 Two
Key Charts . . .
Richard Russell snippet
Dow Theory Letters
August 20, 2004
Extracted
from the August 19, 2004 edition of Richard's Remarks
Oil --I'm including two key charts below. The first
shows light crude in what's looking increasingly like a parabolic
rise. Back last December the 50-day moving average for oil rose
above the (red) 200 day MA, and it was gang-busters on the upside
from there. As you can see by RSI at the top of the chart, oil
is now overbought. But these parabolic rises can continue up
at an astonishing and accelerating rate, so I wouldn't get in
line to short oil.
I wouldn't short oil for two
reasons.
One -- Everybody's shouting "It's the top, it's the top."
Secondly, the point&figure chart projects oil to 55. Of course,
P&F projections don't always happen, but it's a thought.
So far, rising oil doesn't seem to frighten consumers. However,
if oil does reach 50 I think it's going to frighten Wall Street.
Gold -- Below we see a daily chart of gold. Here
we see the rising 50-day MA for gold climbing toward the also
rising 200-day MA for gold. A crossing with the 50-day above
the 200-day MA would be a big plus for gold. In the meantime,
if spot gold can close above 410 that would obviously be a breakout
on the chart and another plus for gold.
At the bottom of the chart
we see the blue histograms moving above zero and turning bullish.
All in all, it appears that gold has built a strong base, it
has gotten rid of most of the Johnnie-come-latelies, and it could
be getting ready for an attack on the highs at 430.
Again, there's no hurry, and
the longer and larger the base, the better the chance that gold
will "go for the gold."
(One share of the Dow buys
24.52 ounces of gold).
more follows for subscribers . . .
Richard Russell
Dow Theory
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