Sunday, December 11, 2011

Gold's Secular Bull Daily and Weekly Cycles


I have been working on several projects involving writing script for use on the ThinkorSwim platform for weeks and weeks. Tonight I would like to post one of the projects that is completed.


This is a collage of 4 charts which very accurately identifies each of gold's daily and weekly cycles since the inception of it's secular bull market in February 2001. The small blue arrows point to each daily cycle low. The larger orange arrows identify the weekly (intermediate) cycle lows. Green dots identify the daily and weekly cycle highs that are within a right translated cycle, while red dots identify those within a left translated cycle.

In attempting to make sense of where we are at present, please note that each C-wave top throughout this secular bull has been followed by a weekly cycle that was left translated. I believe that we are presently in that type of situation, with the $1923.7 high achieved earlier this past fall as a C-wave top and the $1507 intraday low in latter September beginning our current weekly cycle.

If I am correct, the high achieved in early November will prove to mark the high of this left translated weekly cycle (ie. we will not see $1800 gold until well after this weekly cycle bottoms). My best guess is that the current weekly cycle will bottom sometime in February.

If, by chance, the September low is breached that would suggest we are in a continuing D-wave. Indeed, the early 2004 and 2008 C-waves were followed by left translated weekly cycles that "failed" to hold their Day 1 price level.  But for now I am satisfied to entertain the notion that we are in a normal A/B-wave phase and that price will hold above the $1500 level into February.

Some other things I am writing the computer code for include the True Strength Index (TSI) indicator BUY/SELL signals of gold's secular bull market which will appear as an indicator directly below the price chart you see, and an adaptation of the script that allows for stocks/ETF's to be compared with gold's cycles and TSI BUY/SELL signals. One will be able to view a chart of, say, GDX or NUGT, and simultaneously have all of the cycles and TSI information of gold superimposed on that chart.

Another project I have nearly completed offers a precise analysis of the 4 hour cycles of gold.     It turns out that each daily cycle of gold is made up of nested 4 hour cycles. These 4 hour cycles are usually around 40 bars (4 hour bars, of course).  They are either left or right translated and provide some very interesting trading opportunities - not only for gold but also gold/mining related stock products such as GLDGDX and so on.  I look forward to beginning to trade this information soon and posting it for your observation and discussion.

Have a great week and I hope to get another post up within a week or so.

13 comments:

  1. You did all the coding yourself john? wow..
    is it applicable in other platfom also? let's say Meta Trader?

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  2. Pacific Ocean - I like your screen name. By chance do you live somewhere near the Pacific Ocean?

    Yeah, I did all the coding and I have been at it for so many hours that the coding is pretty slick.

    Applicable? Not sure I understand your question.

    Will the ThinkScript code I have written run on Meta Trader or some other platform? No, I don't think so.

    Could my code be reworked to another format such as Meta Trader? Yes. But I don't have access to Meta Trader nor its programming language.

    At some point I may look into that. And if you have any followup ideas I'd love to hear them.

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  3. will you be sharing the code?

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  4. great work, John! Many thanks for sharing it with us!

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  5. Anon - I do anticipate sharing the code at some point. Probably of greater usefulness is the code for the 4 hour cycles which I have not shown yet. It seems to be nailing these turns in gold with scary precision. I should post it soon.

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  6. Good to see you back John. Bad link on thinkorswim. I will be looking fwd to your upcoming posts.

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  7. welcome back also,John, was wonder if you would come back to us.

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  8. Hello John,

    Great work!

    I am new to TSI and would like ask you the criteria that you used to determine when a C-top is definitely in...as you depicted in above gold charts with conviction.

    Thank you.

    Tim

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  9. Hi John

    Great to have you back! Looks like fantastic work you've been up to. Congrats!

    Greg

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  10. Hi John

    Looking at your work, as the intermediate cycles appear to be roughly six months apart, if we take the July cycle bottom, it looks possible that the Oct bottom might be too early. Could the real bottom of this intermediate cycle be in Jan?

    Also, extrapolating your internmediate cycle bottom data, if that's so, then the next intermediate cycle low could be around the $1650-$1700 area. This is just me visually interpreting your charts so not sure how much merit my views have!

    Anyway, looking forward to your new posts - I think we've all missed you!

    Greg

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  11. Hi Tim - C-wave tops are determined using several tools but the one I favor for simplicity sake is it's percentage above the 200 dma. I have written about this earlier but just going from my recollection, the 2006 C-wave topped 34% above its 200 dma, the 2008 C-wave topped at 28% and the 2011 topped at around 32%.

    I am sure the exact measurements are in previous posts - but the point is that price at a C-wave top is always reached in parabolic fashion and is EXTREMELY stretched above the 200 dma mean.

    If you look at the entire secular bull you will be hard pressed to find price ever reach even 20% above the 200 dma, let alone 30%+.

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  12. Greg - thank you for your kind encouragement.

    I suppose there are lots of ways to look at the same thing. What I observe is the tendency for stretched cycles to be followed by shortened cycles. The weekly cycles previous to July were very lengthy - with 5 and 6 daily cycles. That this is followed by a couple of weekly cycles of just 3 or 4 daily cycles is not surprising at all. In fact, it is expected. Indeed, if you look over the entire collage I posted, many weekly cycles are just 3 daily cycles.

    The next intermediate cycle low? Hey, your guess is as good as mine, to be honest. I have a hunch the bottom will come much lower than $1650-$1700 area.

    Perhaps just nonsense, but we know that gold has an 8 year cycle......which somewhat explains gold's behavior in 2008 following the bull's inception in 2001. And if you look back 20 - 30 years further you will see this 8 year cycle easily.

    But the early 2004 C-wave, like the 2008 8 year cycle low, was also followed by a failed left translated weekly cycle. Very unusual. If there is such a thing as a mid-cycle low I have to wonder if 2012 will provide us with one. It's possible. In that case something closer to $1400 seems reasonable.

    I'll be looking at that in greater detail, 4 sure.

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