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#1 greenie

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Posted 03 February 2007 - 11:48 PM

Hello Fib, I was looking at the advanced/decline charts on your website, and needless to say, they strongly support the bullish side. One question: if you look at the XAU A/D around May 9-10, there was a large upward spike in it, as well as breakout in price. We all know what happened after that. I am not saying that this negates the current bullish case in any way, but do you have any statistics about how many times fakeouts like what XAU showed happen, and also is there any other indicator to catch false positives? I constructed some internals around May 11 for gold stocks, and they all confirmed the breakout shown by your chart. Best, G.
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#2 fib_1618

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Posted 04 February 2007 - 12:57 AM

I constructed some internals around May 11 for gold stocks, and they all confirmed the breakout shown by your chart.

Hi Greenie,

The most important thing that you have to always consider when trading the markets is knowing the particular animal in which you're working with. In the case of the precious metals, this is a highly emotionally charged sector for many reasons. Because of this, there's always going to be times in which "irrational exuberance" is going to creep in, and with this sector especially, right at the top.

In the case of the XAU, an index of 14 components, its usage is the same as that of the Dow...these are the stocks in which many consider the "shiniest" of what's available for equity investment in this asset class. So, it's not all that surprising to see that when the XAU did move to all time highs last year, and gold was spiking higher but negatively diverging with silver, instead of a breakout, what was seen was a typical blow-off of this same pattern.

But the proof is in the data.

The first chart is that of the XAU advance/decline line and the XAU itself from 1995. Below that is the advance/decline line of 72 precious metals stocks that is exclusive to Technical Watch and the price of gold. Between the two charts you can see the clear advance/decline divergence between the broad market of PM stocks and that of the top 14 as we moved into last years peak warning you of this same blow-off to the pattern.

Interesting charts, wouldn't you say? Did you (or anyone) wish to share an opinion on what they might be suggesting to us right now?

Fib

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#3 dcengr

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Posted 04 February 2007 - 01:07 AM

The divergence in the 72 precious metal stocks and XAU appears to have gotten more severe starting in jan 05. Yet price continued to increase in XAU for 17 months thereafter. What would point one to the exact top (or one within 5%?) based on the charts listed? Thanks
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#4 briarberry

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Posted 04 February 2007 - 07:17 AM

as you know the biggest cost for a gold miner is energy so that might have caused some percentage of the divergence as the price of oil and gold went up together (i don't trade gold)

#5 fib_1618

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Posted 04 February 2007 - 10:03 AM

What would point one to the exact top (or one within 5%?) based on the charts listed?

The answer you seek is not available with this kind of information. This is something that needs to be monitored by other technical tools that would compliment what this same data represents.

Fib

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#6 dcengr

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Posted 04 February 2007 - 02:06 PM

What would point one to the exact top (or one within 5%?) based on the charts listed?

The answer you seek is not available with this kind of information. This is something that needs to be monitored by other technical tools that would compliment what this same data represents.

Fib


Can you post such technical tools that would let one nail it to within 5% of the top? Or is that too much work?
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#7 fib_1618

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Posted 04 February 2007 - 03:17 PM

Can you post such technical tools that would let one nail it to within 5% of the top? Or is that too much work?

You actually know what they are...RSI, ROC, MACD...anything that would give you the edge of in ascertaining price exhaustion. Fibonacci ratios can also provide a blueprint of what to expect within this same relationship.

Remember that the A/D data is a longer term tool of market liquidity and it can take some time before enough of a vacuum develops before supply and demand forces try fill this same void. Think of it as slowly stretching a rubber band that eventually will find its breaking point...and whoosh. The 1998-2000 period is a good example of this where each and every divergent structure could had been the last one...it was just a matter of being patient while still exploiting the exuberance of the time (during which many technicians came to the erroneous conclusion that technical analysis "didn't work anymore").

As far as the gold data is concerned, the A/D charts make it very clear that if you're going to invest in this sector that it would best to stay with the XAU components as their showing stronger sponsorship than that of the 58 others. Both A/D lines are suggesting that money flow is currently positive and supporting the current price advance. And longer term, there seems to be other areas that provide more value for money to flow into because of the overall declining structure of the A/D patterns from 1995.

Definitely not a "buy and hold" sector as some would have you believe.

Fib

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#8 IndexTrader

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Posted 04 February 2007 - 03:28 PM

What I get out of the 72 stock A/D line is that it is largely irrelevant to the price of gold at this time. Reminds me of the Nasdaq A/D. IT

Edited by IndexTrader, 04 February 2007 - 03:29 PM.


#9 fib_1618

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Posted 04 February 2007 - 05:22 PM

What I get out of the 72 stock A/D line is that it is largely irrelevant to the price of gold at this time. Reminds me of the NASDAQ A/D.

Yes, it does, doesn't it?

You'll also note that the same type of personalities tend to focus on both of these same areas of investment as well (and I'll leave it at that).

Fib

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