Sunday, December 9, 2012

Perspective Offered on Gold/Miners Current Status

Every once in a while investors in precious metals and their miners go through a phase where they simply cannot see the forest for the trees. My sense is that many investors are going through such a phase at the present time. I hope what I will discuss in this brief effort will give many a renewed focus on the journey of the gold bull and the motivation to not get thrown off any time soon.

About a year ago I wrote a very detailed analysis of gold's cycles - daily and intermediate - as well as the repetitive ABCD pattern which gold is presently repeating for the NINTH time since 2001. The link to that easy to read analysis with great charts is here: Gold's Secular Bull Cycles and its ABCD Pattern.

The key point to note is that gold's intermediate cycles, averaging 4.5 months, are made up of smaller daily cycles that average 24 days. The intermediate cycles are usually right translated. This means that intermediate cycles do not top until sometime after (to the right) of their midpoint duration. That is, an intermediate cycle that ultimately lasts 20 weeks, trough to trough, would peak sometime after the 10th week. Similarly, the daily cycles nested within the intermediate cycle are also usually right translated. So, a daily cycle of 22 days would reach it highest intra-day price sometime after the 11th day, and so on.

However, there are left translated daily cycles and left translated intermediate cycles. And their occurrence is surprisingly predictable.

Left translated daily cycles occur as the final daily cycle of EVERY intermediate cycle. If you take a look at the charts I created a year ago (link above), you will see an orange arrow pointing upwards at each intermediate cycle bottom. You will also see a red dot above price just before the arrow. The red dot identifies the top of a left translated daily cycle, while green dots identify the tops of right translated daily cycles.

Having attempted to restate these basic cycles characteristics of the gold bull, this brings us to the present situation and the chart below.

The current C-wave ( and IC 1 = Intermediate Cycle 1) began on May 16, 2012. To date, a single intermediate cycle has been completed. It consisted of 5 daily cycles. The first 4 daily cycles were right translated, as expected, and the final daily cycle was left translated. No surprise there, either.

As I think it is very likely that the first daily cycle of the second intermediate cycle completed last Friday with a low of $1684.1, we are just today beginning the 2nd daily cycle. This is the time to BUY!

Those who have been focused on the trees and not the forest are understandably very wary at the moment. Those who understand that gold is continuing its journey exactly to script do not have a worry in the world. 

I have been absorbed with writing computer trading strategies for months now and honestly not looking at things as carefully as I am at the moment. 

In the perfect view of hindsight, I wonder what the heck I was thinking to buy any mining position long from around early September forward. Well, I wasn't thinking, obviously. My point is that buying into the 4th daily cycle is already late in the game as it is likely to be a left translated daily cycle.....and even more likely to be followed by a fifth daily cycle that is left translated, as was the case. 

So if you have wondered why I have not been selling any positions, perhaps you now understand. The optimal time to unload was quite some time ago and so patience will get it right the next time. It is a bull market, after all. 

Keep smilin',



  1. Hello, John. This is another excellent and most helpful article. Thanks much. I understand the intermediate cycles top in a certain time frame (for instance, around 4.5 months), but I wonder if there are technical clues which help you identify tops sooner rather than later. Have you any thoughts on this?


  2. John,

    I also use TradeStation but have been unable to find a TSI indicator. Have you found one or did you write your own in Easy Language? If you did write one in EL I would be happy to support your effort with some FRN's.

    Chi-Town Deadhead

  3. Hi Joe - yes, a couple of thoughts come to mind. But first, please allow me to
    clarify one of your comments. The average intermediate cycle is around
    4.5 months from beginning to end (that is, from trough to trough).

    The intermediate cycles of gold's C-wave are always right translated - except at the
    very end of the C-wave / beginning of D-wave phase. This particular intermediate cycle
    is always left translated. You can see this on my post and charts of a year ago -
    downward pointing arrows are intermediate cycle if right translated,
    red if left translated. This of course means that the first daily cycles are all going
    to be right translated within each right translated intermediate cycle.

