A reader mentioned that at times I seem to be commenting and referring to charts not included in the presentation. These commentaries are originally published in the subscribers section of Merv's Precious Metals Central on Saturdays and include multiple charts. During the process of revising the original commentary some charts are unavoidably eliminated but the commentary may still refer to information in the original charts.

The long term P&F picture (chart not shown) is still that of a long term bull in progress and a long way from reversing. As often mentioned, this chart originally gave us a long term projection to $380 at the $290 break, then to $580 at the $320 break. The original projection was met and now we await the second projection. The recent several month lateral trend has also given us two projections after the break. One to $560 and another to $600. I like the sound of a round number and will go with the $600 projection. At the present time gold would have to drop to the $410 level before it gives us a reversal confirmation. It could happen but not all in one day.

Gold is rapidly closing in on my long term (up sloping) moving average line but still further away from the popular 200 DMA line. The long term price momentum indicator (I use the 150 day RSI) is showing weakness and has moved below a defined up trend line but still inside its positive zone so no panic yet. As for volume, it is still above its long term moving average line but not that far above. As often mentioned, I would place more emphasis on volume in the other time periods rather than long term.

All in all, I am still BULLISH on the long term position of gold.

The intermediate term P&F chart (shown today) shows a break below two previous lows for a potential projection to $420 BUT the up trend line has not yet been broken so the break is unconfirmed at this time. A move to $450 would confirm the intermediate term reversal. Note that the downside projection, should the break be confirmed, still does not put the price into a long term reversal. It would be just above where a long term reversal would occur, based upon action to date.

Looking at a candlestick chart there are some interesting points. The support break this past week has, so far, not broken the up trend line. That might come this week. The break projects to the $439 level based upon the head and shoulder (or "box") count. The momentum indicator is showing greater weakness than the price as it is almost at the level it was at in Aug while the price is far from its Aug low. Although still in the positive zone the momentum needs only another day to go below the neutral line into the negative zone. The volume indicator (I use the On-Balance Volume) has crossed below its moving average line and the line slope has already turned down. Of greater interest, and I'm not sure of its significance (if any) is the daily volume bars at the bottom of the chart. It shows volume activity rising every 2 months, at the end of the month just prior to futures contract expiration month. But for the past few years Sept did not have this peaking activity when one might expect it to. Just a curiosity. To complete the indicators, the price is below a negatively sloping intermediate term moving average line.

Putting the indicators together I must go BEARISH here although there still is that up trend line to overcome.

If you take a good look at this weeks Gold Indices Page you will see in the table that I have added two extra Indices. One is a "quality" silver stock Index (shown this week) and the other is a speculative silver stock Index. I expect to have the component stock tables available for subscribers, hopefully next week. It should be noted that with silver, there are very few pure silver companies. Most have silver as a by-product or as a secondary metal with gold or copper. I have made no attempt to distinguish pure silver plays from silver by-product plays. That is for the individual to decide what's what. The web site www.silverstrategies.com has a brief summary of most of the companies that are components of these tables. You might want to take a look there if you are interested in silver.

As for which stocks are most likely to give you the biggest bang for your buck, that is questionable. There are some studies that say you will get the most with silver stocks. I don't know. They are all alike from my perspective.

A look at the Merv's Qual-Silver Index shows an 800% advance in little over 2 years. It has since gone into a lateral move suggesting to this point a triangular pattern or a falling wedge pattern. In either case this suggests a bullish situation and a future break on the up side. Who high on the up side? Well, these patterns often occur at a half way point in a trend so we could be in for another good move. Whether it would be another 800 points or another 800% (big difference) remains to be seen.

Today we look in on the relatively new AMEX Gold Miners Index. This is an Index of some 40 gold stocks and is probably the most aggressive gold Index of the major North American Indices, slowly taking the place previously held by the AMEX Gold BUGS Index.

AMEX GOLD MINERS INDEX (chart not included)

After a 100% advance in less than one year the Index then went into a wide lateral trend for the past two years. There have now been two intermediate term declines and two rallies. How much more of this are we going to see before the Index finally breaks out one way or the other? My guess is not much longer and the break will be on the up side. However, in the mean time it seems we might be in for another of those declines. If one looks through the various Merv's gold Indices he would see a similar lateral pattern (except for the Merv's Gamb-Gold Index). They all seem to be waiting for a break-out.

