 ChartWorks (snippet)
Gold Into Capitulation
Mode
Technical observations of RossClark@shaw.ca
Bob Hoye
Institutional Advisors
February 10, 2005
Those who monitor gold prices will be well aware that the decline
since the December 3rd high of $456 is beginning to feel excessive.
As a matter of fact there are only eight occurrences since 1972
where gold has fallen at a pace capable of generating concurrent
daily oversold readings in both my exhaustion model and summation
index. I categorise this as a capitulation signal. We have a
new one today [Editor's
note: written Tue 8th].
This weakness comes at an appropriate
time, following the January 1st Economic Confidence Cycle date.
In a major uptrend (rising
233-day moving average) the capitulation signals have resulted
in an upside reversal within 48 hours, retracing 40% to 50% of
the total decline. This has been followed by a consolidation
of 8 to 13 weeks and then a re-instatement of the underlying
uptrend with an explosive upside move lasting months and making
new recovery highs. Mining stocks can be anticipated to recover
with the gold price.
While the gold price is definitively
oversold, the XAU (88.59) and HUI (192.37) have achieved only
initial oversold readings and are still above measured targets.
We can be aggressive bottom pickers as the XAU approaches 86
or the HUI closes in on 184.
The following table outlines
the action of Homestake Mining (HM) in the six months following
the previous signals. Homestake Mining was used for research
purposes due to the minimal history of the XAU and HUI. (A
comparison of the 1997 signals in the XAU & HUI generated
similar results to the Homestake analysis). During declining
years Homestake consistently rallied by 24%, while in the three
uptrending years (1972, '73 & '74) rallies were much stronger.
This year the gold price is straddling the uptrending 233-day
moving average.
Bob Hoye
Institutional Advisors
E-mail bobhoye@institutionaladvisors.com
Website: www.institutionaladvisors.com
CHARTWORKS - FEBRUARY 8, 2005
Hoye Archives
The opinions
in this report are solely those of the author. The information
herein was obtained from various sources; however we do not guarantee
its accuracy or completeness. This research report is prepared
for general circulation and is circulated for general information
only. It does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific person
who may receive this report. Investors should seek financial advice
regarding the appropriateness of investing in any securities or
investment strategies discussed or recommended in this report
and should understand that statements regarding future prospects
may not be realized.
Investors should note that income from such
securities, if any, may fluctuate and that each security's price
or value may rise or fall. Accordingly, investors may receive
back less than originally invested. Past performance is not necessarily
a guide to future performance. Neither the information nor any opinion expressed constitutes
an offer to buy or sell any securities or options or futures contracts.
Foreign currency rates of exchange may adversely affect the value,
price or income of any security or related investment mentioned
in this report. In addition, investors in securities such as ADRs,
whose values are influenced by the currency of the underlying
security, effectively assume currency risk. Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.
321gold Inc
|
