Sunday, June 26, 2011

X Marks the Spot for Gold's Bottom; Silver Update

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Believe me when I tell you I entirely understand that nothing under the sun works 100% of the time in being able to fortune tell the exact movement of the financial markets. Our task as successful traders and investors is simply to do our very best at putting the odds in our favor - fully understanding we will never bat 100%, at least not for very long, and we should be very pleased when we manage to get the majority of trades to go our way.
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Having said that, I hoped it would be encouraging to some readers to again take a closer look at gold's daily and intermediate cycles. This time with an eye on the intermediate cycle top that occurs about every 6 months, and a closer look at what happens after the top is in.
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Click on any chart to ENLARGE
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On this daily chart of the World Gold Index (XGLD) you will notice that I have used an 'X' to mark the spot of each of the recent intermediate cycle bottoms. I also used an 'X' to mark the spot where at least one daily cycle concluded before the final left translated daily cycle (which is also the bottom of the intermediate cycle).
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I'm sure you will notice the relative symmetry of the intermediate cycle tops. Kind of like clock work, don't you think? Also notice how accurately the True Strength Index (TSI) indicator nails the exact bottom usually within a single day or the very day itself.
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Finally, the three preceding intermediate cycles concluded with a left translated daily cycle. This is what we presently have as gold appears to have topped on Day 7 of a 20-28 day cycle.
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And let's take a quick look at silver. The continuous futures contract began trading a little over an hour ago. Traders were very quick to test silver and succeeded in bringing it down to $33.88 in fairly short order.
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15 comments:

  1. Thanks for the great post!

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  2. Thanks John, very assuring

    I wish you well.

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  3. JOhn, is it just the metals or the entire market do you think will go down ?

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  4. Dan - Thanks.

    Gilbert - I'm going to sleep tonight like a baby.

    Anon - I think the entire market will be down considerably over the next 4 weeks - maybe 200 S+P points.

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  5. John great post. Do interest rates follow the same "cycle" that gold and stock market does?

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  6. Thanks John , have a nice dream.
    Tracy

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  7. Thanks for the update John.

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  8. John

    GDX,GDXJ & SPY all show positive crossovers of their TSI moving averages while GLD shows a very negative crossover. To my untrained eye it seems possible for equities to go up as they frequently do before the 4th long weekend. Then down?

    Thanks for the continuing education.

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  9. Jeff - I have never studied that.

    Tracy - I slept well, thank you.

    IAmPhoenix - awesome! Now for +2.

    Nik - thank you for being a reader!

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  10. Douglas - I don't use moving averages per se. But what I do see is that everything has made bearish crossovers of the TSI (7,4) ZERO line. I have no clue what equities will do before the 4th of July long weekend. I do think that once the S+P trades below 1241 it's time for me to buy TZA.

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  11. Hi John,

    great posts--today is very strange, dollar just dropped down for some reason, but oil, gold, silver are also down --what is your take on the dollar dropping like it did and the metals dropping also-

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  12. Thanks Bob. Well, if you look very carefully at a 60 minute chart you will probably notice that for the past 6 hours the dollar is net lower and gold and silver are net higher. So, these things move around, seemingly irrationally at times, but in the end it tends to all even out.

    Traders seem to migrate from testing a high to testing a low. At the opening bell last evening (Sunday 6 pm EST) the dollar was tested up to 76.60 (Sept contract). Now, some 14 hours later, the dollar is being pushed to test the low of last Friday (around 75.50). My hunch is that once that issue is resolved, the dollar will turn up and work on testing the high achieved last night, and so on.

    It's just the way the game works. You have a group of folks bullish and another group bearish. Each is in the market to make money, of course, and think their direction bias is correct. One group always wins a battle, the other group loses. The winning group then demands that price go their way, and for a while it does. At some point the other group charges out of the recovery room or the medic's tent and starts a new battle to reverse direction. And on and on.

    I write all this to try and explain that these ups and down during the day are usually benign when compared to the bigger picture. If you are bullish and the bears have been winning for several hours, it just gives you a better entry point. Something to smile about, right?

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  13. thanks john,

    I'll stick to your analysis and Gary's-- I think gold /silver are both going to be trending down as you show so well in your reports.Today with the dollar down big you would of thought gold/silver would be up big time but gold is basically flat and silver is still down--At least for me there will be better entry points in the near future

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  14. Great Blog thanks for sharing your knowledge.

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