My recent analysis of the price of gold has been based on looking for situations earlier in the current gold bull market that parallel the current situation. This analysis has indicated that we are at or near an intermediate bottom presuming the bull market is intact. I think the analysis has some value and is on track. Leave me a comment if you think I'm off-base. I particularly enjoy creative, personal insults [NOT].
This piece provides a link to the previous post along with the updated key chart and accompanying text (in "quoted italics") with a BOLD PRINT UNDERLINE summary of whether the historical parallels remain on track. I'll be starting with the most recent analysis and working backwards.
March 18, 2012
Here's the updates from the above post (now a week old).
- In both cases gold consolidationed mostly above the panic treasury lows up until treasuries closed above the envelope (the return to normalcy) [see GREEN arrow].
- This return to normalcy happened in March in both 2009 and 2012.
- In 2009 this was followed by two more weeks of gold weakness as the treasuries continued to march higher. So, we could see another couple of weeks of gold weakness if the pattern holds.
- The move from the return to normalcy to the end of the year was from almost 900 to almost 1100. That's a 22% move targeting $2025 for the end of 2012 year close for gold if the pattern repeats.
- Stocks moved higher along with gold while the USD fell throughout the remainder of 2009. This could also happen this year if things start smelling better in Europe (stronger Euro/weaker USD) and they continue to ladel out monetary liquidity to keep in power the powers that be in France, Germany and the US (all of which have elections this year)."
THIS PARALLEL REMAINS ON TRACK, THE SUMMARY OUTLOOK IS UNDERLINED ABOVE.GOING OFF-TOPIC, I CONSIDER MITT ROMNEY GETTING ELECTED TO BE AN EXAMPLE OF "KEEP IN POWER THE POWERS THAT BE".
"The chart above shows each case in the current gold bull market where the weekly RSI touched 50 from above.In just about all cases (except 2008), such a touch was close to a short-term bottom in both weeks and percentage of price.
Green lines show cases that are similar to the current situation where a few months earlier gold significantly penetrated the 50 RSI, bounced back above 50 significantly (to around 60 but without touching 70) and again touched the RSI 50 from above. In four out of those five occurrances (Mar 05 being the exception), gold was with a couple weeks of a low price that has not been revisited since. This is just another reasonably independent anlysis of the current bull market showing that, if the gold bull market is in-tact, the price of gold is probably very near a bottom and about to significantly turn up. In the exceptional case of Mar 2005, the low that was never revisited was a couple of months in the future and only a couple of percent below the touch RSI 50 from above price."
SEEMS ON-TRACK WITH ANOTHER COUPLE WEEKS OF GOLD PRICE WEAKNESS TO GO. EXAMINING THE CHART MORE CAREFULLY I HAVE IDENTIFIED ANOTHER GREEN LINE (9/2006). A RESTATMENT OF THE OUTLOOK IS NOW: IN FIVE OF SIX CASES GOLD WAS WITHIN A MONTH OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. IN SIX OF SIX CASES GOLD WAS WITHIN 4% OF A LOW PRICE THAT HAS NOT BEEN REVISITED SINCE. THIS PUTS MY SHORT TERM GOLD OUTLOOK HAVING A LOW THAT IS NO LOWER THAN THE DEC 2011 LOW.
"What was happenning to Gold and what followed after a significant overbought spike in the S&P500 to commodities ratio (say RSI > 77)? There were four such situations, in each case:
- Gold was consolidating an bull market (multi-year or all time) high.
- Gold was within a month of a low price never to be revisited.
Another independent analysis indicating the end of the gold correction is probably near (or here) provided the Gold bull market remains intact."
THE ABOVE REVISED CHART HAS THE GREEN LINES LINED UP WITH THE PEAK RSI VALUE (EQUIVALENT TO A WEEK AGO). I THINK THIS LEAVES US VERY CLOSE TO THE NEVER TO BE REVISITED INTERMEDIATE LOW WEEKLY CLOSE PRICE OF GOLD.
