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In my commentary of May 6 entitled "Are inflation pressures under control?" it was observed that along with the super bearish financial press pronouncements on GM and Ford, "the recent spate of doom-and-gloom headlines strongly suggests that the latest stock market correction has ended and a short-term bottom is in." This was confirmed by the 2-week blow-off rally currently underway. But while the broad market, and especially the tech sector, rallied, the gold sector got left behind in the dust. Now, however, it seems, the gold will get their chance to rally in the days ahead after spending the last several days trying to establish the recent bottom. At turning points it's often possible to gain a "heads-up" advantage over the field using a reliable micro-term triple moving average series that incorporates the work of the commodities trader J.R. Maxwell (who wrote a valuable book on the subject back in 1976 entitled "Commodity Futures Trading with Moving Averages"). Maxwell used the 3/5/10-day MA combo but I've tweaked with this a bit to make it more conducive for stock trading to come up with the 3/6/9-day MA series, the shortest possible daily moving average series for stock trading without resorting to the tick chart. Maxwell's 3-day moving average can be applied in conjunction with the 6-day and 9-day MA (especially useful for the commodity stocks including the golds) to the leading gold stocks in for turning point clues. The chart suggests that the XAU gold/silver
index will rally in the days ahead with the first nearby test
at the 85.00-86.00 pivotal area, and then possibly to the 90.00
level. The MACD indicator is oversold and has traced out a potentially
bullish divergence relative to price in this indicator and the
9-day trend line (as shown below) has been tested enough times
in the past two months to suggest a breakout attempt to the 85.00-86.00
area and possibly to as high as 90.00 before strong resistance
is encountered. The action of the past few days strongly suggests
that last week’s low will stand for the immediate-term.
*** lif Droke is the editor of the 3-times weekly Momentum Strategies Report, a forecast of U.S. equities and markets. He is also the author of several financial books, including "Stock Trading with Moving Averages." For free samples of his work, visit www.clifdroke.com. |
