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Watching the XAU for timing signalsClif Droke
JMSR snippet
As we discussed in last month's newsletter, October can be a dicey time for the junior mining equities, notwithstanding the positive seasonal trend that is typical in the fourth quarter of the year. This proved to be the case as some juniors experienced sharp pullbacks last month, while others were up strongly, and still others were mired in trading ranges. In the main, however, the dominant interim uptrend lines were up and suggestive of continued upward bias as we round out the junior mining "rally season" heading into December. Turning our attention to the XAU gold/silver index, it was nearly one year ago that the XAU double-topped in late November 2004 below the 110 level. So here we are almost one year later at the XAU is once again struggling with the 110 area and has traced out what could be *interpreted* as a double top. I emphasize "interpreted" since nothing is confirmed until a sell signal is generated, and as yet there has been no confirmed sell signal for the XAU. In fact, the XAU index remains above its rising 30/60/90-day trend lines, which indicates the trend and underlying interim momentum are still up. I strongly believe in giving the benefit of the doubt to a major market index that is trending above these three important rising moving averages (30/60/90-day). Although the XAU index remains above its respective 30-day and 60-day moving averages, the Amex Gold Bugs Index (HUI) slipped slightly below its 30-day and 60-day Mas on November 15. A sell signal? Not yet, for in my conservative estimation it would require at least a 1-day close below the 90-day moving average of either (or both) indices before a top has been confirmed. In the XAU index, the 90-day moving average intersects at approximately 103. In the HUI, the 90-day MA intersects at about 220. We'll need to monitor these pivotal levels in each index as we head into December for timing clues. The XAU's 60-day moving average intersects at about 107 as of Nov. 21, and a violation of this level on a closing basis would send a "heads-up" that the 90-day MA will likely be tested. Remember, unless the 90-day MA is violated I consider the dominant interim trend to still be up for the XAU. The dominant trend takes precedence over the near-term internal indicators. More follows for subscribers, you can subscribe here. --Clif Droke |
