Gold Smackdown …

December 18, 2012

The dollar was dropping & equities were rising and gold received a smackdown
that took out the presumed daily cycle low (DCL) on 12/07.

To start off I want to look at the silver chart.

Silver tends to lead gold and we see that silver had a fakeout DCL a day earlier than gold on 12/06. Silver began to drift higher supporting the notion a daily cycle low was left behind on 12/06. Then on 12/13 silver had a panic day down which broke below the 12/06 low. That was telling us that something foul was afoot.

At this point it appeared that silver printed either an extended DCL or possibly a failed daily cycle. Because gold on 12/13 did not breach its 12/07 low I thought that silver had an extended low. Since gold held above its 12/07 low I remained in observation.

It turns out that I was half right because gold soon followed.

As stated gold printed a fakeout DCL on 12/7.
On 12/13 when silver breached its 12/06 low, gold appeared to print a bullish reversal. I gave more weighting to gold than silver, since they were so deep in the timing band. In retrospect I should have articulated what was happening in silver.

As I view that silver printed an extended daily cycle, so too do I think that gold has printed one as well.

The other note of significance for gold is that it also broke below the previous daily cycle low.

A failed daily cycle occurs as the cycle seeks out is intermediate cycle low.
Recall that we believed that the cycle that began on 11/06 was not only a new daily cycle, but a new intermediate cycle as well. Since a new intermediate cycle cannot begin with a failed daily cycle, we must conclude that besides an extended daily cycle, but this also extended the intermediate cycle as well.

We can see here how this has extended gold’s weekly cycle.
This is either week 21 or week 31 for the weekly cycle.

I am not comfortable with a 21 week label because that would mean we need to recognize week 10 as an extremely early intermediate cycle low.
I not not comfortable with a 31 one week label as well, because that gives the weekly cycle an extreme in the other direction.

Either interpretation gives us the same result, we are now expecting a new intermediate cycle to begin when the current daily cycle prints a daily cycle low.

So I am looking for gold to print a daily cycle low in the next day or two.

A failure to do so may mean that the Grinch has stolen our Christmas …

10 responses to “Gold Smackdown …”

Blackwell

December 18, 2012

Thanks for your update, LM. When other folks are throwing their hands up and walking away.. you make it seem so easy. I already bought silver when it gave us a fakeout.. I thought for sure it would rebound quickly. So, I’m in the red here. Let’s hope we get one of those violent rallies out of the ICL that we all like. That would be a swift kick to the Grinch!

Reply
jamesmarkii

December 18, 2012

Look at Golds price action last year from 12/15 to 12/28.

Reply
1. likesmoneystudies
  
  December 19, 2012
  
  Gold did play some nasty tricks last year as well
  
  Reply
trondtveten

December 18, 2012

The gold chart hs I mentioned some time ago that hadn’t yet reached its down target, well it has now. With a head top of 1754 and neckline 1708, 1708 minus 46 = 1662 exactly.. That supports LM’s contention that the ICL is in.
(Many cyclists curiously looks down on the head and shoulder patterns. But not on patterns in general, as triangles and flags are used.
I think it has to do with them being too “low brow” and un-prestigeous. Too many ordinary people (& cnbc) recognize them).

Reply
1. likesmoneystudies
  
  December 19, 2012
  
  Tond,
  
  One of the reasons why I like cycles is that it tracks the cyclical nature of human emotions in the market.
  
  Really, triangles and flags and yes head and shoulder patterns also measure human emotion in the market place.
  
  Reply
FLR

December 18, 2012

Doesn’t this question the fundamental utility of cycle analysis. It does not appear to have much utility in real time, as it only serves a backward looking tool. In this particular case the daily and intermediate cycles for gold are far off from the “range”, e.g. 18-28 days for DCL in gold. I think that you need to do long term statistical analysis and introduce probabilities to your analysis. E.g. when you made your call for DCL on Dec 7th then it should have an associated probability.

Reply
1. likesmoneystudies
  
  December 19, 2012
  
  FLR,
  
  No one set of tools works well in all market conditions.
  Cycles will work best in a trending market.
  Cycles seem to be doing well with the other asset classes that I track.
  I admit gold has been frustrating lately.
  For me, cycles provide a framework to build expectations.
  Realization of these expectations adds to the confidence of taking risk.
  Divergence of expectations signals prudence.
  
  Reply
Trond

December 19, 2012

According to cycle theory, when gold a few days ago broke the intermediate trendline drawn from the summer lows thru the November low, wasn’t it then highly probable that the IC bottom still hadn’t printed?

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MTG should begin uptrend very soon | Wall Street Stocks

December 19, 2012

[…] Adventurous times – thinking back and looking forwardsAdventurous times – thinking back and looking forwardsVolatility For Australian Dollar At Historic LowsThe Truth About Healthy RelationshipsThe highs and the lows 2012Beckham addresses Galaxy tenure on cusp of final MLS gameGetting Off the Emotional Roller CoasterLiturgics, Latin, Etc.Gold Smackdown … […]

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Steve Wade

December 19, 2012

I think Gold will be just fine. http://screencast.com/t/IiLyzKUphq8

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