I believe gold has reached it highs for some time---WILL PROVIDE ANALYSIS THIS WEEKEND. What went ri
cohodk
Posts: 19,184 ✭✭✭✭✭
I was going to post this in the mega econ thread, but thought starting a new thread would be easier to research in 15 months.
Ok, well now I am going to write more unconventional nonsense.
Seems I have a serious problem with that, but for some reason my analysis is most always validated, so here goes.
Barring a parabolic move, I think we may have seen or are very close to seeing the highs in gold for some time. I may be premature, but thats typical as I dont have much patience. Below is a weekly chart of gold. As you can see thats quite a 9 year rally. More than a 4 fold increase in price. You will notice a momentum indicator that I have found to be incredibly useful, and will note that it has marked the tops in gold very accurately. Its normal cycle is about 2 years, but this has been shortened to about 12-15 months due to the strong upward momentum. All of the previous peaks in the momo were associated with a parabolic move in gold except for in 2004. That non parabolic move resulted in a sideways consolidation for the next year and a half. Also notice how the momo indicator held above the 50 line--another indication of strength.
Now lets focus on the last 18 months. After hitting a high in March 08, gold declined 34% in the next 7 months thus giving up the entire parabolic rally from late 07 to 08. That selloff resulted in the momo indicator breaking the 50 line--perhaps a sign of weakening strength. Momo is now over the 80 level and near a point at which it turns lower. A faster momo indicator is shown at the bottom which may also be indicating that the longer term momo is about to peeter out. Only a parabolic move higher can support a higher momo, but given the "unusual" strength of the rally in the dollar today, I think this unlikely. I believe the cycle of the momo indicator will revert back to its 2 year norm.
An asset class rally of 9 consecutive years is a rare beast. This may be good as it could signal longer term strength, but is none-the-less, long in tooth. The increased volatility over the past 18 months is probably also an indication of a top or consolidation.
So I am going to go out on a limb and say that gold will close below the close of 2009, thereby 2010 will be a down year for gold. There are also several other political, economic and psychological factors that weigh on my opinion, but will not get into now. Dont misinterpret my comments. Im not saying the bull run for gold is over. Im not saying gold will suffer a major collapse in 2010. I am saying that a timely investment, gold is not. You can think Im crazy, that I know nothing, live in fantasy land, or am completely oblivious to the sorry state of US fiscal policy, and thats fine by me. But I am willing to make a major claim in a public arena, and will accept my just desserts whether proven correct or wrong.
***********This prediction is null and void if gold closes lower for 2009 as this would already be a 20% decline in price and would mark the end of the consecutive yearly closes.
Ok, well now I am going to write more unconventional nonsense.
Seems I have a serious problem with that, but for some reason my analysis is most always validated, so here goes.Barring a parabolic move, I think we may have seen or are very close to seeing the highs in gold for some time. I may be premature, but thats typical as I dont have much patience. Below is a weekly chart of gold. As you can see thats quite a 9 year rally. More than a 4 fold increase in price. You will notice a momentum indicator that I have found to be incredibly useful, and will note that it has marked the tops in gold very accurately. Its normal cycle is about 2 years, but this has been shortened to about 12-15 months due to the strong upward momentum. All of the previous peaks in the momo were associated with a parabolic move in gold except for in 2004. That non parabolic move resulted in a sideways consolidation for the next year and a half. Also notice how the momo indicator held above the 50 line--another indication of strength.
Now lets focus on the last 18 months. After hitting a high in March 08, gold declined 34% in the next 7 months thus giving up the entire parabolic rally from late 07 to 08. That selloff resulted in the momo indicator breaking the 50 line--perhaps a sign of weakening strength. Momo is now over the 80 level and near a point at which it turns lower. A faster momo indicator is shown at the bottom which may also be indicating that the longer term momo is about to peeter out. Only a parabolic move higher can support a higher momo, but given the "unusual" strength of the rally in the dollar today, I think this unlikely. I believe the cycle of the momo indicator will revert back to its 2 year norm.
