“The powerful rally by large Precious Metals (PM) stocks over the past couple of weeks is believed to be the start of a ‘breakout drive” that will vault the sector indices out of the large holding patterns that they have been stuck in for past 18 months, for these patterns date back further than the actual highs to the start of last year, ushering in a period of rapid and substantial advance.”

The powerful rally by large Precious Metals (PM) stocks over the past couple of weeks is believed to be the start of a ‘breakout drive” that will vault the sector indices out of the large holding patterns that they have been stuck in for past 18 months, for these patterns date back further than the actual highs to the start of last year, ushering in a period of rapid and substantial advance.

There are two crucially important points to appreciate at this juncture. The first is that PM stocks, being the province of speculators much more than the PMs themselves, tend to lead the latter, so that the current vigorous advance in the big PM stocks can be expected to translate into strong rises in gold and silver soon, which are still way below their highs of last year. The second point is that the big PM stocks tend to take the lead and perform best early in a PM sector uptrend, while the small exploration stocks behave like the sediment at the bottom of a river – it takes quite a current to get them stirred up – and so they tend to perform best towards the end of a sector uptrend when the uptrend has been underway for sufficient time to attract increasing public attention. This is why the largest stocks are performing really well at this juncture, which is made obvious by placing the charts for the HUI and XAU indices one beneath the other – the HUI index is comprised of lower cap stocks than the XAU. When we do this we see immediately that although the HUI index has not made a clear breakout above its key resistance level, it can be expected to do so shortly, because the XAU index has staged a clear breakout.

Go to this link and read the rest of the story : Marketwatch – This Time It’s for Real… By Clive Maund
Clive Maund
resourcecharts@yahoo.com

This entry was posted on Tuesday, July 24th, 2007 at 5:17 pm and is filed under ZMisc. You can follow any responses to this entry through the RSS 2.0 feed.