 XAU vs. XOI in September
Clif Droke
September 10, 2004
The month of September will
likely be a month where two major natural resource sectors diverge
after both enjoying impressive bull markets through 2003 and
most of 2004. The two sectors in question are the oil stock sector,
represented by the Amex XOI index, and the gold stock sector,
represented by the XAU index.
The XOI Oil index is currently
peaking along with the price of crude oil, and XOI will most
likely trend sideways-to-lower in September. One way of expressing
this in technical terms is to observe the price trend of XOI
relative to its 30-day, 60-day, and 90-day moving averages (dominant
short-term MAs). After trending higher above the rising 30/60/90-day
MAs for the past two years, XOI broke below the 90-day MA on
a closing basis before rallying back above it last month. Despite
currently being above the 30/60/90s, these moving averages are
out of their proper alignment, and with the previous break below
the 90-day MA serving as a warning, XOI's uptrend looks quite
toppy.
The XAU index, on the other
hand, has already undergone a lengthy corrective phase in 2004
and after trending below the falling 30/60/90-day moving averages
for the past few months has recently broken above all three of
them, most recently closing above the 92.00 level. Not only is
the XAU above this important moving average triage but the moving
averages are in their proper alignment. This strongly suggests
a rally for XAU in September.
With respect to the XOI Oil
index, the crude oil trend in general is currently topping and
by the end of this year we should see oil prices back below $40/barrel.
This eventuality is being signaled in the XOI index, as well
as the crude oil chart itself. The trend toward rising oil and
oil stock prices is coming to an end as we near the fourth quarter
of '04.
The XAU, meanwhile, has been
diverging to the upside relative to the broad market as represented
by the S&P 500, another positive technical sign in the short-term.
XAU should have a favorable month of September to reward the
patience of those who have waited through the grinding market
trend of the past 3-4 months.
--Clif Droke
clif@clifdroke.com
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Clif Droke
is the editor of several subscription services including:
1) The Momentum
Strategies Report,
a combined forecast and analysis of U.S. stocks and indices and
international precious metals stocks. Sent via e-mail Mon, Wed
and Friday, also published online. $144/yr.
2) The Gold
Strategies Review,
a monthly forecast & analysis of gold and silver futures
and precious metals stocks. Published online. $200/yr.
3) The Durban
Roodepoort Deep & XAU/HUI Report (a.k.a. The DROOY Report)
for traders. This report now also covers Glamis Gold, published
online every trading day. Aimed at serious day
and short-term traders of Durban Deep and Glamis and followers
of the XAU & HUI index. DROOY Subscribers are billed monthly
$50/month.
Clif Droke
is also the author of numerous
books
on finance and investing.
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©2002-2004
Publishing Concepts
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