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XAU Gold Index Attempting Another Upleg

07/11/02 11:25:05 AM
by Gary Grosschadl

For the second time in the past two weeks the gold sector is trying for another upleg. This time it may succeed.

Security:   XAU
Position:   N/A

With today's bearish action on the main indices, it is no surprise to see that the XAU gold and silver index was one of the few winners as speculators want to play this linkage. As the chart shows, the previous upleg stalled at the 80 level. At that time I remarked that the MACD indicator would have to confirm its bullish moving average crossover by rising above the zero line - It failed to do so. It retraced through the 75 congestion zone to settle and bounce off the 70 level which was a previous resistance level.

Now we have a better attempt gearing up this time as several indicators reveal. This time we have an actual bullish DI crossover, however the ADX line is weak and must reverse. On the hourly chart (not shown) the ADX line is rising strongly and moved past the 40 level so this gives a clue that the daily ADX line may reverse and improve.

Graphic provided by:
Note that the RSI and CCI indicators (the relative strength index is a momentum oscillator that compares the magnitude of gains against the magnitude of losses, and the commodity channel index is an oscillator used to identify changes and strength in trend ) are already registering stronger levels than at previous upleg thrust.

As before, wait for additional MACD confirmation of a rise above the zero level. This time we have a stronger indication that this attempt will result in a better upleg. Provided we get past the 80 stall zone, the next likely resistance level is 85 and then possibly onward to challenge new highs. When this upleg is exhausted, one indication to watch for will be a downturn and then a crossover of the MACD lines.

This may well coincide with another bullish turn in the main stock indices as the market searches for yet another bottom. This grinding market makes it a challenge to trade, even for the nimblest of traders. The markets remain reversal-oriented keeping traders challenged.

Gary Grosschadl

Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.

E-mail address:

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Date: 07/20/02Rank: 4Comment: I realy enjoy the information charts regards bob.

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