technical analysis is an "art" and not a "science."
I said before that two technicians can look at the same chart and come up with two different outlooks.
Let me amend that to say: two technicians can look at the same chart and come up with three different outlooks.
but what is important is this: if you are going to follow technical analysis, you CANNOT add fundamentals to the mix. If you do add fundamentals, you are discounting the value of the technical analysis.
frankly I don't have any idea what the fundamentals will do to gold prices, except for what I have published which is that gold does well with inflation and gold does well with a falling dollar.
But I can say from MY look at the charts that gold is now in a trading range, and until it breaks out to a new high, it will not be in a new bull market.
for those of you who see it differently, I appreciate your "artwork."
Ok. Now I see a reasonable drawing of the "long term" pennant formation we were talking about a few days back (ie Thomson's article). Link to GIM page 607 of their main thread...4th chart down from top of page. Kiwi_Envoy is the chartist. What I was missing was the major lower trendline that started years back and underscores the bottom starting in August 2007, hence a reasonable looking 16 month pennant. Using that as the lower line, and then lining up the several peaks since March 2008 gives one a fairly convincing pennant formation that is close to resolution. If it does not break on this current leg, it seems it will correct back one more time and then resolve. Considering that the major lower trend line is upwards bullish for years, this pennant should resolve itself upwards. If someone could paste it in that would help.
The more little pieces that keep adding to the "bullish" side the more reason to side with bull over bear. I continued to be surprised at how gold keeps coming back each morning after being beat down in London. A few months back, that action would had lead to routs. The past 2-3 weeks it's only lead to recoveries. Interesting action and similar to what we started seeing in August-October of 2007.
Another tidbit that is bullish long term and short term for gold. The MoreAU index takes out the effect of currency fluctuations on the trade-weighted USDIndex. The chart shows higher lows over many years and multiple up channels. The index closed higher on Dec 31st than it did at the March 2008 high. No secret that gold is also at all time highs in several other key currencies as well.
I read TA differently than most. Perhaps thats why it works very, very well for me.
IMHO, longer term charts only get you out further from the top and get in further from the bottom.
Surely gold has been up for the past 7 years. It has also been in an uptrend for the past 70 years. My contention all along is that gold and all other assets are nothing more than trading vehicles. Back in August I stated that those who trade gold over the next few months/quarters will be able to make more $$$ than those who have held for the past 7 years. Since then we have had a $190 rally, a $250 drop, and a $210 rally. Thats $650 worth of movement, or nearly 80% of the then current price. Of course no one would have been able to take advantage of 100% of these moves, but no one can argue the opportunity that was presented. And I see no reason why the volatility should subside.
I also dont see where the indicators are "about" to turn up. I think they actually turned up 2 months ago. Perhaps now they are beginning to look tired. After the next cycle, your longer term indicators will have turned higher, but in waiting you missed out on a 30% trade, and will most likely miss out on the next 20% swing.
I'll say it again, it appears to me like the current trend will extend up to the $920's where there will be a short consolidation before the next trend begins. Of course the next trend could be up or down, but, just based on the length of the current downward channel that we're in, it's about time for a breakout of the channel (upward). With the new year, Obama coming into power, and a bunch of other minor factors, it appears to me like a breakout move up from the $920's is likely, and will extend up to and beyond $1025.
Time will tell. But despite days of lowering gold prices oversea, it picks back up in the US, a much different pattern than usual. Today, the rebound from just under $850 came back to $860 as of 2:30pm. This almost smacks of honest trading, less PPT plunges. Note the dollar moving up strong. They'll need to push gold down a lot more than this to discourage the bulls.
Sinclair has the following information on his website today concerning commodity index rebalancing occurring in the next week or so....a potential reason to sell-off gold, and buy copper and oil. The % drop in the gold index is about 27%, while copper will bump up by 30%. It's nice when companies like GS can mess around with their own indexes annually and make a nice profit in the rebalancing.
Here is the other "WHY" gold was sold down today. The truth will set you free of the manipulators. $25,000,000,000 of index commodity funds follow the index readjustments made herein. Gold is REDUCED from 10.8 to 7.9 percent of the index which therein causes related selling by INDEX FUNDS. Buying or selling by index funds is a yearly, onetime event. These adjustments are needless artificial buying and/or selling of specific commodities that skew market prices and produce opportunities both to buy and sell short.
gosh, is the pennant going to break out to the downside??
