Wednesday, December 19, 2012

Where's the Fire?

I hear sirens in the night and people screaming, but where is the fire? I don't smell smoke, I don't see the flames and I don't know where the excitement is seems everyone has felt the burn on their skin....but not me. This is eery and I will be the last one to know what everyone else knows, I suppose. That bothers me. Maybe these rose colored glasses of mine need a new prescription? Hey, anything is possible.

But in the meantime, while feeling increasingly isolated, alone and indifferent, I'll share with you what I see and how I make sense of gold's current situation.

Click on any chart to ENLARGE
The chart above is a look at the C-wave that led to the March 2008 parabola and followed the May 2006 parabola.

The 2006 parabola was followed by the shortest and most shocking D-wave ever. In just 22 trading days it retraced it's C-wave by 53%!  

The first intermediate cycle of the C-wave that followed was rather brief - a mere 12 weeks and used only two daily cycles. This was followed by a second intermediate cycle of much grander proportion, using 6 daily cycles - the final two of which were left translated.

The first IC retraced 56.9% of its advance and dipped just below the 200 dma. The second IC retraced 50.2% of its advance and closed below the 200 dma on its final day.

I guess you are wondering why I am writing about gold's behavior in 2007? Hang on, I'm about to get there......

The chart above is one I posted a week or so back. It shows my observation that this C-wave's first IC was right translated, consisted of 5 daily cycles of which the final was left translated. Very standard stuff.

It also showed my thinking that the second IC was comprised of a first daily cycle that had just concluded on Day 28 and was right translated. Again, very standard stuff.

Well, I was wrong. The bull was not done fooling people and it fooled me too.

Very similar to the fake out manuever it performed in early February 2010, it treated all arrogant enough to think they had it figured out (starting with myself) to one last mighty buck - thrusting itself below the 200 dma. With everyone dizzy and confused gold then took off and never looked back.

The chart above restates my understanding of what is going on. That is, the first IC has concluded as of yesterday - Day 31 of a stretched and final daily cycle. It had 6 daily cycles of which the final two were left translated (as in 2007). Price reached somewhere around $1662 which is a perfect 50% retracement of the IC (as in 2007). 

The concern regarding both gold and the US Dollar falling at the same time is a valid one. My observations of that correlation are that this condition does occur and provided it is not prolonged, gold will decouple itself and reverse direction higher as the buck continues to plunder. The time periods from which I offer this observation are: 
Jan 2011, 
July 2010, 
June 2007, 
Sept 2003 and 
June 2002.

Another time I will detail my 2008 story which will make clear why I will not sell my positions, no matter what the analysis....but for now I gotta go to work.

It's a bull market. Be sure of that, always!



  1. Super work, John. I understand you have a friend who I hope takes encouragement from this. He's been taking a lot of grief lately.


  2. Great work John, I think you´re right about this being an stretched DC but is very possible that we have more pain ahead. I´m looking for the 100wma to be the bottom.

  3. My friend has an infinitely better understanding of cycles and their
    inter-relationships than I will ever have. For my part, I find this
    study of gold/miners fascinating. As I process various ideas that I find
    interesting I sometimes write (post) about them. I am, as it were, thinking
    aloud.....but that does not make me some kind of expert or anything.

    With the benefit of some more free time as it is my lunch hour now, I have
    put the 5 dates I cited in this post where the dollar and gold were strongly
    correlated and both in the negative direction. What I see now is that each of
    these 5 curious correlations occurred during the final daily cycle of an
    Intermediate Cycle. This also seems to square with my view of things presently.

    It won't be but a few days from here that it will be crystal clear I was wrong
    again or correct for a change. If gold should continue to make new lows then my
    idea of a stretched daily cycle conclusion becomes nonsense and I suppose the
    next thing I will be wondering, seriously, is whether the previous D-wave really
    never concluded last December. With the monetary policies around the world openly
    trying to devalue their currencies so aggressively, one would reasonably think
    that the precious metals would benefit. However, if the world is about to experience
    a bout of deflation, as in the Fall of 2008, absolutely nothing will rise in value.

