Technically Speaking with Burak
Weekly Commentary
(For week ending 23 Dec 2005)
Mervyn Burak, CMT
Over the next week or so gold will move higher and probably lower but unless something REALLY dramatic happens then this commentary and the one next week will be highly simplified to provide me with a Christmas and New Year break.
GOLD
There wasn't much change in gold over the past week. The long term action still has gold well above its long term moving average line and above a long term up trend line. Momentum is also still in its positive zone. On the intermediate term much is still the same. The price came down to the positive sloping intermediate term moving average line and bounced right up again. The action is still above the intermediate term up trend line. Momentum is still positive, where it's been since the start of this latest up move in late July. And the volume indicator continues to be positive in its action although the daily volume could be higher. It's the season and many players are off for a vacation.
The long term is still BULLISH and the intermediate term is still BULLISH.
My next long term P&F projection is still to the $600 level followed by $1075 and then $1575.
As mentioned last week, I still have no new intermediate term P&F projection and require some more lateral action before that would be possible.
The short term and immediate term commentary is usually kept for subscribers to Merv's Precious Metals Central but this is Christmas and besides, the commentary has been highly simplified and shortened for this and next week so I have included it here.
Gold went up, gold went down but in the end gold finished just about where it was the previous Friday. On the short term gold is below a negative sloping moving average line although the action on Friday just touched the line. Momentum had crossed into the negative but crossed back above the neutral line, but only by a hair. Daily volume action could be better but one should not expect volume to act as it should during a vacation period when many traders have gone on vacation. We can set both a support and resistance levels for the short term. The closing below or above these levels tells us which way the next short term move is going. The support can be set at the $494 level while the resistance can be set at the $512 level. These are the levels to watch.
For now I must still classify the short term as BEARISH but await the breaking of one or the other of the indicated levels.
As far as immediate action is concerned it does look like gold wants to move higher. It is above its very short term moving average line although the line has not quite turned up yet. The Stochastic Oscillator (SO) had moved quickly into the oversold zone and is still there although it looks like it is reversing and has just moved above its moving average trigger line. The immediate term direction looks to be upwards. If that's the case then the short term may see a break above the resistance.
MERV'S PRECIOUS METALS INDICES
As mentioned last week, I am in the process of reviewing and upgrading my overall universe of 160 precious metal stocks (primarily gold and silver) as well as the individual gold sector groups. I have just finished updating the overall 160 Index components and this resulted in a slight modification to the previously modified Qual and Spec Indices. I did delete 4 stocks that are still trading but whose mergers are almost a 100% done deal. These were Placer Dome, Virginia, St. Jude and Bolivar. Should any of these mergers fall apart that stock will be immediately placed back in the list. For the first time I have included the Exchange Traded Funds (ETFs) or more specifically in some cases, Gold Trusts, into the universe as they are a very important component of gold stock (and bullion) trading. iShares COMEX Gold Trust was not included due to lack of sufficient historical trading history but it should get in later in the new year. The Indices tables that are published this week in the subscribers section and have been fully upgraded are the Merv's Gold & Silver 160 Index, Merv's Qual-Gold Index and Merv's Spec-Gold Index. Only the Merv's Gamb-Gold Index has not yet been reviewed and upgraded.
Let me once more remind readers as to what these various Indices are.
The Merv's Gold & Silver 160 Index is meant to represent the wide spectrum of gold stocks traded on the North American markets. One should find here every stock that is a component stock of the major popular Indices. One should also find here a good variety of exploration stocks which are where one would expect to see the stocks that could become the future 10, 20 and 30 baggers. What you will not find here are the very recent stocks or the lightly traded stocks. To be included in this Index the stocks must have more than a years worth of active trading due to such need to calculate some of the indicators. ALL of the other Indices, including the new Silver Indices, derive their component stocks from this overall universe. Stocks in this Index range in size from the huge Anglo American with a market capitalization of over $50,000 Million to the small Bralorne Gold with a $7 Million capitalization.
The Merv's Gold & Silver 100 Index is not included as a regular technical information page (in the subscriber's section) because all the stocks are part of the overall 160 Index. It is, however, included in the Merv's Gold Indices table. This Index includes the 100 largest capitalization stocks from the 160 list, at the time of review. It was initially put together because everyone likes lists of 100 stocks. In general these are the 100 largest North American traded gold and silver stocks, although there may be a few missing that are at the lower end of the capitalization scale. The 100 Index review has been completed.
Merv's Qual-Gold Index is my quality Index. The 30 largest North American traded stocks are the component members of this Index. If one is looking for quality this is the place. The smallest company in this Index is capitalized at over $700 Million.
Merv's Spec-Gold Index is the upper end of my speculative sector. The NEXT 30 largest North American traded stocks, after the Qual-Gold companies, are the component members of this Index. This is where the next quality companies will come from. The market capitalization for this group ranges from a high in the $750 Million range down to the $250 Million level.
Merv's Gamb-Gold Index may be seen as the bottom of the barrel of the 160 universe. Where the Spec-Gold are at the upper level of speculative stocks these are at the lower level, the most speculative or the GAMBLING stocks. The component stocks are taken from the bottom 60 stocks after the top 100 (in the 100 Index) have been determined. This is where you might find those 10, 20 and 30 baggers but it is also where one could find the stocks that go to zero. NEVER invest in these stocks FOR THE LONG TERM. These are for buying and selling, hopefully at a profit. This is still the one group that has not undergone a year end review. I expect that this group will be highly revised by time I am through. Where the bottom 60 stocks gained 7.4% this past week the 30 components in this Index only gained 1.2%. Many of these stocks have already been delisted from the 160 universe but since I had not completed my review I published this Index with its continuing components. Next week it should be upgraded and the performance of the Index should change for the better.
Mervyn Burak, CMT
Hudson Aero/Systems Inc.
Market Technical Information Group
www.themarkettraders.com
merv@themarkettraders.com
26 December 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.
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