAU closed below the 81-78 zone, it will set a downside target of 72.
For the very short-term, we are trading XAU options off the hourly chart while looking to position ourselves for the next tradable move, which ought to exceed 5 points. If we got an hourly close above 86, then we would expect a further advance to 90. On the other hand, if we get an hourly close below 84, we would expect a further decline to 81-78.
Ike Iossif
|
|||||
|
Home l Broadcast l Market Monitor l Storm Watch l Sitemap l About Us l Contact Us |
