9/10/2006
(C) 2006 William Schmidt, Ph.D.
NEM - Newmont is the leading corporate producer of gold in the world.
Without knowing the reasons for the weakness of the last few days,
as the stock fell 4 points, the technically minded investor and trader
should be concerned with what looks like the glaring bearishness
developing in NEM.
Any further price weakness next week would break the well-tested
support line at 48. If prices break this support line and stay below
it for 3 trading days, I would consider the support decisively ruptured.
There is a risk of a significant drop ahead for NEM. If the support line at
48 is decisively broken, we can reckon then a price-target way down at 32.
This is because classic technical analysis teaches that one should
take the height of the previous pattern at its widest point (16 points)
and subtract that amont from the point of breakdown (48). (You can see
below that the height of the pattern was 16 points in January. Its
peak then was 62 and the support line was 46.)
A breakdown in NEM would be quite significant. Gold is often considered
a proxy for inflation. If NEM and GOLD decline, then the DOLLAR
should get stronger and that would mean the FED will be less inclined
to raise interest rates, and this should, in turn, be bullish for the
stock market after the seasonal bearishness of the next 6 weeks
is gone...
Watch Light Crude also. It is coming down to key support at 66
in the chart below....It may still turn up because it is at its year-long
uptrendline. It is now slightly below its rising 200-day ma. A bigger
decline by oil and gold should help boost the stock market after
September is over....
