Friday, October 5, 2007

Bull Run in the Silver and Gold Index (XAU)

Bull Run in the Silver and Gold Index (XAU)SocialTwist Tell-a-Friend
Tim Ord





The $XAU chart above dates back to 1985. At the bottom of the chart is the Price Relative to gold Ratio (PRTG). PRTG ratio measures the premium or discount the $XAU is selling against gold. This ratio identifies when gold stocks are cheap or expensive compared to the yellow metal gold. When PRTG ratio is near .20 or below then gold stocks are out of favor and cheap and at a good buy. When PRTG is near .30 range or higher then gold stocks are in favor and expensive and near a high. The time to buy gold stocks is the transition from cheap heading to expensive. To identify this buying zone, we have drawn a red trend lines connecting the highs on PRTG and where PRTG has exceeded those downtrend lines and have triggered buy signals. These buy signal on the monthly PRTG ratio where triggered in early 1993, late 2001, early 2003 mid 2005 and in the last couple of months a bullish crossover has occurred and has triggered a buy signal and the buy signal is still on going. Even though a “Shakeout” did occur in August of this year the month PRTG buy signal remained intact. Therefore the bigger trend is up.





Above is the Breadth statistics for the HUI as of the close yesterday. We keep tabs on this study because its giving good insight of what is going on the HUI index. The bottom window is the % of stocks above its 50 day moving average. When this percentage is near 0% the market is near a low and when near 100% the market is near a high. The next window up is the % of stocks above its 10 day moving average. Again the same percentages work the same way. When both the 10 DMA and 50 DMA are both at extremes (either near 100% or 0%) the market is near a turn and head in the opposite direction. We have circle in blue where the 10 DMA and 50 DMA where near 100% and helped to pick out the highs in the HUI. Recently both the 10 DMA and 50 DMA turned down near the 100% range and suggest the market was near a short term high. The HUI tested the previous high of 9/21 and the McClellan Oscillator was far below its previous high and a negative divergence similar to the negative divergence at the previous highs on the HUI. The negative divergence on the McClellan Oscillator helps to confirm the 10 DMA and 50 DMA for a short term top. We have support coming in near 160 on the XAU and the next support below that is the 147 range. We will be watching these areas for a bullish setup on the XAU. Also on the last COT (Commitment of Traders) report, the Commercials have back off its bullish stance and now are short term bearish. Also Seasonality for Gold in the month of October is bearish.


Therefore they may be a pull back this month but the pull back should be bought. We have support coming in near 160 on the XAU and the next support below that is the 147 range. We plan to go long the XAU on the next buy signal.


Editor's Note: watch for Tim Ord's upcoming book, "The Secret Science of Price and Volume", to be published by John Wiley & Sons, in February 2008.

Sunday, September 30, 2007

HOTS Weekly Options Commentary

HOTS Weekly Options CommentarySocialTwist Tell-a-Friend
Peter Stolcers

This week the market fell into a very tight 30 point trading range on the S&P 500. In the absence of news, light directionless trading set in. The economic releases came in slightly better than expected, but everyone knows they are hindsight. It is the future the Fed is concerned about.

This same scenario will unfold next week during the first four days. The economic releases are very light and they include the ISM numbers, building permits and auto sales. PEP, WAG and RIMM are the only earnings worth mention.





The fireworks will let loose on Friday with the release of the Unemployment Report. The weak number last month paved the way for the Fed to lower interest rates. If there is an increase in unemployment, the market will have a negative reaction. On the other hand, solid employment could prove that last month’s decline was an aberration. If this unfolds, the market will make a run at the all-time high.

I still suspect that the market is headed higher. Global growth is fueling our economy and housing only makes up 5% of our GDP. Earnings are right around the corner and we have not had an earnings warning outside of the home building sector. BSC and LEH were supposedly “exposed” to sub prime and both posted decent results. As companies release earnings, their guidance for next quarter will have a tremendous influence on the market.

This market can swing either way. While we wait, we will stay balanced.

Editor's Note: To take advantage of our high performance Options Trading Service (HOTS), click here.

Disclaimer and Terms of Service

© Copyright 1998-2014, Hamzei Analytics, LLC. Hamzei Financial Network is published by Hamzei Analytics, LLC, 11 N Green Street, Suite 4C, Chicago, IL 60607, Admin@HamzeiAnalytics.com (310) 306-1200. The information herein was obtained from sources which Hamzei Anlaytics, LLC believes are reliable, but we can not and do not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Hamzei Analytics, LLC or its principals may already have invested or may from time to time invest in securities or commodities that are recommended or otherwise covered on this website. Neither Hamzei Analytics, LLC nor its principals intend to disclose the extent of any current holdings or future transactions with respect to any particular security or commodity. You should consider this possibility before investing in any security or commodity based upon statements and information contained in any report, post, comment or recommendation you receive from us. The content on this site is provided as general information only and should not be taken as investment or trading advice. Any action that you take as a result of information, analysis, or conclusion on this site is ultimately your responsibility. Always consult your financial adviser(s) before making any investment or trading decisions.