Friday, December 30, 2011

Gold: Look Out Below The D-wave Continues

Today, something significant happened in the gold market.... and it's not good news for the bulls, at least short term. 

The current weekly (intermediate) cycle began on September 26th with a low price of $1535 became a left translated weekly cycle on December 22 when the count of days within the weekly cycle reached 63.  The cycle's high of  November 8th (Day 31) then became left of the cycle's center. 

But as I recently pointed out in Gold's Secular Bull Cycles and Its ABCD Pattern, each and every C-wave top has been followed by a left translated weekly cycle except the 2002 C-wave. The odds therefore were very high that our current weekly cycle, which has followed the $1923.7 C-wave top of September 6th, would also be left translated.

However, the left translated cycles that have followed all but one C-wave, curiously, were not failed cycles - except for the early 2004 and 2008 C-waves. A failed weekly cycle is one in which the cycle bottoms lower than the price where it began. 

Here is a daily chart of the 2003 - 2006 cycle data for gold.

The early 2004 C-wave was followed by a weekly cycle that was a failed weekly cycle. When a cycle fails price will continue to fall sharply and when it finally bottoms, the A-wave begins with a very powerful rally.

Here, let's take a closer look at the early 2004 example to see the failed weekly cycle in more detail.

In this case, the weekly cycle bottomed 7 or 8 days after the failure.

In 2008, gold investors were not so fortunate to simply endure a week or two for things to start getting better.

In this case, price sliced right through the failure line and kept going, only to decide to retest that price level (unsuccessfully) and then take everyone on a fantastic ride into outer space..... crashing for one week and soaring for the next..... seemingly over and over again

Last summer I wrote about a post titled, Gold C-wave Tops and D-wave Retracements.  My research detailed each of the 6 historic examples with measurements of D-wave price retracement of the C-wave that preceded it, trading day tally for each D-wave, and the relative speed in terms of trading days that each D-wave plummeted to reach key Fibonacci levels.

With today's breach of the current weekly cycle perhaps this would be an opportune time to refresh our memories on the kind of damage D-waves do to the price of gold.

The following chart shows the entire 2009 - 2011 C-wave that concluded September 6th and applies some Fibonacci measurements to this C-wave's $1058.7 rise above its $865 beginning.

It is a bit scary to see the historic retracements of the previous 6 D-waves and apply them to today's situation. We have a retracement to date of 38%.  I would put the odds that gold has finished falling at about ZERO. And I would put the odds that gold reaches $1400 at 80 - 95%.

Some readers have been writing to inquire about my work on the four hour cycle of gold - and what it is telling us now, if anything. The following chart jumps us in a new direction with an overview of the past 180 trading days that platform makes available for the 4 hour time setting.

For starters, the blue counts are the bar lengths of each four hour cycle. These measurements have ranged from 57, 55 and 50 on the long side to 28, 31 and 36 on the short side.

The purple counts are a calculation of the number of trading days in each daily cycle at its concludion. These daily cycles have ranged from 14 to 28 days. My own research on the entire lot of daily cycles from 2001 to present is that daily cycles average 24 days.

The next chart zooms down the time frame to just the current weekly cycle.

Some quick things to note.  There have been 3 completed daily cycles in this weekly cycle (18.8, 23 and 27.3 days each). Within each daily cycle we find the nested four hour cycles. The first two daily cycles had three nested four hour cycles. The third daily cycle had four. We have just begun a new daily cycle - literally at 8:00 am cst this morning. And that means we will have more nested four hour cycles before the conclusion of this daily and weekly cycle. 

If you would like to study the number of four hour cycles that are nested within each daily cycle just look at the chart that preceded this one!

Well, getting down to the nitty-gritty now. Here is a chart of the four hour cycles up close with the TSI BUY/SELL signals below price.

We see that price has bounced after crashing through the failed cycle level of $1535 (as in the 2004 example), the slower trending TSI (25,25) has turned from red to green, indicating a likely change in trend direction, and the TSI (7,4) has signaled a trend line break BUY (green dot).

BTW, the small red/green dots above price locate the four hour cycle high - red is for left translated, green for right translated.

