The McClellan Market Report - Daily Edition XAU & Gold McClellan Financial Publications, Inc Posted May 18, 2005 excerpt from The McClellan Market Report - Daily Edition of May 16, 2005 Current Opinion - XAU & GOLD: Bearish short and intermediate term. Change to short and intermediate term bullish if the XAU closes above 81.27. Gold dropped for the third trading day in a row, and has now fallen $8.60/oz since last Wednesday. The XAU is in even worse shape, as gold stock traders seem to be abandoning all hope. That index is nearing the level of its May 2004 low. But more important than the level is the fact that the XAU has fallen really far in a short time. That adds up to an oversold condition, as illustrated by the indicator in our chart. Over the past 4 years, only the July 2002 and May 2004 bottoms saw a more oversold condition, and those two were indeed very good bottoms. So even though we see gold prices as being in a generalized downtrend until 2009, we know that such a downtrend won't proceed in a straight line, and that big trading opportunities will appear along the way. It looks to us as though an important trading opportunity for gold stocks is shaping up right now. This sort of rare oversold condition makes it tempting to "catch the falling knife," but we have to advise against that. The frustrating aspect of oversold conditions is their ability to lead to even bigger oversold conditions, and that is the danger of jumping in too early. We note also that a full moon lies ahead of us on May 23, and we have noted previously that full moons have an interesting ability to act as turning points. Because of that, and because of some Timing Model signals that we reported in our last newsletter, we'd be much more inclined to make an early leap into an oversold condition towards the end of this week. Lots more follows for subscribers... McClellan Financial Publications, Inc email: tom@mcoscillator.com website: www.mcoscillator.com You can learn more about the work of Tom McClellan and Sherman McClellan by visiting www.mcoscillator.com. They publish a twice monthly newsletter, The McClellan Market Report ($195/year), and a companion Daily Edition ($600/year or $160/quarter). You can see samples and get information about subscribing by visiting their website. ©1996-2008, McClellan Financial Publications, Inc., P.O. Box 39779, Lakewood, WA 98496-3779. www.mcoscillator.com, tel: 253 581-4889, 800 872-3737, fax: 253 584 8194. 321gold Inc