Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Crash, Deja Vu All Over Again

Commodities / Gold & Silver 2009 Dec 16, 2009 - 01:50 AM GMT

By: Bob_Clark

Commodities

Best Financial Markets Analysis ArticleGold seems to have found a resistance level.  It could be the 1 year cycle high that was suspiciously absent when I wrote, article for M.O."Gold, a Cyclical Recipe for Disaster"


Here is what I said:

"The next thing we need to do is define what the 1 year is doing, we don't want it     blindsiding us with a sudden clunk. Here it gets fuzzy, there is no clearly defined low to make a call on.  Also there is a very strong seasonal cycle in gold that makes its lows in the summer and tops out in the February to March time frame, it also has to be factored in.  What I have done is tentatively peg it as the low in late October, but I also realize it could come in anytime now as well.  I also know that the fat boys are extremely short gold futures.  So I guard our positions with stop loss orders and won't be surprised by a sudden melt down. If it has not been made yet, it has to be soon, before the end of the year."

I thought I should follow up on gold now that we have turned down.
 
We sold the last of our gold trading positions right on the highs.  Now the question is, what comes next.  Is this the end of the run?  Has the bubble burst?  How far will it fall?  Is there any way to know?  Lets check it out.
 
In the chart below I show a thirty four year chart of gold.  In it I have marked the 8 year cycles with stars and red lines.  The blue line shows the most recent cycle low which occurred in October of 2008.  We should not see another big low for 8 years.  What we should see is the first 1 year cycle low since making the 8 year cycle low, I believe we are seeing it now.  If you have not done so, please read the original article by clicking the link above.
   
 
 
In the chart below, I have narrowed the focus.  This chart is of the GLD ETF.  It is the last five years on a daily basis, it shows the 8 year cycle low which I believe we made last fall.  It clearly shows the inverted head and shoulders pattern from which we broke out in October of this year. The objective of this H&S pattern should be 133.  It is normal for a H&S pattern to return to the right shoulder area after a breakout.
 
In this chart we see several areas of high volume frothy areas, which I have marked in red.  The high volume area in 2006 was big at the time but the ETF was new then and gold was not in the public eye either.
 
There are a number of ways to project the size of a correction, expect a retracement to a moving average or a trend line is one way.  Fibonacci levels, which expect 50% or 62% retracements of the last leg up, is another.  I did not put them in the chart.
 
The 200 day exponential moving average is popular and often a strong support level.  It is currently at 98.30 and is moving up quickly.  If you don't know how to use these methods please contact me and I will be happy to give you the different levels.
 
I thought I would use a different approach here.  We will see how well it plays out.
As I said last month, if we were going to make a 1 year cycle low it would have to come this year.  Well, here it is.  The big question I am asking is, can it make its low and turn up by the end of December?  That remains to be seen but I will watch carefully to see what happens.
 
In the chart below, you will notice I have marked three areas in different colors.  They are corrections from previous spike tops, often occurring after things get a little too frothy.  Notice that the kick backs we have seen in the past seem to put a damper on GLD's Mojo for more than a few days.

 In the chart below, I have taken those color-coded previous corrections and spliced them, full size, into the current price action (see the box in the five year chart).  I began at the 8 year cycle low made last fall and ended at the recent all time high.  The results are interesting and gives us an idea  of what to expect over the coming days.
 
I would like to see an early low like the one on the left (orange).  It would be ideal because the 1 year cycle low should bottom in 2009.  It may take until the end of the year to find a solid bottom.
 
 

Above, we see that the previous corrections took months to play out. We also see the 102.50 level may become a turning point this time.  That is interesting because it is also the 50% retracement level of the leg up that began in April.  In a couple of weeks the 200 day M.A. will have moved higher as well. The smaller blue correction on the right is also possible, especially if the bulls are still pawing the ground. 
 
In my email advisory, as well as my article on M.O. .covering the US$ collapse, I suggested a year end rally was probable in the dollar because a 1 1/2 year cycle was bottoming.  Plus, the dollar tends to rally at year end as American multinationals repatriate their profits and convert them into dollars.
 
It looks like more downside is possible for gold and then patience will be required as the margin traders get squeezed out. I have posted the latest commitment of traders report on my blog. It  shows that the "Fat Boys" are starting to cover their shorts, grudgingly.
 
As Yogi Berra would say, "It is like deja vu all over again."

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2009 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in