Waiting for The Big One
Contributed by Olaf Sztaba
NA-Marketletter
www.na-marketletter.com
July 12, 2004
INTRODUCTORY SUMMARY: The latest surge in the price of gold
shows how the metal likes to rally. The bull market, however,
doesn't like company. In the pre-rally period it always aims
to confuse and disappoint the greatest number of investors possible.
Gold and gold stocks are doing just that.
GOLD NOW: Recently, gold made significant progress. The
yellow metal topped the $400 level in just one shot, moving above
its 50- and 200-day Moving Averages. The longer one (200-day
MA) continues trending upwards, while the shorter line (50-day
MA) is about to turn to the upside. These technical developments,
although positive, still allow gold to experience one more setback
before the metal turns into rally mode again.
Chart with
the 50- and 200-day moving average, courtesy of Stockcharts.com
GOLD STOCKS: Gold stocks behave somewhat differently.
The main gold stock indices have returned above their 50-day
Moving Averages, but are unable to conquer the important 200-day
MA, as gold has done. What does this mean? Gold stocks are lagging
behind the yellow metal, which usually happens before a pullback.
It is highly possible that investors will be given one more chance
to load gold stocks before they start rallying, but don't expect
any significant discounts. This is a two-layer bull market (the
best of all) when secular and cyclical trends are both bullish.
Having said that, counting on much lower prices may be an illusion.
Chart with
the 50- and 200-day moving average, courtesy of Stockcharts.com
In short, any decline
in the gold sector is a bonus and should be viewed as a buying
opportunity.
THE INTERMEDIATE-TERM: Two major gold stocks indices, the
HUI and the XAU, are trading below the falling 40-week Moving
Averages. As long as they remain there, the latest mini-rally
should not be considered a new up-leg in progress. Gold indices
will most likely hit those averages from below and stage one
more sell-off. The time-window for such a manoeuvre is closing
fast as we approach the August-September period - a popular time
for a golden rally to begin.
FINAL SUMMARY: Don't let the market confuse you. The gold market
is preparing to do something big - very big. Stay alert and consider
any occasion to accumulate gold stocks.
For individual gold stocks recommendations, sign in for a free
trial at www.na-marketletter.com.
July 13, 2004
Contributed by Olaf Sztaba
Email: osztaba@na-marketletter.com
Website: www.na-marketletter.com
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