Friday, December 28, 2012

The Microscope on Gold's ABCD Pattern and Intermediate Cycles

As something of a diversion from the work I have been doing on designing and back testing strategies I decided to revisit some earlier work I had done on gold's secular bull ABCD repetitive pattern. The twist that is new this time is the use of the Excel spreadsheet to record dates and prices and then manipulate the data to shake out trading day counts as well as raw and percentage measurements of the various waves. Once I got into this project I decided to include the weekly (intermediate) cycle data and additionally keep an eye out for Fibonacci relationships.

It turns out that gold's secular bull, now in its 11th iteration of the ABCD pattern since 2001, has indeed been keeping a few secrets guarded and I will point these out to you as this article progresses.

Our first chart simply shows the price gain each ABCD pattern has achieved in succession. Gold began its secular bull on February 15, 2001 with a low price that day of $255. After its first ABCD pattern gold began the second ABCD pattern just $9.10 higher ($264.10) than where it began, and so on.

The following chart looks at the number of trading days in each of the 10 concluded ABCD wave patterns and provides a sum of the results. I have always been fascinated with the symmetry and Fibonacci relationships I notice in gold's price movement, but it was a complete surprise to discover that the total number of trading days in the A-waves, added to the total number of trading days in the B-waves EQUALS the total number of trading days in the D-waves!

Next up is a microscopic view of the 10 infamous parabolic C-waves with a close look at the % gains each achieved from Day 1 to peak as well as the number of trading days for each. 

The percentage gain each C-wave was able to achieve from its genesis seems to support the concept of a parabolic. That is, the rise (% change) becomes generally steeper over time.

9 of the 10 C-wave lengths were related to another C-wave in terms of a Fibonacci metric. The only C-wave length that left me puzzled was 7 (57 days).

I was truly dumbfounded to discover the relationship between the 2006, 2008 and 2011 C-waves. 

The fourth and final research chart will now be the subject of our attention. This chart concerns itself only with the 32 intermediate cycles that have completed since 2001.

I made reference to which of the ABCD waves each intermediate cycle was involved. In the early years of this secular bull, the ABCD pattern was absorbed entirely within a single intermediate cycle. As the bull morphed, one intermediate cycle took care of the A and B-waves while the following intermediate cycle took care of the C and D-waves.

Further along in the structural evolution, one intermediate cycle took care of the A and B-waves, a separate intermediate cycle was then allocated to the C-wave and a concluding intermediate cycle for the C-wave finale and ensuing D-wave.

This gave the C-wave one intermediate cycle all for itself (2003). In 2005 the C-wave had two intermediate cycles all to itself. In 2006+ the C-wave had three intermediate cycles all to itself. By 2009+ the C-wave had 5 intermediate cycles.

Again, this is substantial proof that as this gold bull is progressing its very structure by morphing and becoming increasingly more parabolic in nature.

The color scheme I used in the above chart is light blue for an intermediate cycle during the A and B-waves, bright green if an intermediate cycle ONLY during a C-wave, dark green if occurring at the parabolic top of the C-wave and continuing into the D-wave, and dark magenta if the intermediate cycle was exclusive to a D-wave and its conclusion.

The Total Retracement of IC column with percentage figures considers the starting low price of the intermediate cycle, the highest intra- day price achieved and the percentage that this amount is retraced by the end (low) of the intermediate cycle.

The IC Begin to Peak column with percentage figures considers the starting low price of the intermediate cycle and the percentage price is able to climb above the IC beginning measured at its peak.

If interested, one can determine which intermediate cycles are left and right translated using the two columns that count trading days. A cycle is considered right translated if the peak occurs 'to the right' of the midpoint day of the cycle's length.

For example, the first IC is 113 days and topped on day 65. The midpoint of a 113 day cycle is 56.5. This example is right translated because the top (day 65) occurred 'to the right' of the midpoint day (56.5).

The second IC was 90 days and topped on day 36. The midpoint day was 45 so this IC is left translated as the top occurred 'to the left' of the midpoint day (36 comes before 45).

There are a number of other interesting observations that can be offered from this data, but I'll give it a rest.....for now.

Off topic: I continue to think we will see gold trade intra-day sometime in the next week or so below $1636. That should mark the true conclusion to the first IC of the 2012 C-wave and begin the second. As you may have noticed from the data in the final chart, this IC has been the strongest of any first C-wave IC to date both in terms of % gain from low to peak and in terms of the percentage of retracement. 

Hold on 'cuz this bull ain't nowhere near done just yet!


  1. Thanks for the work you do, John.

    In one of your earlier posts you said you were holding shares underwater and would not sell. What's the story there?

    I, too, have underwater shares in miners and have continued to hold. What advice do you have to that, and to what price point on gold do you see being acheived in this upcoming intermediate cycle?