Looking at a shorter term chart of this Index one can see that the Index is below its short term and intermediate term moving average lines and both lines are pointing downward. On a brighter side, the price momentum, although showing weakness, is still in the positive zone and the daily action is still above the up trend line from the May low. So, we get a mixed message as to what's going on from a more timely term.

As mentioned above, most of Merv's Indices are tracing a two year lateral trend similar to the AMEX Gold Miners Index, some narrower and some wider in band width. Despite all that is written about gold and the various North American Gold Indices I have always cautioned that they do not necessarily reflect what is happening to the actual gold shares which most investors buy. These Merv's Indices provide information about the movements and trends of the average gold stock in various categories and not just the few large company stocks. For comments against each individual Index, subscribers should go to the specific Index page for the latest chart and information about the component stocks as a guidance source.

MERV'S GOLD & SILVER 160 INDEX

The overall universe of 160 precious metal stocks lost 0.9% on the week. A lot better than the major North American Indices but they were heavily weighted towards the larger companies and Barrick did not do well during the week. Most major Indices were pulled down because of Barrick. From a review of the other Merv's Indices it is obvious that the speculative and gambling variety of stocks was what pulled this Index lower. Although a majority of stocks closed higher (83 advances and 67 decliners) the decliners were, percentage wise, the drivers.

The Index itself is below its intermediate term moving average line but still above the long term moving average. The same for price momentum, negative for the intermediate term but still positive long term. As the chart shows, we are still nicely snuggled in between the upper and lower lateral channel lines of a two year "box" pattern. It looks like we may be heading back towards the lower line but let's not get ahead of ourselves.

MERV'S QUAL-GOLD INDEX

Although not the best performer during the week in the Merv's Indices the Qual-Gold Index out performed all North American Indices except for the S&P/TSX Gold Index. That Index seems to have "capped" the effect of the Barrick decline and with the Placer Dome advance along with a few other larger stocks had a good weekly performance. As for the "breadth" of the Qual-Gold performance, well, with 16 advances and 13 decliners let's just call it a draw. As for the Index itself, it is within a gently downward sloping wide channel and appears to be heading towards the lower line. However, the up trend line from the May low is still intact and may cause the Index to continue higher, which if continued for any length of time would break the upper resistance channel line. Just dreaming.

MERV'S SPEC-GOLD INDEX

The best performer of the Merv's group of gold Indices, Merv's Spec-Gold Index advanced 1.9% on the week powered by a couple of good winners, including our last week's recommendation Tan Range Exploration with a 23% weekly advance. This Index has about the best breadth of the groups with 19 advances and 10 declines. Although it had a good week the speculative (and gambling) stocks are still not REALLY moving although there are a few here and there that are. The Index is in a wide lateral two year trend but unlike the Qual or 160 Indices which are at their upper levels the Spec Index is at its mid position, or slightly below the mid. Although below both moving average lines, below its up trend line from the May low and with a very weak momentum the Index seems to be bouncing off a support in the 207.50 level. We'll just have to wait and see how this extends into the future.

MERV'S GAMB-GOLD INDEX

In general the gambling stocks have not been doing that great recently. However, the Gamb-Gold Index has not been a laggard to any degree. It is the ONLY Index that made a new all time high earlier in the year and almost breached that level a few weeks ago. This was primarily due to the great performance of a small group of stocks rather than a general bullishness of all the gambling stocks (on the week there were 12 advances but 15 declines). The Index is below its intermediate term moving average line but above its long term line. Both levels of momentum are still positive. Most interesting is the up trend line. Here, instead if just being an up trend line from the May low it goes back to last year's July low for a more significant up trend line. If it should break that line such a break must not be ignored.

Mervyn Burak, CMT
Hudson Aero/Systems Inc.
Market Technical Information Group

www.themarkettraders.com
merv@themarkettraders.com

7 November 2005

During the day Merv. practices his engineering profession as a Consulting Aerospace Engineer. Once the sun goes down and night descends upon the earth Merv. dons his other hat as a Chartered Market Technician (CMT) and tries to decipher what's going on in the securities markets. As an underground surveyor in the gold mines of Canada's Northwest Territories in his youth, Merv has a soft spot for the gold industry and has developed several Gold Indices reflecting different aspects of the industry. As a basically lazy individual Merv's driving focus is to KEEP IT SIMPLE.

To find out more about Merv's various Gold Indices and component stocks, please visit www.themarkettraders.com and click on Merv's Precious Metals Central. There you will find samples of the Indices plus other publications of interest to gold investors.