    Second, one can think of each ABCD pattern as something of a parabola within a parabola.
    The big parabola is what has been transpiring since 2001. The smaller parabolas are the
    C-waves nested within this larger secular bull parabola. If you think about the shape
    of a parabola, it begins relatively flat then begins to rise at an increasingly faster
    rate. The A, B and early portion of the C-waves are very similar. That is, price does
    not make substantial upward gains. Also notice that the current C-wave, first intermediate
    cycle progressed in similar fashion - flat then progressed sharply higher. We should expect
    that successive intermediate cycles will generally rise at faster rates than the intermediate
    cycles that precede them.

    On the technical side, C-waves tend to top when price reaches significantly above the 200 dma.
    I have written much about this. The point is that until a number of right translated intermediate
    cycles have transpired and price is excessively above the 200 dma, the end of successive right
    translated intermediate cycles is not in sight.

    Of course there is more to say, but that's it for now as I hear the school bell ring. I hope these
    thoughts help and thank you for your question.

  4. Thanks much, John. And yes I understand the cycles are measured bottom to bottom. I was simply careless in my inquiry. Again, you have been very helpful.


  5. Hi Chi_Town - what are FRN's?

    Here is what I use, with some other junk added in that can be cut:

    [LegacyColorValue = true];


    var: TSI_Trigger(0), emaAvg(0), tsiVal(0), MovAvg(0);

    tsiVal = TSI(Price, Raw, Smoothed1,Smoothed2);
    emaAvg = XAverage(Price,xEMA);

    Plot1( tsiVal, "TSI" ) ;
    SetPlotColor (1, DecelerationColor);

    Plot2(XAverage(Plot1, TSImovavg), "XAvg");
    If plot2[1]<Plot2 then SetPlotColor (2, RisingColor)
    Else setplotcolor (2, fallingcolor);


    There is another way to write this and if for some reason
    this does not work for you, I will write out the longer version.

  6. John,

    FRN = Federal Reserve Notes :)

    Thanks for the info.

    I tried putting it into Tradestation and it is giving me n error on line 20.

    Thanks again for your time and effort with helping us.

    Chi-Town Deadhead

  7. Chi-Town - sorry about the bogus code. I cut and paste from something
    I had that works, but perhaps in a bigger context.

    I'll write this out now - my preferred long vong version - and let me
    know please if I get it wrong twice, OK? Also, I am changing the color
    of the TSI depending on what it is doing in which quadrant, and adding
    a red ZERO horizontal line.

    Inputs: LongChi (25), Short (13), PosUp (blue), PosDown (Cyan), NegDown (Magenta), NegUp (blue), ZERO (red);

    Variables: TSIChi(0), diff(0);

    diff = close - close[1];

    TSIChi = (XAverage(XAverage(diff, longChi), short)) / (XAverage(XAverage(AbsValue(diff), longChi), short)) * 100;

    Plot1(TSIChi, "TSI_Chi");
    If TSIChi>TSIChi[1] and TSIChi>0 then SetPlotColor(1, PosUp)
    Else if TSIChi0 then SetPlotColor(1, PosDown)
    Else if TSIChi<TSIChi[1] and TSIChi<0 then SetPlotColor(1, NegDown)
    Else SetPlotColor(1, NegUp);

    Plot2 (0, "ZERO");
    SetPlotColor(2, Red);

    :-) John

  8. John,

    Thank you again. This did have 1 error but I think I figure it out.

    Else if TSIChi0 then SetPlotColor(1, PosDown)

    This was the line that had the error in it. I added an "=" in between TSIChi and 0. Is this correct. It seemed to take it in Easy Language and it appears to be working.

    I have been using it on TOS but their data feeds get screwed up too often and I was getting some false readings.

    I'll let you know how it works out on TradeStation.

    Chi-Town Deadhead

  9. Chi - dang it! I see the error in the code above.
    No, don't use " = ". Instead use " > ".

    What the code is saying is this:
    1. if TSI rising above ZERO, then use color blue.
    2. if TSI falling above ZERO, then use color cyan.
    3. if TSI falling below ZERO, then use color magenta.
    4. if TSI rising below ZERO, then use color blue.

    I use the terms 'positive' and 'negative' interchangably
    with the concepts 'Above ZERO' and 'Below ZERO'.

    The ' = ' will only make the TSI cyan when the TSI reads
    exactly 0.00000 Instead, use ' > 0 ' and it will work perfectly
    as intended.

  10. John,

    Thank you. I made the change and it worked fine.