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On Bottom Watch - Mike Swanson (9/13/06)

Submitted by Mike Swanson on Wed, 2006-09-13 08:10.

Yesterday gold stocks tried to firm up, but once again faltered as the rest of the day went on. The XAU and HUI are now both below all fibanacci support levels. Their next support level is the June lows. As long as a bottom comes above those lows the long-term bullish uptrend will be intact. If we bottom above those lows I think we'll see a quick snap back up to 140-145 XAU area - and then a dip and consolidation to setup for a possible real breakout at the end of the year. However, if we end up seeing the XAU make a weekly close below the June lows then the bullish long-term technicals will be broken.

I don't think this is going to happen, but instead of worrying about if it is or not I am now preparing to buy on the next bottom. I'm going to be watching the action carefully for a day in which gold is down and the stocks are outperforming. Don't think this will happen today, but I'll have to watch the action carefully everyday for signs that it is about to happen. Looks to me we are likely to pause at this level for a few days and then make a last drop in the metal, that should bring a bottom early next week.

Will likely make a list of stocks to buy tonight.

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