Things have gotten a bit more complicated since I wrote my December 19th post 'Where's the Fire?', but I continue to ask the same rhetorical question and am somewhat amazed at the 'freak out' all around me. Yes, things have been strange lately with the gold and dollar behaviors but I don't think without a decent explanation which I will offer in this post.
One of the things I have quietly been puzzled by is the lack of a credible trend line break of gold's intermediate cycle begun on May 16, 2012. I have been unable to find a single intermediate cycle that did not have a trend line break - and I have looked at all 31 previous intermediate cycles. So, for starters, I have been waiting to see if this event would occur and as of a few hours ago, it finally did.
|Click on any chart to ENLARGE|
Some of the curious items:
1. This intermediate cycle has, as of today, measured 165 days. Until now, the longest intermediate cycles occurred in the 2009 C-wave and were 148, 131 and 120 days. In 2007 the C-wave leading up to the 2008 parabolic included a pair of intermediate cycles that measured 128 and 127 days. The longest intermediate cycle in a D-wave was in 2008/09 at 123 days.
(See my December 28th article 'The Microscope on Gold's ABCD Pattern and Intermediate Cycles' for details).
2. This intermediate cycle began with a daily cycle that peaked on Day 15 and concluded on Day 31 - the definition of a left translated cycle. No other C-wave has begun with a left translated daily cycle.
3. This intermediate cycle has included 7 daily cycles nested within its massive structure. No previous intermediate cycle has used more than 6 daily cycles.
4. Every C-wave intermediate cycle top was followed by a left translated daily cycle with a couple of exceptions (3/2/2006 and 6/6/2011). Not this one. This intermediate C-wave cycle topped on 10/5/2012 and the following daily cycle topped on 11/23/12 and was right translated.
Turning to a 60 minute chart for a closer look at the trend line break of the intermediate cycle and the trend line break that just missed on December 20th, we have this chart (below).
There has been some speculation that the U.S. Dollar Index is presently suffering from an aborted intermediate cycle that was expected to be bearishly left translated but has now got a whole new attitude.
I'll admit that it is a screwy situation, that is for sure.
But this is what I see.
The dollar began a new intermediate cycle on February 29, 2012. It peaked on July 24 (day 61) and bottomed on September 14 (day 99).
This was followed by a shorter intermediate cycle that peaked on November 16 (day 45 - /DX 81.515) and bottomed on December 19 (day 68).
This shorter IC peaked much lower than the previous IC - thus the lower highs concept of a change in trend direction. BUT, this IC was also bullishly right translated and did NOT make a lower intermediate cycle low than the previous IC. We would expect (if not demand) that this IC would make not only a lower high but also a lower low. This means to me that my IC explanation is suspect.
You understand why I characterize this situation as screwy, right?
Holding on to the concept that cycles break their trend lines before moving on to a new cycle, you will note the purple dashed lines I have drawn on the chart above. Clearly, the IC trendline begun on September 15 has been broken.
Anyway, I offer another possible interpretation: this IC did not conclude early on day 68, but is still ongoing. If it should bottom below the pricepoint where I have put the '99' (/DX 78.725) and do so after the 90th day (defining a left translated IC - as expected) then everybody would probably be real happy. Oh, lest I forget....it would also be required that the 81.515 current high for the IC not be surpassed to the upside.
I see that the dollar is presently stuck at the precise price level of the left shoulder top of the head and shoulder's pattern there has been so much talk about. Perhaps traders are a bit dumbfounded about what comes next as the rest of us?
Well, I say, hang in there. For the FED to be buying 80% of the US Govt debt (because there are no other buyers, obviously) and then infer that they will stop this practice sometime before the end of 2013 is the idiocy of all statements I could ever imagine. They are dreaming and hope you and I believe the dream - while they have transferred all the debt of the private sector's mistakes onto us, the public taxpayers. Ha ha. I say bullshit.
And besides, it's still a bull market!