Roque's Gallery -TSC - Searching for Bulls in the Gold Complex

www.thestreet.com By John Roque Special to RealMoney.com 01/27/2003 11:46 AM EST Editor's note: This column was originally published Jan. 22.

You know how it is. You feel pressure to perform every single day, and you look at charts here and there in order to get some edge. But you don't really monitor longer-term charts. You can't. There's just not enough time in the day.

Earnings are being released, and you're busy trying to figure out if the number was in line, better or light. You're also contending with the inevitable daily stock disappointment, Iraq, North Korea, Venezuela and any other geopolitical worries. I figure it's safe to say that portfolio performance anxiety is already building.

Mind you, I'm not writing this to say that I've conquered the "perspective" discipline. What is that exactly? Tough question. I think it means to not be shaken out by daily moves, to have an aerial view, to see stocks in a bigger-picture scenario. However you define it, I'm still very far from it.

But I do make a habit of, as my friend Doug is fond of saying, "looking through" the charts. He contends that by using the look-through method, you can prepare for more important moves. Looking through the charts means seeing how daily price movements affect weekly price charts and how weekly price movements affect monthly price charts.

The trouble is, and I'm sure Doug will likely agree with me, there's so much volatility that even the most disciplined investors -- those with perspective -- can run into difficulty when trying to look through the charts.

Let's try this with an example. Take a look at the monthly and weekly charts to get some perspective on Newmont Mining (NEM:NYSE - news - commentary) .

Judging by my daily email and phone encounters, there are very few investors enamored with Newmont, the gold-stock complex or the physical metal. There's no affinity for anything to do with gold. It's been a long time since anyone has made any money with the sector. It's considered a relic, nobody understands it, and most people, even if they are considering it, only view it as a corollary to the geopolitical instabilities. When it comes right down to it, people only want to own "sexy" stuff. That makes gold the Phyllis Diller of investments.

Investors' inability to embrace Newmont et al. is especially interesting because virtually no other sector in the entire market displays the same technical characteristics: bullish absolute and relative strength, group strength, underlying commodity/monetary asset strength and generally uninterested investors. Maybe this is a stretch, but the lack of interest in Newmont and related stocks is the reverse image of technology in the spring of 2000. I'm sure you remember -- back then, tech had broken charts with ebullient sentiment. Now, gold and gold charts have bullish charts, and most people don't care or don't like them.

So how did I use perspective and look-through methods to read these charts and come to these conclusions? I coupled anecdotal sentiment evidence with technical analysis, and then I used longer-term charts (monthly to smooth the data and weekly to show some volatility) to get perspective on where we've come from and where we can go. Daily charts don't provide that sort of perspective.

Perspective and the look-through theme combine to produce a powerful vision for Newmont, the gold stock complex and the physical metal. And not in a Jim Jones Kool-Aid kind of way. Here's the takeaway:

1. The gold complex is bullish.
2. Gold stocks should be bought on pullbacks.
3. We're in a secular bull market for the gold complex.
4. As long as sentiment remains unconvinced, these stocks will likely be insulated from speculative forces.

John Roque is the technical analyst at Natexis Bleichroeder, a New York-based investment brokerage firm specializing in Europe and the U.S., and a frequent guest on CNBC. At time of publication, Roque had no position in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback and invites you to send it to John Roque.