Has the Bell tolled for XAU?
by Clif Droke
December 02/04
This is the question some gold and silver stock traders are now asking. Has the XAU index topped, short-term? Or is there some more life left in its uptrend?
There is no way to answer this question with absolute certainty as to
whether or not a high has been seen for this year. However, one observation
that can be made right now is that the upside momentum that has propelled
the XAU up to the 110-111 area this fall is still alive and should keep
the index from declining much further in the immediate-term. Moreover,
a re-test of 110-111 is a strong possibility this month as the historically
strong November-December season nears its end.
Take a look at the above daily chart of the XAU. Note the still-positive
configuration of its 30/60/90-day moving averages, the prime momentum
and short-term trend indicators. Not even the 30-day MA has been violated
yet during the past several days that the XAU has pulled back from its
previous high. There should be strong underlying support around the 105-106
area in the next few days as XAU attempts to build a base of support from
which to re-test 110-111. The 60-day MA is the key trend indicator and
is showing the dominant short-term uptrend to still be intact, notwithstanding
the weakness from recent days. This is why I'm confident that at least
the 110 area will be re-tested if nothing else this month.
There are a couple of concerns, however. For one, the XAU index is starting
to show a bit of relative weakness compared to the broad market. As the
S&P has made a new high for the year and has made higher highs in
the past month, the XAU has made slightly lower lows and hasn't broken
out yet above its November high. Another concern is Newmont Mining (NEM),
the leading blue chip gold that has recently closed two days below its
30-day moving average. I'll have more to say on this situation next time.
Meanwhile, the Amex Oil Index (XOI) looks to have a bit more upside potential
early in the month, but appears to be in the process of topping, short-term.
XOI is about to send another "channel buster" reversal signal -- a sign
of exhaustion in the short-term trend.
Clif Droke
ClifDroke.com
Clif Droke is the editor of the daily Durban Deep/XAU
Report and is the author of nearly 20 books on technical analysis and
the financial markets. His latest book is "Channel Buster! (How to trade
the most profitable chart pattern). Visit his web site, http://www.clifdroke.com/,
for free samples of his work.