ROUNDING TOP WK 1/20/06

The rounding top is suggesting that the HUI & XAU are getting weak again and has turned down at a lower high. The BOP charts are also suggesting that money is flowing out, more so in XAU than HUI at the present.
A casual observation on my part suggest that a shallow pullback will last till the end of Jan. or first week in Feb. then might rally into late April.






Comments??

Edited by mss, 21 January 2006 - 01:47 PM.

Hi mss, I've been thinking about your charts for a while. Now that I understand that they are derived from (HUI)^2/(XAU)^2, it is basically measuring whether the HUI is outperforming the XAU or vice versa. Please correct me if I am wrong. In true gold index impulses up, the HUI should outperform. It is interesting that the XAU actually outperformed for some time last year until the HUI finally broke out. So it took a long while for the rate chart to get going to the upside. This despite the HUI climbing about 150 points in the last 9 months. The bottomline is how do I trade those charts? I assume you focus on the BOP and the direction of the yellow and red line (up or down). Casually observation seems to say that when both point up, it is bullish, and when both point down, it is bearish. What is BOP by the way? Also, how do you conclude that the next pullback will be shallow and end in early Feb.? I agree with that thinking basd on what I have seen this past month, but I am very curious how you draw such a conclusion. cheers, john

Edited by SilentOne, 21 January 2006 - 03:18 PM.

Hi mss,

I've been thinking about your charts for a while. Now that I understand that they are derived from (HUI)^2/(XAU)^2, it is basically measuring whether the HUI is outperforming the XAU or vice versa.

>The bottomline is how do I trade those charts? <
I use the chart, "rate" to suggest direction of the gold stocks, Xau & Hui as a group. I do not trade directly from any level of the yellow line, just the direction. For me it has been useful, as I position trade stocks only. On very rare occasions I will buy/sell puts/calls on the XAU.

>What is BOP by the way?<
The BOP is a measure of money flow, Balance Of Power as the text book calls it. Have made many post about it and the calculation can be found SWINGWAVES BOARD
The direction as well as the level of the BOP is very useful as many times it leads price movement. Sometimes well in advance of price, rarely does it lag and when it does the divergence was due to some "event".

>Also, how do you conclude that the next pullback will be shallow and end in early Feb.? <

The shallow bit is based on the location of the "rate" line to the blue trend line and the time is based on the distance to the TL.
TIME IS BASED ON A "SWAG" ESTIMATE OF MOVEMENT ON THE CHART.
SWAG =(sophisticated wild @ss guess)

John, I hope I answered all your questions clearly enough, sometimes I tend to ramble and digress. If you wont more info PLEASE ask and I will try to clear things up.
Best to you, mss