Apparently not this day. Quick move from $844 low right back to $870. And as far as those manipulators go, they keep on trying to knock it down but the metal is showing lots of resistance, just like a barbarous relic should. Today everything was up, stocks, oil, gold and the dollar. Imagine how gold would do if the dollar went down!
This is what I don't understand: gold is still about $170 below its highs of the spring, but you say gold still has a lot of "resistance" ?? I just don't understand how you can call a $170 drop from the highs any kind of "resistance" to selling??
Continuing to focus on 2008 highs from months ago is the same logic that most fiat bugs made by seeing nothing but the 1980 gold high during the past 7 years. They could not fathom anything but $200-$350 gold any more. In other words they missed the bigger picture.
Roadrunner, he can't see anything but his trigger point. It's as if he won't ever see the trend that's been built up. Typical of a momentum player, and momentum player only.
The $850 top in 1980 was the blowoff. Making that top the focal point of the whole market from 1974-1980 is myopic. That's like saying that the rise from $200 to $600 didn't happen.
Q: Are You Printing Money? Bernanke: Not Literally
And besides ignoring the $100-600 run from 1976 to 1979, he also ignores the initial rise from $35 to $200, and the subsequent 50% correction in the middle of it that failed to derail the 1970-1980 the commodities/collectibles bull.
So, I'm looking at today's gold price, a precipitous drop in any case, and I have a question for Alan. Alan, did demand for gold just inexplicably dry up today? If not, what might be going on to cause such a drop?
It appeared that gold was trading back & forth, back & forth and then - wham! A precipitous drop of over $25.00 in less than an hour. What might be the cause?
I am just curious as to your explanation. Was it just serendipity?
Q: Are You Printing Money? Bernanke: Not Literally
YEsterday the price movement was explained as funds doing some reallocation for the new year. For example, changing from 8% to 6% gold holdings.
Not sure if I believe it, but it is an explanation. It ocurred to me yesterday that we may be in for a correction in gold to $775 here in the short term. As of right now I'm out of gold waiting for the pattern to become more established.
YEsterday the price movement was explained as funds doing some reallocation for the new year. For example, changing from 8% to 6% gold holdings.
Not sure if I believe it, but it is an explanation.
I believe the reallocation explanation for yesterday's changes in price. That's a manipulation in it's own right.
But, what I'm talking about happened today, 10:00 AM NY Time. Did all buying "disappear" suddenly? What else could the explanation be? Surely, it couldn't have been a concerted shorting of gold contracts? Surely not.
Q: Are You Printing Money? Bernanke: Not Literally
Since I use technical analysis, I can't give you the "fundamental" reasons for today's gold drop.
In my reporting, I do mention various fundamentals such as low inflation, liquidation of assets, world wide money troubles. But my analysis of gold is strictly technical.
Gold had a RALLY FAILURE in the spring and as a result headed lower.
I do NOT know how much lower gold will go. But if it drops below 730 it could have a severe drop. There is support at 730.
Regarding past trends... I don't care what happened in the past. I don't care about your "big picture."
I don't live or invest in a "big picture." I live and invest for what is happening NOW. And NOW gold is in trouble.
For those of you who want to dive into the "big picture" go ahead and do that. But I will stick with current trends, and the current trend says gold is in a trading range with NO reason to be optimistic that gold will break out and rally.
When gold does break out and rally, I will be there. But until it does break out and rally, I will sit calmly and observe.
There is no point in owning gold now and risk it losing value.
Since I use technical analysis, I can't give you the "fundamental" reasons for today's gold drop.
I was referring to the chart from 1-7-09 at around 10:00 AM. Not the fundamentals, but the chart. There was no news that I saw that seemed relevant to gold.
Just what looked like a normal trading pattern, and then a sudden and significant drop.
...my analysis of gold is strictly technical.
That's what I'm asking about. From a technical perspective, what happened that would make gold trade evenly and then suddenly fall off a cliff? In technical terms, what happened there?
When gold does break out and rally, I will be there. But until it does break out and rally, I will sit calmly and observe.
That's momentum trading, and that's all it is. That's not meant as a negative comment, but that's all jumping on a trend really amounts to. There's no consideration of any of the reasons why something might be happening. Sometimes, momentum trading works good - I'll give you that. I do it myself when I feel that the risk is low.
There is no point in owning gold now and risk it losing value.
It's good to have this discourse, because there are several points to owning gold, and you apparently don't recognize any of them as valid.