  4. John, I sure hope you continue with your thoughts about the cycle count as this gold cycle develops. Also, I don't know if you read the comments to Gary's posts but I think you will find some of the comments to his December 20 post very interesting. Beginning with comment number 438 there is quite a discussion about whether we are in a B or C wave. My own comment appears at 491, but there are many others worth reading. I'd love to hear your thoughts on this discussion. Joe

  5. Hi Joe - wow, I guess just by coincidence I was reading some of that stuff and decided
    to write a comment on Gary's blog minutes ago.....which is unusual for me because I try
    to stay out of the picture over there.

    Anyway, discussions are good ways for people to try out their ideas and I am totally in
    favor of that. But there is absolutely no merit to the arguments being ballooned. At least
    in my opinion. I entirely agree with Gary's analysis and do not see even a hint or possibility
    that it is flawed.

    We are now concluding (concluded?) the first C-wave intermediate cycle. It appears to me that the
    bull has morphed a bit to now include an intermediate cycle capable of using 7 daily cycles nested
    within its structure, rather than the previous 6 maximum. And, it can include 3 left translated
    daily cycles at its conclusion, rather than the 2 left translated maximum.

    You know, when gold was $300 or $500, gold's structure was so much more compact and uncomplicated. But
    as this large scale parabolic continues on its path upwards, the size of all kinds of measurements
    grows as well.....and this should not surprise us.

    People try to explain why gold has been tanking lately. I've read lots of that reasoning and it is
    probably true that each (fund selling, profit taking, Iran, Central Bank manipulation, etc.) has played
    a part in the big picture. But whatever the rationale, it really does not matter who gets the credit.
    My point is that this is a bull market and in the longer term, gold, silver and miners are going to
    rise much much higher.

  6. I don't doubt the bull, but based on simple momentum, trend lines, and virtually identical bottoms in Dec and May, it sure looks to me like the final bottom of the last gold correction didn't come until May (even if it was a tiny bit higher than the December bottom). Just as Gary thinks the cycles are distorted by manipulation in the present time frame, we shouldn't be surprised if some force or another causes the last bottom of a correction to be a tiny bit higher than the 2nd to last bottom.

    By the way, I thought you disagreed with Gary and believe the recent daily cycle was not on its 11th days but had concluded at 31 days. Is that not still possible? Thanks for your replies. I'm learning a lot. Joe

  7. Hi Joe - I am pleased to know that you are learning a lot that adds meaning and
    value to your investing considerations. Ultimately I hope to offer thinking that,
    while not always correct due to my dark crystal ball, does challenge others
    understandings and promotes confidence in their decisions - whatever they are.

    I think I understand what you are trying to say about another bottom but the expectation
    is opposite to your statement - that bottom will be lower not higher that the current low.

    First off, I would say that you should listen to Gary 10X more than whatever I write.
    He is the true expert, not I. Having said that, every person perceives reality just a bit
    differently and I just write what is on my mind - what interests me - something that I have
    usually given a good amount of research and thought.

    Personally, I do not think the cycles are distorted by manipulation. I've heard a few arguments
    regarding this opinion and the arguments do not sway me - probably for the reason that each argument
    elicits a more compelling explanation for disagreeing in my own mind.

    The daily cycle count and so on has been a frustrating moving target for all of us. On Day 31 I
    thought the daily cycle had concluded, but I was entirely incorrect. Assuming Thursday's low of
    1636 holds then the past daily cycle will have been stretched to 33 days. I seriously doubt this
    will be the case as I think gold will make a lower low in the upcoming days.

    There are several reasons I think this but to be brief, it has to do with the thinly traded rally
    in late August and early September from $1630 - $1775, the daily cycle count would make a little
    more sense with the previous daily cycle being 28 days, not 33. I don't think there has been an
    Intermediate Cycle with 7 nested daily cycles - so this IC will be novel if it happens.