An asset class rally of 9 consecutive years is a rare beast. This may be good as it could signal longer term strength, but is none-the-less, long in tooth. The increased volatility over the past 18 months is probably also an indication of a top or consolidation.
So I am going to go out on a limb and say that gold will close below the close of 2009, thereby 2010 will be a down year for gold. There are also several other political, economic and psychological factors that weigh on my opinion, but will not get into now. Dont misinterpret my comments. Im not saying the bull run for gold is over. Im not saying gold will suffer a major collapse in 2010. I am saying that a timely investment, gold is not. You can think Im crazy, that I know nothing, live in fantasy land, or am completely oblivious to the sorry state of US fiscal policy, and thats fine by me. But I am willing to make a major claim in a public arena, and will accept my just desserts whether proven correct or wrong.
***********This prediction is null and void if gold closes lower for 2009 as this would already be a 20% decline in price and would mark the end of the consecutive yearly closes.
Excuses are tools of the ignorant
Knowledge is the enemy of fear
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Comments
just look at that reverse head and shoulders formation, look at the shoulder line.
its all there.
www.AlanBestBuys.com
www.VegasBestBuys.com
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Selling calls or call spreads would seem to be a good way to go because premiums on calls are skewed high.
Other considerations do enter in. The economy, the middle east, the russians & chinese. But those are pretty much constants. The big "?" in my mind is the new paradigm we are looking at in government. They really are quite an assemblage, and not in a good way.
Added - one last thing. If gold goes parabolic, that's not really gold talking. That's the dollar saying that "we have a big problem, Houston". But we already know that.
I knew it would happen.
I have a couple of comments on the chart:
1. I would tend to toss out the huge fall 2008 correction as a bank- contrived 100 yr, 1-off paper gold selling event. If you lop off half of that deep-V it's probably more in tune with what the chart should have looked like. The rapid recovery in the gold price by January sort of supports that. I'd have more confidence in analyzing the smoothed chart w/o the one-off event included. A log chart will tend to smooth it (and I know that you don't like log charts). Then the deep momentum dip goes away. The chart reflected paper gold activity which we know is having problems vs. the real thing. Gold stocks were hammered back to 2003-2004 levels in fall 2008 and fell by 65-85%. That's just non-sensical imo. They fell further than regular stocks and those guys were mining MONEY! You can't have a better business model esp. with the price of commodities (labor, oil, utlilites) falling faster than gold to boost the profit margins even further. And with many of the miners tripling or quadrupling since then supports removing that V-notch.
2. If one considers the last gold bull market starting in 1968 when the public market divorced from the central bank market, then that bull market lasted 12 years. The formal US gold price would have risen long before 1971 if it weren't fixed. There were no huge paper games being played back then...for one there were no gold otc derivatives. The gold price retreated twice I believe during the 2 recessions of the 1970's, otherwise it probably would have risen every year. And those recessions occured because the FED tightened. Let's see if there will be any considerable tightening the rest of this year or in 2010.
3. The last 3 momentum and RSI peaks from 2004-2008 are all at wave 5 tops and part of a continuous 7 year up move. So what do we have from 2008-2009? If it's just a correction in the longer term 12-13 year bull market, then we could be still in wave 1 of the next multi-year move up. Compare the same indicators to the 3 main earlier waves 1 and 3 from 2001-2007. We definitely have not just finished a wave 5 move of the 2nd major leg up in gold. It's only 1 yr vs. 7 years for the first one. Something else has to be going on here. The 2 choices are either an 18 month ABC correction with B just having finished up, or the start of an entirely new major wave 3 up following a shorter ABC correction that has already ended. Which of the 2 choices is correct decides where we go next. Cohodk's analysis probably doesn't care which scenario is in play as it decides purely on declining momentum. But if this is early in wave 3 up (wave 1 was from 2001-2008), then it would normal to have a lower momentum.