1) Gold is not tied into the monetary system. That's a major plus in my book. You could say that it responds inversely to the fiat currencies around the world, but that's an artifact, a byproduct - and not really a direct correlation because the governments don't play with gold directly anymore.
2) Gold requires no government to maintain value anywhere in the world, i.e., it's a universal currency/store of value. That's a plus.
3) The dollar and U.S. debt is being horribly mismanaged. Gold is a better-than-average antidote to governmental mismanagement.
4) My gold didn't vaporize the way the stock market did in 2008. In that light, your statement about "risking loss of value" by holding gold is clearly disconnected from reality, at least it was last year. I sold ALL of my stocks midyear and bought more gold. I didn't lose 40% of my retirement funds. God help you if you are in Treasuries right now. That's what I'd consider vulnerable, and for no return to boot!
Nobody's married to gold - nor should they be. There's a time to own gold, and there's a time to own paper assets. I have an MBA in finance, and I know asset valuation. You'd think that I'd be all over these "bargains" in the stock market right now. But, in fact - I still see plenty of risk in a market that is still overpriced in terms of historical P/E ratios in many of the market segments. Not to mention the overhanging massive trillions of CDOs and CDSs that are not accounted for. The other shoe hasn't dropped, heck - the first shoe isn't done hitting the pavement yet.
In addition, I see a government that is ready to overspend and to tax us heavily by letting the current tax cuts expire in 2010. When California is able to reduce their own spending and to work their way out of the need to ask for a Federal Bailout or when some financial center bank presidents are prosecuted for malfeasance - those will be a couple small indications to most of us that stocks are on their way to becoming viable as an investment again. That's going to be awhile. The game is still rigged in paper assets and there is no integrity in the financial system.
Geez, I thought this was going to be a quick, glib remark but it's turning into another danged dissertation. Anyhow - you get my points, I hope.
Q: Are You Printing Money? Bernanke: Not Literally
JMSKI52 ASKS: "From a technical perspective, what happened that would make gold trade evenly and then suddenly fall off a cliff? In technical terms, what happened there?"
Using technical analysis I cannot answer your question. In true technical analysis, there are NO REASONS given for moves. In true Technical Analysis ONLY the moves or price changes are what matters.
In fundamental analysis we say "a stock went up because the company's earnings were good" or we say "a stock went down because quarterly sales were bad."
But in technical analysis we say "a stock went up because it went up" or "a stock went down because it went down."
when you add a REASON to your Technical Analysis you are no longer giving TRUE technical analysis... then you are mixing in fundamental analysis.
So, I cannot explain WHY gold prices behaved the way they did the other day... all I can say is... "they did behave that way."
In true technical analysis you would put that day's behavior into the charts and make it part of the overall chart movement that you would observe.
and regarding your "several points to owning gold."
All I can say is "ok" if that's why you want to own gold. For me, I buy gold when I think the price is moving up. If you have other reasons to own gold, best of luck and I hope you make money.
Comments
I will say it again...
technical analysis is an "art" and not a "science."
I said before that two technicians can look at the same chart and come up with two different outlooks.
Let me amend that to say: two technicians can look at the same chart and come up with three different outlooks.
but what is important is this: if you are going to follow technical analysis, you CANNOT add fundamentals to the mix. If you do add fundamentals, you are discounting the value of the technical analysis.
frankly I don't have any idea what the fundamentals will do to gold prices, except for what I have published which is that gold does well with inflation and gold does well with a falling dollar.
But I can say from MY look at the charts that gold is now in a trading range, and until it breaks out to a new high, it will not be in a new bull market.
for those of you who see it differently, I appreciate your "artwork."
happy new year.
www.AlanBestBuys.com
www.VegasBestBuys.com
Ok. Now I see a reasonable drawing of the "long term" pennant formation we were talking about a few days back (ie Thomson's article). Link to GIM page 607 of their main thread...4th chart down from top of page. Kiwi_Envoy is the chartist. What I was missing was the major lower trendline that started years back and underscores the bottom starting in August 2007, hence a reasonable looking 16 month pennant. Using that as the lower line, and then lining up the several peaks since March 2008 gives one a fairly convincing pennant formation that is close to resolution. If it does not break on this current leg, it seems it will correct back one more time and then resolve. Considering that the major lower trend line is upwards bullish for years, this pennant should resolve itself upwards. If someone could paste it in that would help.
