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!