4. How would this analysis look on the gold monthly chart rather than the weekly since that's where a true bull market has to hold up as well?
roadrunner
actually any ideas on how the gold to silver ratio might behave?
Groucho Marx
I would like to look at this on a ten year monthly
The wildcard is that the $USD looks like it could break .72 and actually seek .63
In that case gold is going higher
A one day dollar reversal/rally does not make it a trend
However, I'm very short the market so I'm down with a strong dollar
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Lower order waves often have lower momentum. I'd say we could be at the same point as October 2005 heading up into wave 3 of the first major leg. Back then gold broke out of long consolidation in the $375-$425 range. After breaking out to a new high it can back and retested the previous high of $450...but briefly. That would correspond to a 5% retrace today or about $1017. Basically sweeping back through the old high of $1033 and then some. Then off again.
It would be a pretty pitiful "bull" market if all gold could muster after it's 8th year and following a 19 month correction is bumping gold from $1033 to $1071....4%.
roadrunner
Also the dollar is overdue for some sort of rally be it a dead cat bounce or legit buying by funds looking for a quick bounce to the upside, this would be the trigger for a stock market and commodity correction which could be fairly small at 10% or severe at 30%.
A quick look at the bollinger bands is sufficient for my use... but I'm only a stacker. What paper I own is basically in Central Fund of Canada, and has been there for years... I'm planning to sell it this spring... only to pick-up physical in return at some later date... plans can change.
2010 is looking like one heck of a ride to me... double-dip? /elections? / fed raises rates? / 'fundamental' reforms?
I DO think its a cool thing to warn people if you really believe its in their best interest... which I think is the case... for that I applaud you.
www.AlanBestBuys.com
www.VegasBestBuys.com
Selling calls or call spreads would seem to be a good way to go because premiums on calls are skewed high
I do not intend to give specific investment ideas or advice.
That's the dollar saying that "we have a big problem, Houston". But we already know that
Exactly. I believe markets move on the "unexpected". Since we already know there are problems, prices most likely reflect the situation. At least until new information becomes available.
It would be a pretty pitiful "bull" market if all gold could muster after it's 8th year and following a 19 month correction is bumping gold from $1033 to $1071....4%.
I would exchange the word pitiful for tired. Four fold in nine years is a great bull.
Your chart says to me that gold will hit somewhere around $1,200 The 25 week momentum line is still aiming upward and has yet to roll over and embed for a while as the previous peaks had. So at least in the short term wouldn't it imply further to run?
Like I mentioned there is a chance I am premature. I could make an arguement for $1250-1300, but I dont think that is in the cards. If gold follows the same trend from the last 2 months, there is an 1150 year end target or about 7.5% higher. Im comfortable trading liquidity for 7%.
Guys, all I can say is that I LOOOOOOOVE that reverse head and shoulders pattern. Just LOVE it.
I obviously am not buying the H&S formation. As I run the pattern against the 100 thousand or so charts I have stored in my brain, I just dont see the pattern. I see what you see, but I am not convinced on the pattern. However, if you are correct, then it would imply a target of 1300 as I mentioned above.
Knowledge is the enemy of fear
Wierd, I was invested in pms for the entire bull, and it still doesn't even feel like a bull. It's the same feeling I got when libor went to 4.25% and Paulson stood in front of the cameras saying that the whole financial system could crash if he didn't get $800 billion for the bankers with a 1 page proposal.
Nothing really feels real. Earnings reports don't really seem like earnings, and stock market rallies don't really seem like rallies. Nobel Peace prizes get awarded for doing nothing, and the Secretary of Treasury "believes in a strong dollar" with interest rates at historic lows. The recession has ended, and already high unemployment is expected to keep rising at least into next March. P/E's are uncomfortably high, and the market keeps going up (why not - it's probably our own money from TARP anyhow.)
Congress won't bother to read their own 2,500 page legislation before voting on it, we stand to get hosed on taxes over energy and health care while while benefits are extended to those who don't, won't and haven't contributed - and anyone has to wonder why confidence is eroding?
Maybe I'm not the one who's going crazy, or maybe I just need "an attitude adjustment".
I knew it would happen.
roadrunner
<< <i>Four fold in nine years is a great bull.
Wierd, I was invested in pms for the entire bull, and it still doesn't even feel like a bull. It's the same feeling I got when libor went to 4.25% and Paulson stood in front of the cameras saying that the whole financial system could crash if he didn't get $800 billion for the bankers with a 1 page proposal.
Nothing really feels real. Earnings reports don't really seem like earnings, and stock market rallies don't really seem like rallies. Nobel Peace prizes get awarded for doing nothing, and the Secretary of Treasury "believes in a strong dollar" with interest rates at historic lows. The recession has ended, and already high unemployment is expected to keep rising at least into next March. P/E's are uncomfortably high, and the market keeps going up (why not - it's probably our own money from TARP anyhow.)
Congress won't bother to read their own 2,500 page legislation before voting on it, we stand to get hosed on taxes over energy and health care while while benefits are extended to those who don't, won't and haven't contributed - and anyone has to wonder why confidence is eroding?
Maybe I'm not the one who's going crazy, or maybe I just need "an attitude adjustment".
You are not the only one, then.
PS: to stay more on topic, I disagree that gold has reached a high. It might have one or more more troughs as the powers that be continue their desperate attempts to manipulate the market, but I think it's about to go parabolic too.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
I would agree that if we double dip next year, gold would present itself in another buying opportunity.
Let's see, sell some at "$2,000" and wait to buy it again at a third of that.
Now if I can just find that crystal ball and find those dates.....
Overall trend is still up, imho.
R95
I suspect the hoser v.s. the hosee model only works if everyone plays by the rules. And to stay on topic...There have been plenty of drum sounds from the jungle that speak of a stock market adjustment but it seems that with the institutionals pumping the life blood into the DOW et al via the ira's and 401K contributions then the market isn't going to retreat too much...as long as those stiffs still contribute to their plans, "saving for their retirement" as it were, the fresh stream of cash will keep all the rest quite leverageable. The only question is it @ 1:20 or can we pump it up a little more like maybe 1:100 or hell, why not 1:10,000...it's only good as long as someone will take it in exchange for something else.
Folks are buying gold and there was that article yesterday about a US retirement fund buying a bunch of gold as part of their basket so the gold bidness is probably going to be lively for a while. And then you have the new rich chinese being sold fresh metal with the partys blessing so gold is in play regardless of what folk may try and tell you. Besides, from 950 where it sat for months to 1050 now is a good thing. I don't see the bottom falling out of gold anytime soon as no one trusts the markets or the media there is only one way to stash. So, if gold drops to $1000...hey, let's sing in the sunshine, life is good. Methinks that there is going to be another attempt, post Cash4Gold, to shake the nonbelievers away from their metal. It could go like there is a bunch of manipulation to drive the price down and scare all the late to the party players so they cough it up out of fear. On the other hand, it seems that the highest form of protest for the moment is to buy and hold physical...it's the great equalizer but come to think of it, it always has been.
<< <i>Something tells me that if the same chart analysis were applied to gold in the 1970's that the time frame from August 1974-1978 (ie 50% gold correction followed by an initial leg up) the momentum would show a tired gold market as well. There were never any significant or drawn out corrections from that point on.
roadrunner >>
I think the difference during the 70's was that for the preceeding 200 years gold was basically fixed. You had a tremendous amount of pent up demand that was resolved with a massive 20 fold run in 7 years. You also had an acceleration in inflation from a relatively high 7% to a very high 13%. In 1979 we had a capacity utilization rate of 84%, which also fueled the inflation fire. There was demand that just coundnt be met. Today, utilization rates are about 69%.
Knowledge is the enemy of fear
The market has changed. I'm not saying the cliche "this time it's different" but I am saying that things are different now. Gold, stocks, the USD... the markets are not behaving like they used to. Something is different. I don't know what it is, I don't know what that means necessarily, but what I do personally believe is that the old rules, particularly with respect to charts and TA may not apply or may not be reliable. Caution is in order.
Regardless, I have no doubt in my mind that any physical gold purchased today will be worth considerably more in a 2-3 year time frame, if not sooner.
<< <i>The thing about reading charts and interpreting patterns is that it works until it doesn't work.
The market has changed. I'm not saying the cliche "this time it's different" but I am saying that things are different now. Gold, stocks, the USD... the markets are not behaving like they used to. Something is different. I don't know what it is, I don't know what that means necessarily, but what I do personally believe is that the old rules, particularly with respect to charts and TA may not apply or may not be reliable. Caution is in order.
Regardless, I have no doubt in my mind that any physical gold purchased today will be worth considerably more in a 2-3 year time frame, if not sooner. >>
This is a good post and expresses my thoughts better than I could!
<< <i>The thing about reading charts and interpreting patterns is that it works until it doesn't work.
The market has changed. I'm not saying the cliche "this time it's different" but I am saying that things are different now. Gold, stocks, the USD... the markets are not behaving like they used to. Something is different. I don't know what it is, I don't know what that means necessarily, but what I do personally believe is that the old rules, particularly with respect to charts and TA may not apply or may not be reliable. Caution is in order.
Regardless, I have no doubt in my mind that any physical gold purchased today will be worth considerably more in a 2-3 year time frame, if not sooner. >>
Let me play the old curmudgeon trader here. It is fine to have opinions, that's what makes a market. The old cliche: for every buyer there is a seller. That said, the above is dangerous stuff. Betting on a game changer is betting on a long shot. No matter how clear it may seem that the game has changed, betting on that event tends to be a losing bet. That's for all markets.
If the chart was for soybeans or a stock like Google, instead of gold would the response be the same--think about that. Take the chart for what it is, that's what successful traders tend to do. Yes, sometimes play a hunch and bet on the long shot game changing event and the parabolic move. However, those traders that do that consistently tend to fall into one of two camps. That trader is either is a magician with a Midas touch in the top 3% of traders, or that trader will be out of the game soon enough broke, having lost everything.
Stay humble, keep learning. Cohodk is one of the most experienced and successful traders on the forum. Most readers would do well to listen carefully to what he has to say, even if they may be on the other side of his trade.
Yet, T & A has kept me out of a lot of trouble and made me a lot of money which I use to buy pm's
I'm not sure what time frame and vehicle(s) the OP is trading on but that makes a huge difference
Daytrading, swing trading and long term trading couldn't be more different
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
1. when five technicians look at one chart, they can have ten or more interpretations of that chart
2. in pure technical analysis you look only at the chart. if you consider fundamental news as part of your reading a chart, then you are no longer doing pure technical analysis
3. pure technical analysis already reflects all fundamental news and factors, which is why in pure technical analysis you ignore fundamental news. that is to say, the fundaments are already priced into the market. however, fundamental analysis can include the reading of charts and technical analysis. (think about that one carefully before you say hogwash.)
and the most important one, which is #4
4. when five technicians look at one chart, they can have ten or more interpretations of that chart (curiously the same as #1)
cheers.
www.AlanBestBuys.com
www.VegasBestBuys.com
Yes, the rules are still changing. Let's start by listing a few changed "rules", and I'm sure that this board can think of more. Here are some potential game changers:
1) Corporate Bondholders are not necessarily on the top during a bankruptcy. The unions will be accomodated first, aka Chrysler. That's a direct affront to the long-standing precedents of corporate law.
2) Flash Trading by huge entities that is largely ignored by regulators.
3) No uptick rule.
4) No limits on commodity shorts, but strict limits on financial stock shorts if the going gets rough for the selected few.
5) Exposure of major companies and institutions to risk beyond what they planned for or what they can account for.
6) Legislative transfer of the liability of private risk to the public sector.
It's the job of this board to figure out what these changes actually mean. That's why we're here, isn't it?
I knew it would happen.
My time frame is the next 12-24 months. I am talking about the spot price of gold.
Knowledge is the enemy of fear
I believe there is no such thing as "this time is different". Humans will react to a situation in the same manner as they have throughout time. For example, if a building is on fire, some people will run away, some will standby and watch, while others will run into the fire. After the fire is extinguished come the looters. Humans have been behaving this way since fire was discovered. Perhaps the information that creates the emotional response is different--substitute earthquake or flood for fire in the previous example. Human emotion is constant and I have found the most successful traders are those that can remove emotion.
Knowledge is the enemy of fear
and good discussions
you aren't the matador and don't claim to be
barring any major political, economic and psychological influence (panic)...it's a good conclusion
<< <i>I believe there is no such thing as "this time is different". Humans will react to a situation in the same manner as they have throughout time. For example, if a building is on fire, some people will run away, some will standby and watch, while others will run into the fire. After the fire is extinguished come the looters. Humans have been behaving this way since fire was discovered. Perhaps the information that creates the emotional response is different--substitute earthquake or flood for fire in the previous example. Human emotion is constant and I have found the most successful traders are those that can remove emotion. >>
Sorry, there are indeed times when it IS different. The recent real estate bubble is a good example. While RE was skyrocketing, common sense and logic no longer applied. RE went up regardless, even though it had been overbought for a long time. Eventually logic and reason returned and it has crashed. But for a year or two, you had to play by the new rules.
Which is true with every bubble. Was true with the internet equity bubble, was true with the oil bubble, will be true with the next bubble.
What Im saying is it doesnt matter if the bubble is RE, Equities, debt, currency, tulips. Human response to the situation will always be the same.
You mentioned that the markets are "not reacting the way they used to". I think they are reacting exactly they way they used to. For the emotions that cause someone to buy or sell or abstain are always constant--greed, fear and apathy.
Knowledge is the enemy of fear
I steadfastly agree. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>I'm not sure what time frame and vehicle(s) the OP is trading on but that makes a huge difference
My time frame is the next 12-24 months. I am talking about the spot price of gold. >>
12 to 24 months
Puts via leaps
or
Futures contracts ?
If so, what kind of stops are you using?
Based on your assumptions----8%? Trailing?
Thanks for sharing if you can/wish
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>common sense and logic no longer applied
Which is true with every bubble. Was true with the internet equity bubble, was true with the oil bubble, will be true with the next bubble.
What Im saying is it doesnt matter if the bubble is RE, Equities, debt, currency, tulips. Human response to the situation will always be the same.
You mentioned that the markets are "not reacting the way they used to". I think they are reacting exactly they way they used to. For the emotions that cause someone to buy or sell or abstain are always constant--greed, fear and apathy. >>
Re: Human response.... I would add to the list that there is a personal "age" factor. I've observed myself getting more conservative in my decisions as I get older. Wealth preservation if you will. I have a friend that is 15 years younger and he reminds me of myself (years ago) as far as taking on risk. Last March and April he was jumping in with both feet with new money regarding the stock market. I've trickled in and out four times. My gains are much smaller than his. But then again I was out of the market by winter of 2007 and he rode it all the way down...and sold some equities.
What will be the condition of the dollar, and inflation in December 2010? What was the condition of those two factors in the 70's.
<< <i>OK, I agree no greed, fear or apathy when analizing. Going to go forward with no emotion. PM prices are directly influenced by falling dollar, inflation, and charts. Correct?
What will be the condition of the dollar, and inflation in December 2010? What was the condition of those two factors in the 70's.
I'll assume you're being facetious.
I see very little similarity in the conditions of present to those of the 1970's.
Knowledge is the enemy of fear
Hoye pivotal events
Bob Hoye's take is similar to Cohodk's chart, at least in the short term. He expects dollar strength coming that will retest its 20 week EMA once weekly MACD crosses back over. But for the moment, this really doesn't say what he thinks about 12-24 months out.
roadrunner
I think we spike to $1,200 or so, and then sells off over the spring-summer 2010 and then its off to the races after the 2010 Elections because of inflation as Market confirms the Joker is a one term nightmare.