The more little pieces that keep adding to the "bullish" side the more reason to side with bull over bear. I continued to be surprised at how gold keeps coming back each morning after being beat down in London. A few months back, that action would had lead to routs. The past 2-3 weeks it's only lead to recoveries. Interesting action and similar to what we started seeing in August-October of 2007.
MoreAU index
Another tidbit that is bullish long term and short term for gold. The MoreAU index takes out the effect of currency fluctuations on the trade-weighted USDIndex. The chart shows higher lows over many years and multiple up channels. The index closed higher on Dec 31st than it did at the March 2008 high. No secret that gold is also at all time highs in several other key currencies as well.
roadrunner
I read TA differently than most. Perhaps thats why it works very, very well for me.
IMHO, longer term charts only get you out further from the top and get in further from the bottom.
Surely gold has been up for the past 7 years. It has also been in an uptrend for the past 70 years. My contention all along is that gold and all other assets are nothing more than trading vehicles. Back in August I stated that those who trade gold over the next few months/quarters will be able to make more $$$ than those who have held for the past 7 years. Since then we have had a $190 rally, a $250 drop, and a $210 rally. Thats $650 worth of movement, or nearly 80% of the then current price. Of course no one would have been able to take advantage of 100% of these moves, but no one can argue the opportunity that was presented. And I see no reason why the volatility should subside.
I also dont see where the indicators are "about" to turn up. I think they actually turned up 2 months ago. Perhaps now they are beginning to look tired. After the next cycle, your longer term indicators will have turned higher, but in waiting you missed out on a 30% trade, and will most likely miss out on the next 20% swing.
Knowledge is the enemy of fear
www.AlanBestBuys.com
www.VegasBestBuys.com
<< <i>gosh, is the pennant going to break out to the downside?? >>
Or is it the shakeout before the breakout?
Sinclair has the following information on his website today concerning commodity index rebalancing occurring in the next week or so....a potential reason to sell-off gold, and buy copper and oil. The % drop in the gold index is about 27%, while copper will bump up by 30%. It's nice when companies like GS can mess around with their own indexes annually and make a nice profit in the rebalancing.
Here is the other "WHY" gold was sold down today. The truth will set you free of the manipulators. $25,000,000,000 of index commodity funds follow the index readjustments made herein. Gold is REDUCED from 10.8 to 7.9 percent of the index which therein causes related selling by INDEX FUNDS. Buying or selling by index funds is a yearly, onetime event. These adjustments are needless artificial buying and/or selling of specific commodities that skew market prices and produce opportunities both to buy and sell short.
roadrunner
www.AlanBestBuys.com
www.VegasBestBuys.com
Apparently not this day. Quick move from $844 low right back to $870. And as far as those manipulators go, they keep on trying to knock it down but the metal is showing lots of resistance, just like a barbarous relic should. Today everything was up, stocks, oil, gold and the dollar. Imagine how gold would do if the dollar went down!
roadrunner
www.AlanBestBuys.com
www.VegasBestBuys.com
roadrunner
The $850 top in 1980 was the blowoff. Making that top the focal point of the whole market from 1974-1980 is myopic. That's like saying that the rise from $200 to $600 didn't happen.
I knew it would happen.
roadrunner
I guess we got our answer today.
Knowledge is the enemy of fear
It appeared that gold was trading back & forth, back & forth and then - wham! A precipitous drop of over $25.00 in less than an hour. What might be the cause?
I am just curious as to your explanation. Was it just serendipity?
I knew it would happen.
Not sure if I believe it, but it is an explanation. It ocurred to me yesterday that we may be in for a correction in gold to $775 here in the short term. As of right now I'm out of gold waiting for the pattern to become more established.
Not sure if I believe it, but it is an explanation.
I believe the reallocation explanation for yesterday's changes in price. That's a manipulation in it's own right.
But, what I'm talking about happened today, 10:00 AM NY Time. Did all buying "disappear" suddenly? What else could the explanation be? Surely, it couldn't have been a concerted shorting of gold contracts? Surely not.
I knew it would happen.
In my reporting, I do mention various fundamentals such as low inflation, liquidation of assets, world wide money troubles. But my analysis of gold is strictly technical.
Gold had a RALLY FAILURE in the spring and as a result headed lower.
I do NOT know how much lower gold will go. But if it drops below 730 it could have a severe drop. There is support at 730.
Regarding past trends... I don't care what happened in the past. I don't care about your "big picture."
I don't live or invest in a "big picture." I live and invest for what is happening NOW. And NOW gold is in trouble.