  2. Hi Heads Up,

    It's coincidental that you wrote your question about my positions under water at the same time
    I was uploading a new post:

    After reading this new post I am sure you will know the answer to your first question.
    Please feel free to offer a followup comment or question, OK?

    Re: current IC - This first IC cycle of the new C-wave was just barely able to surpass
    the A-wave high of 1792.7 with a peak of 1798.1. The second IC should launch shortly and
    using the research I provided in this article, it would be logical to expect this next IC
    to reach at least 15% higher. So, if we bottom now at, call it $1640, a 15% move higher
    takes us to $1886. A 20% move would take us to $1968. So I guess my answer to your second
    question is that I think the upcoming IC will reach and probably surpass the all-time high
    of $1923.7

    Just hang on as it will only get better, not worse, from here.

  3. Excellent post, John. Many thanks for sharing your research with us. Something for me to ponder over the weekend.

    Here's to 2013 being your most profitable year yet!

  4. So there chance that gold will struggle below $1800 until April or so?

  5. Thanks Pima - now if I can get back to figuring out those 4 hour cycles. :-)

    Golden - your question was interesting to think about. And without a crystal ball
    of course I have no idea the answer. I looked back at the previous C-wave tops and
    noticed that they have (understandably) needed increasingly longer periods of consolidation
    following their peaks. Back in 2003 it was about 6 months. 2004 was 8-9 months. 2006 was
    around 15 months and 2008 pushed 18 months. At present we are 16 months past the most recent
    C-wave top. If gold ends up requiring more like 21 months before flight, I guess April sounds
    like a decent guess. Also, as we would expect the upcoming intermediate to be right translated
    that suggests it would be at least 3 months from here before it tops.

  6. Thank you for your generous response to my question, and for your latest article, too. Our thoughts crossed in cyberspace!

    I know opinions can differ, but, in your opinion, John, how many ICs can be expected going forward in the "C" Wave? What are your expectations for the $HUI?

    Your steady demeanor is a blessing, particularly in light of the cycles fraternity losing their collective heads of late. Cheers!

  7. Heads Up - yeah, opinions are just that....opinions. Without a crystal ball really,
    who knows for sure? The best I can hope to do is try to find data that can be objectively
    considered, look for the patterns of consistency and meanderings of stray implications,
    and take my best shot at holding onto both my sanity and my convictions.

    I can make a case for gold to visit $1600 this upcoming week and may write about it later
    this weekend. Wouldn't that be a shock? But aside from that, the pattern of C-wave ICs
    steadily increasing has been validated. But as usual, who knows how long it will continue?
    I really don't know.

    $HUI is incredibly and irrationally cheap. I don't know when, but have no doubt that at some
    point miners are going to revolt against the supression and scream higher. It is so painfully
    true that right about when the very last sane investor throws in the towel the entire complex
    of miners will explode to the upside. That is my observation anyway.

  8. I appreciate and avidly follow your articles. Do you still think gold will hit 1600 this week and how do you come to that conclusion...1636 appears to be an equally measured A and B of an ABC correction and also the 61.8% retrace!? Thanks!

  9. Thanks Ross for being a reader of mine.

    I'm using the Think or Swim platform and it is telling me that
    $1630.4 is the exact 61.8% retrace. Doing the math by hand $1636
    is a 59.73% retracement - as shown on the fourth chart in this article.

    Anyway, what is happening right now is what I have been quietly hoping
    to happen all along. That is, the Intermediate Cycle trend line has never
    been broken and though no one seems to be talking about it, I found it
    odd. All 32 previous ICs are my cookie cutter model. An intra day price
    just south of $1641 or thereabouts would fix that little problem.
    And if we could get an intra day price just below $1636 then the daily
    cycle counts would make complete sense (at least to me.....).

    Some troubling things to my argument are that if this is still IC #1
    of the C-wave, it sure is running long. The previous C-wave (2009) had
    a couple of long ICs of 131 and 148 days. Today we are on day 165. The
    other thing is that we would now be concluding a 7th daily cycle nested
    within the IC. The max to date has been 6. These items trouble me but
    I explain to myself as simply the morphing/evolution of a huge bull market.

    Anyway, we should know soon enough from here whether the bull continues
    to play by the rules, or make new ones. I think if the US Dollar takes out
    its December 7th intra day high (as it is ever so close to doing this evening)
    then gold may be in a heap of trouble. I'll keep you posted.

  10. Appreciate your generous response John. I use ProRealtime EOD data and I guess it doesn't calculate the retrace the same. Would you mind elaborating on what you mean about the IC trend line needing to be broken? We certainly got the break below you were looking for this morning!

  11. Hi Ross - I am in the process of writing a post about that very subject
    right now. The chart is made so I just need to write some dialog and
    will upload very soon. You are correct - we did get that intermediate
    cycle trend line break a couple of hours ago. So far this is playing
    out exactly to my crazy script.