Friday, January 6, 2012
Sold DUST @ $37.76 - Gold Leaves a New Clue
Click on any chart to ENLARGE
With just minutes left on today's week concluding session I took a look at my position in Direxion Gold Miners Bear 3X ETF (DUST) and hit the sell button. Nothing in particular was wrong with the chart technically, I just felt like taking my marbles and going home for the weekend.
While studying the weekly charts of the World Gold Index (XGLD) and looking at the placement of each ABCD wave, I began to notice something I had not seen before. Ever.
I'll show you what caught my eye with the following three charts of the Gold Index. My training/tinkering with gold's cycles, whether they be the four hour, daily or weekly (intermediate) variety, has included an appreciation for the violation of a cycle's price trend line before its conclusion. This trend line break is not a certainty I guess, but a virtual certainty.
So I got to wondering if the ABCD pattern of gold's secular bull market also exhibited this characteristic. That is, has price in every instance broken the trend line of the ABCD pattern before beginning a new ABCD pattern?
Our first weekly chart is the Gold Index from 2002 - 2005. As you can see, there were three complete ABCD patterns in this time frame and indeed, the trend line of each was broken by price before beginning a new ABCD pattern.
The 2003 pattern saw price come down and touch the trend line during the D-wave. But as we will see in other examples, apparently just touching the trend line is not the characteristic of a completed ABCD pattern.
Our second chart looks at the late 2004 C-wave top and continues with the 2006 and 2008 specimens. The introductory price movement of the 2006 example was so flat there was virtually no trend line. That is, the A-wave bottom ($410.10) and C-wave bottom ($413.50) were unable to give an accounting of the ABCD pattern's price trend.
An up sloping price trend line did finally emerge and surprise, surprise ..... it was finally violated by the 2006 D-wave the very week that defined the beginning of the 2008 ABCD pattern.
Also, the late 2004 example, like the 2003 ABCD, found price reach the up ward trend line, but it was not until this trend line was breached a couple of weeks later that the D-wave concluded and an A-wave begun anew.
Finally, let's have a look at the most recent ABCD activities.
On the far left of the chart is the conclusion of the 2008 example - and again note that price tagged the trend line near the conclusion of the D-wave, but it was not until the trend line was clearly penetrated that this D-wave came, mercifully, to a final conclusion.
And on the far right of the chart is the parabolic top of 2011 and we note that the trend line of this ABCD pattern has already been touched by price - but not penetrated.....yet.
My TSI Trading Record has been updated.