For those of you who want to dive into the "big picture" go ahead and do that. But I will stick with current trends, and the current trend says gold is in a trading range with NO reason to be optimistic that gold will break out and rally.
When gold does break out and rally, I will be there. But until it does break out and rally, I will sit calmly and observe.
There is no point in owning gold now and risk it losing value.
www.AlanBestBuys.com
www.VegasBestBuys.com
I was referring to the chart from 1-7-09 at around 10:00 AM. Not the fundamentals, but the chart. There was no news that I saw that seemed relevant to gold.
Just what looked like a normal trading pattern, and then a sudden and significant drop.
...my analysis of gold is strictly technical.
That's what I'm asking about. From a technical perspective, what happened that would make gold trade evenly and then suddenly fall off a cliff? In technical terms, what happened there?
When gold does break out and rally, I will be there. But until it does break out and rally, I will sit calmly and observe.
That's momentum trading, and that's all it is. That's not meant as a negative comment, but that's all jumping on a trend really amounts to. There's no consideration of any of the reasons why something might be happening. Sometimes, momentum trading works good - I'll give you that. I do it myself when I feel that the risk is low.
There is no point in owning gold now and risk it losing value.
It's good to have this discourse, because there are several points to owning gold, and you apparently don't recognize any of them as valid.
1) Gold is not tied into the monetary system. That's a major plus in my book. You could say that it responds inversely to the fiat currencies around the world, but that's an artifact, a byproduct - and not really a direct correlation because the governments don't play with gold directly anymore.
2) Gold requires no government to maintain value anywhere in the world, i.e., it's a universal currency/store of value. That's a plus.
3) The dollar and U.S. debt is being horribly mismanaged. Gold is a better-than-average antidote to governmental mismanagement.
4) My gold didn't vaporize the way the stock market did in 2008. In that light, your statement about "risking loss of value" by holding gold is clearly disconnected from reality, at least it was last year. I sold ALL of my stocks midyear and bought more gold. I didn't lose 40% of my retirement funds. God help you if you are in Treasuries right now. That's what I'd consider vulnerable, and for no return to boot!
Nobody's married to gold - nor should they be. There's a time to own gold, and there's a time to own paper assets. I have an MBA in finance, and I know asset valuation. You'd think that I'd be all over these "bargains" in the stock market right now. But, in fact - I still see plenty of risk in a market that is still overpriced in terms of historical P/E ratios in many of the market segments. Not to mention the overhanging massive trillions of CDOs and CDSs that are not accounted for. The other shoe hasn't dropped, heck - the first shoe isn't done hitting the pavement yet.
In addition, I see a government that is ready to overspend and to tax us heavily by letting the current tax cuts expire in 2010. When California is able to reduce their own spending and to work their way out of the need to ask for a Federal Bailout or when some financial center bank presidents are prosecuted for malfeasance - those will be a couple small indications to most of us that stocks are on their way to becoming viable as an investment again. That's going to be awhile. The game is still rigged in paper assets and there is no integrity in the financial system.
Geez, I thought this was going to be a quick, glib remark but it's turning into another danged dissertation. Anyhow - you get my points, I hope.
I knew it would happen.
I would not short gold now because I don't know if it is going lower.
Actually, I have never shorted a stock or any investment because of the risk of "unlimited liability."
When you "buy" something, your liability is limited to the "purchase price." But when you "short" something, there is no end to your potential losses.
You have to be a true gambler to short ANYTHING.
I am not.
www.AlanBestBuys.com
www.VegasBestBuys.com
Using technical analysis I cannot answer your question. In true technical analysis, there are NO REASONS given for moves. In true Technical Analysis ONLY the moves or price changes are what matters.
In fundamental analysis we say "a stock went up because the company's earnings were good" or we say "a stock went down because quarterly sales were bad."
But in technical analysis we say "a stock went up because it went up" or "a stock went down because it went down."
when you add a REASON to your Technical Analysis you are no longer giving TRUE technical analysis... then you are mixing in fundamental analysis.
So, I cannot explain WHY gold prices behaved the way they did the other day... all I can say is... "they did behave that way."
In true technical analysis you would put that day's behavior into the charts and make it part of the overall chart movement that you would observe.
and regarding your "several points to owning gold."
All I can say is "ok" if that's why you want to own gold. For me, I buy gold when I think the price is moving up. If you have other reasons to own gold, best of luck and I hope you make money.
www.AlanBestBuys.com
www.VegasBestBuys.com
And I hope that you do as well.
I knew it would happen.