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Every day I open up StockCharts.com and I redo every one of
my holdings. By doing this I am able to be conversant in every stock I own.
This morning as I was redoing the Gold ETF (GLD) I noticed an eerily familiar
pattern that had developed at exactly the same time last year.
The people that are my regular readers know that I like to
play nice in the sandbox so in fairness I will say here and now this is not
last year. Most telling is that we have been theoretically taken off our
medicine of Quantitative Easing. The dumping of 30 million barrels of oil
onto the market was a form of quantitative easing and the fact that we will
be buying more treasuries with the interest that is earned from the maturing
treasuries is also quantitative easing. The blatant printing of fiat money
has been ended – at least for the time being. It will be interesting to
see if the patient survives.
As the chart below will bear out the latest gold price
action is strikingly similar to the pattern that unfolded at precisely this
time last year. The reason I want to alert my readers to this is that if this
pattern holds true again, it will provide traders with a good roadmap and
price targets for trading gold in July.
What I am finding very interesting is that there seems to
be a clear pattern now repeating itself on the gold charts that developed
exactly one year ago.
Let’s take a look at the pattern a year ago, compare
it to now and over the next few weeks. By doing so we will see if the future
pathway of the pattern plays out as it did back in July 2010.
First, take a look at the chart below. The chart clearly
shows a broad picture of a repeating pattern of price swings.
Notice how in April of 2010 we had a move up (1) followed
by a small correction (2). Then we had a substantial move to the upside (3)
followed by a correction of about one half of the previous move up (4). This
was followed by another nice move up (5) followed by a substantial correction
back to the level of the first correction (6).
Now
let’s take a look at the exact same time period in 2011.
A look at the chart will show an eerily familiar pattern
that has developed. The only X factor will be the final leg downward. If this
final leg corrects back to the 150 day moving average, as it did in 2010, we
will have a good indication of what to expect from GLD. Look at the chart.
The signs are all there. If leg 6 pulls back to the 150 day moving average
the RSI, the MACD and the slow stochastics will all be exactly where they
were in 2010. Trust your Charts!!! I will be posting a video
on YouTube today regarding this under the "nom de plume"
InvestingAdvicebyGeo. Please check it out.
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