Once more it is really difficult to decide which chart I think comes first today. Others may not agree but I have decided on our Gold Index – XGD. I have highlighted this index many times over recent months, but I think it is time to have another good hard look and … think.
At Friday’s close, XGD had been up for nine consecutive days – probably not a record but too many for my liking. But if we can do a bit of work here, I think the chances of a major upside break is getting close. Yes, there is quite a bit of overhead resistance from the previous highs back in 2019/2020 but after spending so much time building this fabulous base pattern, I think the upside could be phenomenal.
Also, bear in mind that our gold stocks, and gold stocks generally around the world, have not fully reflected the extent of the rise so far in the price of the yellow stuff so - I think that if things get going, it could be a bit dramatic.
If this chart does break out and start a new upward phase, one can’t help wondering what could go wrong in the world to cause such a change of sentiment.
OK, OK – XJO at a new high deserves attention!
Here we see that it has broken topside out of that lovely triangle. It gives a measured move to around 8120. At the same time, I have drawn a line down the page where the apex of the triangle is complete. Often in such beautiful clear patterns, that line can become an important timing mechanism. Just be aware that regardless of this topside break there are growing risks everywhere.
Of all the indicators I have on the New York market there was only one that was suggesting that the game could continue. So, at the top here is the NYA, in the middle is the money going into falling and rising stocks but at the bottom is the ratio of XLY (Discretionary) to XLP (Staples). Or in other words, what you would like and what you need. As we can see, people were a little guarded through most of this year but at the beginning of June, something happened to make them all pull their wallets out with XLY ultimately breaking the downtrend. How long can it last? This week will be interesting.
Now gold. Have to concentrate hard again. At the top is gold and at the lower level USO (United States Oil Fund). The point I am going to try to make here is that I think gold and oil might be trying to get back into sync. They both broke out of their base pattern at the same time in February this year. The first top in gold corresponded with the top in USO. Gold went on to have another surge in May while oil was consolidating but they have both run up together again now. If my thinking on gold is, by some chance right, then perhaps it would suggest that oil could join in the fun.
Short term I am sort of thinking that the uptrend in gold might be a bit steep plus the fact that our gold stocks have gone up for nine days could suggest some sort of consolidation in the gold price.
Going to be very interesting to see if this idea of mine will end up being correct. And if it is, what does it mean is coming down the road to meet us.
The next chart is very interesting as well and just had to be included. At the top is GLD (gold) and then (GDX) stocks. At the bottom, the heavy blue line is the ratio of GDX to GLD, so we are measuring stocks against the gold price. This blue line goes back to early last year. But note what has happened the last few days. The gold stocks have started to outperform the metal giving us a top-side break. Doesn’t alter the fact that I think we can have a correction but as I said, this is the first time in over a year that we have seen money starting to move into the gold stocks.
Got to have another look at the dollar. As we can see it has broken the uptrend that everyone has been focussed on but the support in this area goes back to the beginning of this year. So hard to say that it is all over for the dollar. `
And in case you have been getting excited about the markets, here is a reality check. The price of steel. We need that it to rally otherwise there will be pain in some of our majors.
And London. This is the weekly semi log chart. As we can see, this market broke topside from that resistance band that has been in existence since 2017. Had a rush up and has now pulled back. Looked as though it wanted to move higher again at the end of the week but how far?
The next chart is another reality check. Japan. Goodness what a rise it has had since March last year when it broke out of a lovely base, and I thought it looked “sexy”. I have mentioned before that must be a new word to add to the lexicon of Technical Analysis because just look what the blessed thing has done since. New all time high on Thursday but then fell a thousand points on Friday. Ok a thousand points is not such a huge percentage but would be enough to unsettle a few nerves.
Couldn’t help thinking at one stage this past week that the sentiment of the eighties was back – GREED IS GOOD.
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