Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Technical Analysis Report on 68 Gold Stocks

Commodities / Gold & Silver Stocks Aug 10, 2007 - 12:23 AM GMT

By: Jordan_Roy_Byrne

Commodities

As per the title, I completed a 71 page report on 68 gold stocks. If you go to my home page, http://www.trendsman.com you can buy this report for the economical sum of $40. Each stock has a chart and a paragraph analysis of its six to 18 month technical outlook. With that shameless promotion out of the way let's get to some analysis of gold and the gold stocks.

This lengthy update gives a lengthier look at gold and the gold stocks. Say a one to two year outlook.


To help predict future price action, one thing I do is look at previous bull markets. While the precious metals differ greatly from other markets, price action between various bull markets always maintains similarities. Before we get to the gold stocks I want us to look at the Nasdaq and specifically the Bollinger Band pattern.

As you may or may not know, most large moves begin with a low point in volatility. One way to measure volatility is by the width of the Bollinger Bands. As you can see from the chart, after each low point in volatility, the 18 month rate of change hit a high about 12 to 18 months later.


Another thing we can look at is the direction of both bands. Three of the four biggest moves (measured by 18 month ROC), commenced when the upper band was declining and when the lower band was rising. That occurred in 1982, 1984, and in 1994. Lastly, note the position of the moving averages in 1994 before this market advanced in unabated fashion. From 1991 to 1994, the moving averages indicated a strong rising trend. At the turn of 1995, the 10 month average barely undercut the 20 month average before both began rising as the market took off. Now zooming in as I write this, the 20 month average never declined, while the 10 month average declined slightly for eight months before it resumed up.

Now let's take a look at the XAU:

Now at the current point, the 20 month moving average (since this consolidation began) has yet to decline, while the 10 month moving average declined for eight months. It has turned up again. So these current averages are sitting in the same precise setting they were on the Nsadaq chart in early 1995. The Bollinger Bands are also squeezing in, as they did for those three periods in the aforementioned Nasdaq chart.

What Nasdaq period could this next bull move follow? The pace at which the bands are squeezing in, is similar to 1982 and 1984. Though the current corrective price action within the bands as well as the moving averages, strongly resemble 1995. I tend to think it is going to be either 1984 or 1995. The best indication may be the XAU in late 2001. See how the bands squeezed in then? Overall, the answer to this question is not terribly significant, it just provides another question for us technician geeks to try and figure out.

Keep in mind that the above chart is a monthly chart. Daily signals may take a few days to play out while monthly signals may take a few months to play out. Further consolidation for several more months does not necessarily invalidate the current signals.

Next up is a weekly line chart showing the XAU/S&P 500. While many technicians look to the gold stock/ gold ratio for guidance, I look at this ratio first. Gold stocks can trend with the market but they will never have an impulsive move up without outperforming the stock market.

As you can see, the XAU follows the XAU/SPX ratio. The current picture looks much the way it did in mid 2005. The positive divergences in RSI and MACD preceded the end of that consolidation. Again we have divergences preceding a recent breakout. Carefully watch this ratio. We have a short to near term buy signal. A move up to 0.105 would give an intermediate to long term buy signal.

How about gold?

Gold continues to be trapped in a consolidation range from $640 to $700 with an upside bias. It looks like in the next week or so we may get another test of the high of that range. Confirming a breakout over $700 would be a 70+ reading on RSI. The indicators and moving averages are in beautiful position for gold to stage a very large breakout. That being said, be aware that the yellow metal has struggled to break past $700.

Are there any other charts that might help us predict the direction of gold and gold stocks? Of course. I will show you two.

Next is gold against the industrial or base metals. As we can see from this chart, most of the gains in both gold and the gold stocks occurred while gold was outperforming the base metals. Since the end of 2003 when the base metals have outperformed gold, there has been only one impulsive advance in both gold and the gold stocks. Gold has now made a double bottom and over the next few months could stage a nice breakout against the base metals.

Why is it important to the gold companies, to see gold outperforming the industrial commodities (base metals)? Mining is a costly and intensive business. Rising industrial prices impact the cost of exploring for, developing and ultimately producing gold and silver. Thus, it hurts the PM companies to see industrial prices rising ahead of gold and silver.

Next we have Gold against Oil.

While gold and oil generally trend in the same direction, we can see from this chart that during three of the impulsive phases in gold and gold stocks, gold was outperforming oil. Oil has been outperforming gold for six years but we could see a reversal. There is a long term inverse head and shoulders pattern (see the circles). In the near term this ratio is oversold and should continue to rise. Also, this ratio has made a nice rally at the end of the year during five of the past seven years. If the ratio can break the six year downtrend, the new target would be roughly $19.

Conclusion

The last few quarters have been difficult for investors holding gold shares. Each rally has given hope to the beginning of a new major uptrend, only to consistently fail. Rest assured, despite this seemingly terminal consolidation, the technical and fundamentals have grown stronger. It is true that manipulation and intervention can distort signals but this is mostly true in a short term sense. How else would gold and gold stocks have risen so significantly since 2001? It's called a bull market.

To get my report on 68 gold stocks, go to http://www.trendsman.com . To sign up for my free newsletter, go here: http://trendsman.com/?page_id=17

By Jordan Roy-Byrne
trendsman@trendsman.com
Editor of Trendsman Newsletter
http://trendsman.com

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Jordan Roy-Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules