6 replies to this topic

[Mike]

When gold rises relentlessly compared to gold stocks, the Gold:XAU ratio chart has a very good, although not flawless, record of suggesting profitable entry points. When gold stocks finally respond and surpass gold for some time, a corresponding sell signal is given. Also, if both gold and gold stocks decline but gold declines at a greater percentage rate than the stocks ('96 - 2001), a buy signal will be triggered. A close look at the first chart below lays this out pretty well. We're at a classic buy signal which should be confirmed, or not, by the resolution of the GDX triangle.

http://stockcharts.com/c-sc/sc?s=$GOLD:$XAU&p=D&st=1990-01-01&i=p17080857001&a=35519909&r=123.png

With the buy signal given in the above chart, the apex in this GDX chart has to be descively broken and confirmed; until then we're just messing around. Confirmation levels are 49 & 46.3, more or less.
-Michael K

http://stockcharts.c...41841&r=195.png

Edited by Mike, 14 February 2008 - 03:10 PM.

[johngeorge]

Mike Beautiful charts and a big thank you as well for your discerning analysis. Best to you.

[Mike]

Whoops! When I said this: "Also, if both gold and gold stocks decline but gold declines at a greater percentage rate than the stocks ('96 - 2001), a buy signal will be triggered." I meant the opposite; that is, I meant if both gold and gold stocks decline and gold stocks decline faster than gold, a buy signal will be triggered - like in '96 - 2001.

Did anyone catch this?
Michael K

[Rock]

Mike, Thoughtful well documented analysis. I am more concerned with JR PMs than the GDX. This year long chop around the blue line buy zone looks a lot like 02/03 which eventually led to a rocket shot by the juniors which I do expect sometime this year only if the broads are perceived to have bottomed. Remember, the PMs took off after March 03 when the SPX looked to have put in a higher low from the 02 bottom. My guess is that gold/xau must hit 5.50 or higher before lift off.

[dharma]

the juniors have massive short interest. here is one example.http://www.shortsqueeze.com/?symbol=ngd many look like that. perhaps the hedgies are long the majors and short the jrs? dharma

[johngeorge]

Confirmation day. Best to you.

[Mike]

Confirmation day.
Best to you.

Thanks johngeorge. But, of course, there's always something to worry about. In this case the immediate concern is the very low volume of the big boys on today's breakout. ABX was down 40% and NEM was down 28% and the major market indexes were way down as well: SPX down 44% and QQQQ down 49%. Take a look at this volume analysis chart: Volume Analysis One trader I like says you can't trade the market until the Wednesday after a three day weekend.

Best,
Michael K