-- Posted Thursday, 16 February 2006 | Digg This Article
We're getting there. As I see it the natural gas stocks (XNG) will turn positive again before the golds (HUI). Let's look.
The bold trending line on the MACD indicator on the XNG has now crossed down over the slower trend line. That is our confirmation of the SlowSTO which crossed over in late January. Since that Jan SlowSTO crossover the XNG has been outperforming the HUI, i.e., going down at a lesser rate. You can see that on the "Price Relative To" indicator.
What we need to get back in is for the SlowSTO bold line to cross back over its slower red line. But, that's not enough by itself. You need the top indicator, the MACD to give us an "up" bar - not a bold line crossover as that is a laggard, but a blue downward hanging bar to turn up co-incident with the SlowSTO.
Also, I would like to see at least one of the other two indicators, either the RSI or Wm%R give us an upturn as well along with the MACD & SlowSTO.
When will this happen? Your guess is as good as mine. Will the "Price Relative To" indicator turn in favor of gold when the bold green line touches up against its slower line or will the bold line grind right through it to a higher level? For your answer you'll have to watch the same indicators on the HUI as described above for the XNG.
I suggest taking positions in gas stocks as we don't know whether we'll have a repeat of gas outperforming gold as seen from November '04 until July '05. Since Oct '02 the XNG has followed right along the 30-week mov. avg. (green line), and never once going below it until this past week in Feb. '06. I'd avoid the international oils such as Exxon/Mobil as they are political pin cushions by our demagogic congress. Pick your stock targets and apply these same indicator criteria.
Last May many of you will recall when I jumped into gold stocks two weeks early in April, was stopped out, and then had to re-enter in May. I made the grave error of anticipating what I thought would be the weekly MACD outcome by watching the daily indicators! Patience and strict adherence to what your indicators are telling you is best. So what if you're one day late with your entry? If you've got a 35-50% capital gain awaiting you, what's the problem?
I have the highest respect for the work of Adam Hamilton. He has guided us in and out safely of gold shares for several years now. One basic nutrient in his technical analysis is the pulling back of the HUI to its 200-dma. Since May of 2002 the XNG has never tested its 200-Daily Mov. Avg. In that same period the HUI has touched or gone below its own 200-dma five times. Here's the thing: if another sector such as nat gas can run for nearly four years w/o a test of its 200-dma, why not the HUI? If we are truly ready to turn on the gold afterburners the HUI may stay well clear of its own 200-dma! Not knowing the answer is, of course, why we keep trailing sell stops on our investments!
- - CV
-- Posted Thursday, 16 February 2006 | Digg This Article