March 11, 2012
"We see an overbought advance ending last summer and a wave pattern of consolidation since then. Here's the wave structure:
- Steep rise from near the lower bollinger band to above (outside) the upper bollinger band.
- A steep fall to below the 55 day moving average, but not to the lower bollinger band.
- A rise above the 55 day moving average but not to the upper bollinger band.
- A drop back to the lower bollinger band.
- A rise back above the 55-day moving average but without forming a higher high than wave 3 and not touching the upper bollinger band.
- A drop back to the 55-day moving average but not forming a lower low or getting near the lower band."
THIS WAVE STRUCTURE REMAINS INTACT ALTHOUGH WAVE 6 HAS CONTINUED DOWN THRU THE 55-DAY MOVING AVERAGE BUT WITHOUT FORMING A LOWER LOW OR NEARING THE LOWER BOLLINGER BAND.
"The move starting in Jun 2009 follows the pattern perfectly and even matches the current situation in terms of the month of the year of wave 6 (but is compressed in time overall compared to the current situation). The result having the head and shoulders perfectly meet its target in two months time. If this worked out for the current situation we'd see $1925 in mid-may 2012."
THE CURRENT SITUATION NOW EVEN MORE CLOSELY FOLLOWS THE 2009 PATTERN. THE UNDERLINED ITALICS TARGET REMAINS ON-TRACK.
"The 2006 price action matches well with the current pattern. In addition to the wave pattern matching well, the extremity of the preceding up move (wave 1) in 2006 matches the up move during the summer of 2011. If 2012 is like 2006 we would see one more little downmove in wave 6 prior to forming the final bottom. I think this a real possibility for the next two weeks (with a target of $1650 or even $1630). The resulting action after the bottom was in was a quick 2month rise to about the size of the right shoulder above the neckline and then 8 months (without a lower low than the right shoulder of the head-and-shoulders target. If 2012 follows this pattern we should see $1875 by mid-may and $1925 near the end of the year."
WE GOT THE ANTICIPATED ONE MORE LITTLE DOWNMOVE (SEE UNDERLINED ITALICS ABOVE) AND NOW THE PATTERN EVEN MORE CLOSELY FOLLOWS THE 2006 PATTERN. THE SECOND UNDERLINED ITALICS ABOVE TARGET OF $1875 BY MID-MAY REMAINS ON TRACK.
March 08, 2012
"Last week's little correction is hardly noticeable when you consider the big picture. I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend. I think I'll stick with gold and gold-investment vehicles as my primary investment theme at least as long as that 75 week average holds."
THE ADDITIONAL TWO WEEKS OF MINOR WEAKNESS DOES NOTHING TO CHANGE THE ABOVE BIG PICTURE. I REITERATE MY ABOVE ITALICS UNDERLINED ASSESSMENT: I know of nothing that comes close to gold as far as being in a safe, consistent primary up-trend.
March 01, 2012
THIS ANALYSIS REMAINS ON TRACK WITH AN AVERAGE 6-MONTH (END OF AUGUST 2012) TARGET GOLD PRICE OF $1896/oz.
February 29, 2012
EVEN THIS SHORT-TERM CALL WORKED OUT REASONABLY WELL WITH THE FIVE-DAY MOVE BEING -.4% WHICH MATCHED EXACTLY THE AVERAGE FOR SIMILAR EVENTS. THE EXPECTED FOLLOW-ON LOW WAS NOT REACHED SO NO TRADE ENTRY WAS TRIGGERED.
What think ye? I'm happy to be leveraged up a bit with gold mining stocks and dec 2012 $1500 gold futures call options with a core holding of physical metals in vaults. Of course, anything can happen including a downward plunge that does not rhyme at all with the gold price action of the last 10 years. This is not investing advice and I don't recommend that you trade like I trade.