Today I’m going to start off with a look
at the big picture. The next chart pretty much says it all.
There is a fundamental reason why gold has
been going up for 13 years. That same fundamental is driving the cyclical
bull markets in stocks.
For gold the fundamentals are sustainable and that’s why the gold chart
is rising almost parabolic inter-spaced with normal
corrections/consolidations along the way.
For stocks the fundamentals aren’t sustainable. You can’t drive a
true bull market in stocks by printing money. It just creates bubbles and
crashes. That’s why each one of these bull markets is followed by a
devastating bear market. It’s why the stock market chart has gone
nowhere in 13 years while gold has gone up, up and away.
Until the fundamentals change this pattern isn’t going to change.
Pretty soon the stock market is going to stagnate and start to drift sideways
(followed by another bear market, probably due to bottom in 2016). Pretty
soon gold is going to generate another C-wave leg up (followed by another
sharp move down into the next 8 year cycle low, also due in 2016).
Gold:Did
we bottom two days ago or not? I don’t know. What I do believe is that
the QE4 manipulation has basically created a double B-wave bottom. As we saw
last summer, B-wave bottoms are frustrating SOB’s that whipsaw back and
forth until everyone is knocked off, or dizzy and ready to puke. Then they take off and leave everyone behind.
I think gold is in the process of breaking the
manipulation but as we have seen it’s been tough to get a sustainable
trend going. That is the hallmark of a B-wave bottom. Ultimately I think the
manipulation just stretched the precious metals markets much further to the
downside than would have occurred naturally, so once gold breaks free of this
volatile bottoming process the rally will be just as aggressive if not more
so than the rally out of the first B-wave low last summer.
As we saw last summer, B-waves can churn to the point were
it’s pretty difficult to determine correct cycle counts. It appears to
be happening again. Considering the current daily cycle is left translated it
should drop back below $1555 before bottoming. That being said today’s
move looks like the cycle low may have come on Friday. I wouldn’t count
on gold to give us a clear signal in this environment though. So it’s
anyone’s guess if we now have a strange left translated daily
cycle that bottomed above the prior low.For those
of you trying to hold on to positions during this mess let me put up two more
charts.
On the gold chart you can see the level that triggered a 99 and a 98 Blees rating on the COT report. Historically that kind of
extreme only occurs when price is at, or very close to a final intermediate
bottom.
You can also see that this price level generated an 88 million buying on weakness day in GLD. Again this is almost always a sign that
price is about as low as it’s going to go. Let me emphasize I said
price, not time. Just because price has reached a level that halts the
selling doesn’t necessarily mean that a sustained rally will start
immediately. As we have seen the market may still have to chew up a
significant amount of time before it’s ready to take off. In our case I
think gold is waiting for the stock market to stagnate before hot money
starts to flow back into the sector.So we may have
one more lower low to endure before this is over, and we may not, but two
years from now traders will be knocking their head against the wall saying
“all the signs were there, why didn’t I buy?” Or; “Why didn’t I hold my Old Turkey position?”
This bottom is going to be too complex to time
perfectly, and even if it did bottom on February 20th it’s already
shown that it can still throw most people off just by chopping back and forth
for a month. Maybe that chop has finally ended. Maybe the daily cycle is
still going to make one more trip below $1600. I’ll let others compete
to see who can second guess the next wiggle in the precious metal markets.
All I can say is that the signs are there. Save your head the abuse two years
from now and pay attention to them.
Toby Connor. Gold Scents
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