OK - so where do we go from here?

Lower, obviously. But maybe enough of a bounce in the very short term that I can keep a sale of my NUGT and AGQ positions from being too embarrassing. (lol)  

If that does not work out for me I will stand aside and look the other way for awhile. It's a bull market, after all! Those of you who can wait - you are about the get the buy of a lifetime. Let's all keep an eye on it together, OK?



  1. Thanks John. I don't have a firm grasp of gold's 4 hour cycles yet but maybe it will to me in time. I appreciate all your help. LZD

  2. Thanks John!
    My very best wishes to you and your families for a wonderful holiday season and healthy, happy and prosperous New Year 2012!!!
    I Love TSI!

  3. Thank you John. NUGT looking good for a sell coming up. Thanks for helping me to decide if I should sell into strength or hold.

  4. Hi, John,

    thank you for your kind updates.
    I have just a couple of questions on your article. Why do you put the possibility of gold reaching 1400 USD at 80 to 95%? Due to how D-waves have developed over the years?

    Also, how about where do you think silver might reach? I have read a couple of pieces. Prices range from 21 to 26 USD. WOuld love to hear your comments.

    THank you and best regards,
    Marcus Tan

  5. LZD - I appreciate your support, as well.

    VINCENT - You are the BEST!!!!

    Mike - I try to tell what I know and if helps someone then it is worth my effort, and that is MY reward.

    Marcus - 1400 USD, yes due to how D-waves have developed within this secular bull market.

    HOW LOW WILL SILVER GO? Honestly, silver will generally do whatever gold does. Past that, it looks sick to me. I was reviewing an old post I did about silver and it reminded me that $20 was a distinct possibility (and this was when silver was $35, btw). I am long AGQ but think a better opportunity to have this position will come later.


    looks like the number on the XSLV chart is $22.

  7. Woah, John,

    thanks for the update.
    If gold and silver really goes that low, I think we're really in for the buy of a life time (other than back in late 2008), both for physical metals and the mining stocks...

    Thank you for all the fine work you do, John.

    Thank you and best regards,
    Marcus Tan

  8. Hi John, what about the bullish percent? It is really low and seems cannot go much further.

  9. Anon - you happened to ask about something I am working on writing another script for. I have all the daily data for the entire period that $bpgdm is recorded, I have written the script to chart the data exactly as seen as, but only input about half the data. So at the moment, my script draws the $bpgdm from Feb. 15 '08 to Oct. 28, '09. As always, programming and the data entry itself is time-intensive and proceeds slowly. But I'll get there if not distracted too much.

    When the data is finally input I will make it so the $BPGDM can be viewed on the screen along with GDX, GDXJ, NUGT, GLD, /GC and also so that a separate script will detail the movement of $bpgdm with the TSI, though the background symbol also displayed may be one of the aforementioned.

    But to cut to the chase and try to answer your question, the best example we have that relates to the current situation is Oct. '08 - Jan. '09. In this case, the miners (HUI/GDX) actually bottomed with the $bpgdm reading 15, or thereabouts. What followed was a 'month later' retest of miner price (HUI/GDX) which held, BUT the retest sent the $bpgdm plummeting to 0 (from 15). As the $bpgdm headed to ZERO, the mining index actually bounced off the successful retest and began an explosive rally. The GDX - AS THE $BPGDM IMPLODED TO ZERO - rallied 100% in just five weeks.

    In this example, anyway, it was the positive divergence concept that spilled the beans. That is, miners began to take off while $bpgdm continue to new lows.

    At the moment, the TSI has a positive divergence BUY signal as well as a trend line break BUY signal on the miners.

    But the $bpgdm does not have either with respect to the miners. ie - no buy signal, as defined above - from $bpgdm for miners.

    I wish I could make my projects move faster but I am just one guy working on this in my unpaid 'free time'.

    *Seems it cannot go much further* Yes, true. It may not go *much* further. But it can go to ZERO and that is *further*.

  10. Mr Townsend,i wish you, your family and all readers of your blog a very happy healthy and prosperous new year 2012. May God Bless us all with good health and prosperity in the new year.
    best wishes