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.