Printer Friendly

eMail Article

October 30, 2006

Gold Primed for November Rally
by Michael Swanson

Last week gold stocks broke out of their downtrend resistance channel as the XAU popped above the 130 level. The market tipped us off that a bullish move was in making, because gold stocks outperformed the metal last Monday and Tuesday before breaking out. In fact gold fell over 20 points on Monday and Tuesday while gold stocks went up. It's easy to forget that this happened since it was a week ago, but it was a key event in the development of this new gold stock uptrend. Remember gold stocks tend to lead the metal so if they trade up while the metal drops its a very bullish sign. As I've written before, I believe we are on track to see the XAU go up to the 145-150 area by Thanksgiving.

What is more, according to the most recent commitment of traders report, the gunslingers - the small speculators that are usually on the wrong side of the market - actually shorted 1,315 gold futures contracts and liquidated 3,894 contracts while the commercials initiated 1,213 new long positions and covered 1,416 short positions. The dumb money is showing us once again why its earned its reputation.

Gold hasn't broken out yet though. Not yet that is. Resistance on gold is right at 600 and gold is consolidating right below this level. A close above 600 will make gold close above its resistance downtrend line that has held it down since last May and should lead to a quick move up to at least the 646 level, and most likely to 665 by Thanksgiving.

At the same time that gold appears poised to breakout the dollar is on the verge of breaking support and making a move down to its May lows. On Friday the US government released GDP figures that show a surprising deceleration in economic growth. The dollar traded down as a result. A close below Friday's lows on the dollar will cause it to close below its support trendline, which has held it in place since May. This is important for gold, because gold tends to trade opposite to the dollar.

We are looking ahead to a wonderful month for gold and gold stocks.

Michael Swanson,
WallStreetWindow.com

Disclaimer: Michael Swanson is the President of USA Capital, Inc., which provides management, support, and research for institutional investors, hedge funds, and mutual funds. The ChartWizard is also an employee of USA, Capital, Inc. Both Swanson and employees and associates of USA Capital, Inc. may have a position in securities which they mention on WallStreetWindow or any of its services. In such cases, appropriate disclosure is made. Under no circumstances should the information received from WallStreetWindow represent a recommendation to buy, sell, or hold any security. WallStreetWindow contains the opinions of Swanson and the ChartWizard and is provided for informational purposes only. Neither Swanson, the ChartWizard, nor TimingWallstreet, Inc., which owns WallStreetWindow, provide individual investment advice and will not advise you personally concerning the nature, potential, value, or of any particular stock or investment strategy. To the extent that any of the information contained on WallSteetWindow may be deemed investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Past results of WallStreetWindow, the ChartWizard, or Michael Swanson are not necessarily indicative of future performance.

WallStreetWindow does not represent the accuracy nor does it warranty the accuracy, completeness or timeliness of the statements made on its web site or in its email alerts. The information provided should therefore be used as a basis for continued, independent research into a security referenced on WallStreetWindow so that the Subscriber forms his or her own opinion regarding any investment in a security mentioned by WallStreetWindow. The Subscriber therefore agrees that he or she alone bears complete responsibility for their own investment research and decisions. We are not and do not represent ourselves to be a registered investment adviser or advisory firm or company. You should consult a qualified financial advisor or stock broker before making any investment decision and to help you evaluate any information you may receive from WallStreetWindow.

Consequently, the Subscriber understands and agrees that by using any of the WallStreetWindow services, either directly or indirectly, TimingWallStreet, Inc. shall not be liable to anyone for any loss, injury or damage resulting from the use of or information attained from WallStreetWindow.

Copyright © 2004-2008 Michael Swanson

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »