Saturday, 31 October 2015

Bearish curves on gold chart from last 2+ years

Looking at this weekend gold chart, I noticed that there are bearish curves on gold chart from last 2 years. Ol' Jim Sinclair used to say about 10 years ago that one should have a set of parallel rulers and some French curves to do charting.

Instead of drawing a falling wedge, one might instead encompass the last 2.5 years of price action between two steepening down curves.

Well, here are some curves on the gold chart that do not look too good.

In sketch form, if the recent high circled in red is the high for this current move, then there might be a lot more downside to come. This recent up cycle looks a lot like a stunted version of the previous up cycle from January 2015:

Looking from an even more bearish perspective, this last 2+ years of action mirrors the action in late 2012 to early 2013. We are again at the 4th high of a series of falling highs. Last time, the 4th high was the failure to hold above $1600. This one is the failure to get to $1200. Geronimo?

I am beginning to realize that you can draw almost anything on one of these charts but I do not like at all the downside acceleration of both the highs and the lows. It is ongoing as far as I can see. Who knows when it will end?

The 2012-2013 down move culminated oi the mid-April crash in gold on 12 and 15 April 2013. Immediately preceding the crash there was a failure to hold above $600 (high number 4 in purple/green on the chart) and just after that an abortive little bounce that went to about $1590, failing to reach $1600. That ushered in a $270 drop within a very short space of time.

This time around, we have the recent rally to $1190 (high number 4 in blue/red on the chart). The price failed to hold over $1180 which is key horizontal resistance dating back to the lows of June and December 2013. Very soon after we had a little bounce that failed to reach $1180. This might be an indication that gold is about to break down severely.

Here is a better chart with proper parabolas drawn for me by one of the lead contributors at, which I would thoroughly recommend joining:

Last week's sharp selloff could be very bad news. Unless the price rallies to above $1180 or at least spends at least a number of weeks trading sideways, there is a chance of an imminent second crash in gold  based on this view.

However, the breakdown in April 2013 crashed through a level of support that had previously held 3 or 4 times in 2011-2013, i.e. $1520-1540. This time there is not a level of support to compare to this one. In this case, it might be postulated that the $1030 level (the highs from 2008) might be the key psychological level that may fall this time around.

To Rick’ Ackerman’s $817 target by the end of the year perhaps?

The width of the channel as measured when drawn as a falling wedge in previous posts was about $250 at the start and $170 recently. The $250 is about equal to the original April 2013 crash down move ($-270 from $1590 to $1320) so perhaps I could propose the secondary down move might be of the order of $170 from wherever the bottom of the channel is currently. It is not far above $1000 on the curved channel above and a little higher is you draw it as a straight falling wedge (maybe (1050?). It also depends on the time taken for the move. A down move to $1000-$170 or $830 is well within the realms of possibility.

Here are some great articles on Phase III of bear markets on, etc

Here are a couple of charts from those articles (these do not belong to me but they do not show on the above articles at the moment for some reason.) Note the striking similarity between the down-move in the Dow in 1929-32 and gold in 2012-2015. Both bear markets had their middle stage within an inverted parabolic trading channel. In the case of the Dow in 1932, the final plunge was still within that trading channel but this still allowed for a huge drop to the final low. I suspect the same may happen with gold. At present, the channel bottom is at $1000 but I think that will probably match the action in the Dow at the start of 1932 - a sideways to up shallow bounce to follow plus a plunge to $800. I therefore think the recent $1191 high in gold was probably equivalent to the Dow high in Nov 1932 (or perhaps the one in March 1932 if one is to be a little more optimistic). 

Here are a couple of links:
BOO times TWO!

There was an interesting show on Korelin Economics Report this weekend from the New Orleans Investment Conference:

This post is mirrored on Golf TA Paradise at
"Bearish curves on gold chart from last 2+ years"

with some good user comments underneath.

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