    As for the Dec/May debate I guess I am in the camp that 'the rules is the rules'. And I'll tell you
    what I have found out.....the rules work pretty darned good just as they are. There have to be a few
    lines in the sand so the cycles system is less open to interpretation and more given to non-negotiable
    absolutes that everyone can verify and see for themselves. And since I put it that way, I bet you'll agree.

  8. Thanks, again, John. I have no experience in counting cycles, but I would say that when we look at the period from the beginning of October to now, we have an a-b-c correction. I'm not speaking of gold's larger ABCD moves but the typical elliott wave correction of one move down, one move up and one last move down. Often the a leg of the correction equals the c leg. With that understanding it is very possible we have seen the bottom in gold. If that turns out to be true, then I suppose we have either a very extended cycle of a very short one. I'll be interested to see how that turns out.

    Frankly I'm hoping Gary is right about this being a cycle which is only half done or so. He and his followers need some confidence in the art of cycle interpretation right now.

    You are a good fellow, John.

    Merry Christmas, or whatever holiday you celebrate.


  9. Hello, John. I really hope you have a great holiday. My final thought on the rules of gold cycles:
    When it comes to any rule involving human behavior, such as cycle rules, I think it is best if we view them like the Italians view their traffic laws: suggestions, not hard and fast. :-) Thus, the cycles are said to be 18-25 weeks, not 22 weeks. I suppose the rule about low points in a cycle must have room for small variances because of the complexity of human behavior.


  10. Hi Joe - well, I do not know the rules of Elliot wave analysis so I am unable to compare
    that technique with cycles. I do understand the rules of cycles quite well and I am very
    pleased to see how well they work. I agree that time frames between cycles is not an exact
    metric - that is, cycles do not adhere to a strict repetition of this many days or that
    many weeks in every cycle. Yet there are people out there that try to make cycles work that
    way - using mathematical formulas, sine waves of differing lengths and other considerations
    that kinda go over my head. But as I mentioned earlier, there are some hard and fast rules
    that we use without a fudge factor - notably concerning price behavior - and this provides
    a non-negotiable core to the analysis. If using these constraints were to render the results
    inconsistent that would be a problem, but just the opposite seems to be the case to me.

  11. Super! Consistency is everything.

    Merry Christmas.


  12. Are we in a B wave or is it a C wave still? Also do you follow BBT website as there is lots of talk of B vs C waves. I'm trying to figure out if Gary or Poly is right.

  13. Hello Cycles - I do not follow BBT website and will not look at the link you posted because,
    honestly, I really don't care to debate other people about cycles analysis. My sense is that
    there is some confusion in people's minds because the techniques of Elliot Wave and Cyclical
    Analysis are not clearly understood by those discussing them. That is, the concepts used by one
    system becomes somewhat blurred and applied to the other system while people grapple with making
    sense of the data.

    FWIW, I am comfortable with the idea we are completing the first intermediate cycle of the C-wave
    right now and we should begin a brand new intermediate cycle in the next week or two. If correct,
    this first intermediate cycle would have presented a couple of new twists not seen before in the
    entire bull - and at least partially explains the confusion in getting it right as we went along

    Those two new twists are the introduction of 7 daily cycles nested within a single intermediate cycle.
    Previously the maximum had been capped at 6 daily cycles. And secondly, the final 3 daily cycles were left translated (if indeed daily cycle 6 which topped on Day 14 and bottomed on 28 can be called that - left
    translated). There are two previous examples of an intermediate cycle that concluded with two consecutive
    left translated daily cycles, but 3 is something altogether new.

    Anyway, cycles or waves or something else, I think we can all agree that we are experiencing a long term
    parabolic shaped bull market that is far far from over and for those who are patient with their investments
    the rewards will be really impressive. Thanks for sharing your thoughts.