I'm afraid I don't see much out there to keep gold down.
Not trying to embarass the OP. It takes courage to make a market call as the market eventually makes fools of all of us.
--Jerry
Kind of like saying the top was at $10.50 when it really went to $10.90. Does it really matter?
Knowledge is the enemy of fear
<< <i>This is a call for the next 12-24 months. If it goes 4% higher, then I say whooppdy do.
Kind of like saying the top was at $10.50 when it really went to $10.90. Does it really matter? >>
So the obvious question is how high does gold go before you say your analysis is wrong? 5%? 10%? 20%? Or is it a time factor?
I realize that your trading style is more minute by minute day trading with tight stops, so a 12-month outlook is only a framework to look through. Is there a price point where you reverse the negative frame and start trading from the long side? Stochastics in general, work maybe 80% of the time, however, some of the time stochastics fail, it is a runaway market to the other side. Position traders that use stochastics almost have to have use a stop, even though the indicator keeps generating stronger signals as the trade moves against them.
Is there a price point where you reverse the negative frame and start trading from the long side
At this time I have no price point at which I would reverse my position as I still have very high confidence in my call. Tomorrow maybe the most important day for gold for the next year.
Knowledge is the enemy of fear
<< <i>Will it make an "evening star" formation tomorrow? If so then you will have your answer.
Is there a price point where you reverse the negative frame and start trading from the long side
At this time I have no price point at which I would reverse my position as I still have very high confidence in my call. Tomorrow maybe the most important day for gold for the next year. >>
Candlesticks are less reliable than stochastics, though when they fail, it doesn't become a huge loser, like stochastics tend to generate.
I think the most important day happened already and was the breakout from $950. If there is a reversal it is most likely to generate a trading range, not a waterfall decline.
I knew it would happen.
If Cohodk's view comes to fruition it will be through the general road map that Rosen diagrams in the above article. It surprised me to find out that gold in the mid-70's also did an expanded B-wave correction (a higher high) on it's way to a 50% decline. I should have known that but it never clicked. The current move up in gold from March 2008 could be in a similar expanded B wave formation (a higher all time high has occured). But one big difference is that the mid-1970's correction didn't have the breakout of a massive inverse H&S formation.
Rosen's theory is predicated on linking the 1970's together with post 1999 gold. I'm not sure that a wave 2 from 1980-2002 (22 yrs) makes a lot of sense unless the future wave 4 takes a similar amount of time.....not 6-18 months. In any case it's interesting information for the worst case downside to gold if you hang your hat entirely on Elliot Waves and Fib ratio's.
Very low volume today on GLD, SLV...lowest in weeks. GDX had them both beat percentage wise. But over the past 3 days....rapidly declining volume on gold and silver.
roadrunner
<< <i>
Very low volume today on GLD, SLV...lowest in weeks. GDX had them both beat percentage wise. But over the past 3 days....rapidly declining volume on gold and silver.
roadrunner >>
So does the stock market cliche apply to the gold market, "never short a dull market?"
So much for the "most important day for the next year," down $2, a yawner. Even if it turns out to be an intermediate top, it certainly won't rank in the top 50 days for 2009. I think ProofCollection has an excellent point that candlesticks are a much muddier indicator for 24-hour markets such as gold. A clear candlestick in the New York market, may not look like anything, or even give an opposite read when looking at a candlestick based on London time or Asia time. So which signal does a trader take?
Let me add a point for the readers, many of which are novices. Position trading based on stochastics without stops can be the road to the poor house. Like I said, stochastics tend to have a high probability, but the losers can be huge. It is one thing to use the longer term stochastic as a frame for day trading. However, for position traders that hold overnight for weeks or months, in a strong trending market, the stochastic can generate stronger and stronger signals until the trader is completely broke. Stops or other loss limiting techniques are a must when going against the trend.