Robert J. Cote, Jr.
Thirdeyeopentrades
www.thirdeyeopentrades.com
October 27, 2006
XAU Batter On Deck
Let's examine the XAU and see what the chart suggests. As this is being written before the week has ended, this week's candle is premature. That being said, we're just benchmarking its progress since our last essay about it.

At Thirdeyeopentrades, we're waiting for "Cracking the Code" to elicit its signal which has the highest propensity to suggest getting aboard for the next sustainable upward leg in the precious metals bull market. The requirement is the simultaneous expression of a MACD cross over along with the XAU:$GOLD ratio trend line performing the same.

Back in September of this year only the ratio line crossed and the MACD failed to join it. Subsequently, the shares pulled back quite a bit. It's now nearly two months later and the shares are trying to move back to the place where they broke down.

The key point to be aware of is that the "Cracking the Code" signal can only be evaluated at week's end. The weekly chart must complete. So, the next time that a simultaneous crossing of the two indicators occurs, that's when we'll move in to precious metal shares in a serious fashion.

How long would such an advance last? We don't know. That's when support lines will come into play but we'll deal with that topic at a later date. Let's just be ready for "Cracking the Code". First things first, as they say.

Some people argue that knowing when to get off the bus is more important than knowing when to get on. We disagree as if one gets aboard the bus just before the trend corrects, well, that's simply too late and can be damaging. "Cracking the Code" allows us to ride the middle of a sustained leg upward and, since 2001, has been uncannily accurate in predicting sustained legs upward.

Only the best of traders should attempt shorter term swing trading within consolidations like we have now. Our opinion is the safer strategy is to wait patiently for "Cracking the Code".

We'll show the PMPIX chart next as it's revealing a similar formation as the XAU.

Get your popcorn, soda or adult beverage ready as the next batter on deck may have something in store.


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