gold next move

Gold has now confirmed that an intermediate bottom was set on September 26. The double bottom at $1600 is a powerful basing pattern that should generate a test of the $2000 level by sometime in December.

For reasons covered in the nightly reports I don't really expect gold to push much above the $2000 level during this particular intermediate cycle.


Also for reasons discussed in the nightly reports I think the mining stocks, which have been unloved for the last year, are probably going to be the recipients of most of the hot money during this intermediate cycle. Both silver and gold have already generated parabolic, or semi parabolic moves. I think it's time for a big rally in the mining stocks over the next four or five months.

Dollar Teetering on the Abyss

We all better hope I'm wrong on this one, but I think the CRB just put in its three year cycle low in October. I'm also afraid that Bernanke has done irreparable damage to the dollar. If I'm right about both of those assumptions then we are on the brink of a historic inflationary period.

I've marked the major three year cycle bottoms in both the CRB index and the dollar index on the chart below with blue arrows. (Actually the CRB cycle tends to run about two and half years on average).

The dollar is now a great risk of forming a left translated three year cycle. A break below the October 27 intraday low would initiate a pattern of lower lows and lower highs of an intermediate degree. When the intermediate cycles start to roll over that is usually a sign that a major cycle has topped. If the dollar's three year cycle has topped after only five months we will be at great risk of a severe currency crisis in the fall of 2014 when the next three year cycle low is due. Even more concerning is if the CRB cycle has bottomed. If it has then commodities are poised for a huge surge higher during the next two years as the dollar deteriorates.

The next couple of weeks are going to be critical for the dollar. Sometime in the next two weeks the dollar is going to drop down into its next daily cycle bottom. On average that cycle lasts about 20 to 25 days. Monday will be the 12th day of the cycle. The reversal last Thursday has the potential to mark the daily cycle top. If that top holds then the dollar is at great risk of moving below the October 27 intraday bottom sometime in the next two weeks as it moves down into its next daily cycle low.

The dollar must hold above the October 27 low. Failure to do so would indicate that the cancer has now infected the currency markets, most specifically the US dollar. A penetration of the October 27 low would indicate that the current intermediate cycle topped in only two weeks. That should potentially lead to another 15-20 weeks of generally lower prices on the dollar index with the next intermediate degree bottom due sometime in early to mid March.

If that scenario plays out we are almost certainly going to see the CRB break it’s down trend line confirming a major three year cycle bottom has been formed.

The extremely mild nature of the decline so far is a serious warning sign that QE1 and QE2 are going to eventually trigger massive commodity inflation.

At this point all we can do is hope that the three year cycle in the CRB will stretch slightly long and bottom early next year. If it fails to do so, and the major three year cycle low did occur in October, then we have some serious inflation heading our way in the next two years.

More importantly to precious metal investors, if the dollar’s three year cycle has already topped then there is a very strong possibility that the next two years, as the dollar collapses down into its 2014 bottom, will drive the bubble phase in the gold bull market.

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Toby Connor
GoldScents
www.goldscents.blogspot.com

Gold, Silver, USD pattern

Gold is in “Bump-and-Run Reversal Top” Pattern

The gold index is forming an intermediate-term “Bump-and-Run Reversal Top” pattern and it now is in the “Bump” phase. The next target prices: 1) 1550 at the Lead-in Trend Line, and 2) 1380 at the Target Line.

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Silver is in the “Run” Phase with “Dead-Cat Bounce”

The silver index is still in the “Run” phase of the “Bump-and-Run Reversal Top” pattern. After a “Dead-Cat Bounce”, silver should be in a post-bounce decline driving prices gradually lower. The last price target is project at 22 on the third target line, which is close to the price level when this pattern originally started on the left side of the following chart.

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U.S. Dollar is Forming a “Symmetrical Triangle” Pattern

The US dollar index is forming a 11-month “Symmetrical Triangle” pattern (see here). Prices should be choppy inside the triangle.

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U.S. Treasury Bond is Forming a “Descending Triangle” Pattern

The 30-Year US Treasury Bond index is forming a 7-week “Descending Triangle” pattern (see here). The price trend can be any direction leading to this pattern depending on which side to break out.

Gold pattern

“Three Peaks and the Domed House” Pattern for Gold is saying…

My version of George Lindsay’s basic model uses a macro or “phase-counting” approach which is different from Lindsay’s classical micro approach (which uses “number-counting” from 1 to 28) in that it divides the “Three Peaks and the Domed House” pattern into five major phases as follows:

1. Three Peaks
2. Basement
3. First Floor
4. Roof
5. Plunge

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The “Plunge” phase typically comprises two powerful down-waves. The first down-wave from point 25 to point 26 has finished. Now gold could be still near point 27 right before the second powerful, also most severe, down-wave from point 27 toward point 28. The price target is projected at 1300 which is the lowest price of the entire pattern.

As the chart above depicts:

• the “Three Peaks” Phase - points 2 through 9 - in gold developed during the months of November and December 2010
• the “Basement” phase (bear trap) – points 10 through 14 - formed in late January of this year when gold had a separating decline to reach a low at $1310 per ozt. in early February
• the “First Floor” phase – points 15 through 20 – of the Domed House was built during May and June
• the “Roof” phase (bull trap) – points 21 through 25 - began in early July and concluded in August

The “Plunge” phase has been underway since early September and gold could now go as low as$1,290/ozt. to $1,300/ozt. before moving higher again.

S&P pattern

The S&P 500 index is in the progress of potentially forming a “Three-Peaks and a Domed House” pattern as shown in the chart below.

My version of George Lindsay’s basic model uses a macro or “phase-counting” approach which is different from Lindsay’s classical micro approach (which uses “number-counting” from 1 to 28) in that it divides the “Three Peaks and the Domed House” pattern into five major phases as follows:

1. Three Peaks
2. Basement
3. First Floor
4. Roof
5. Plunge

Currently the S&P 500 index is in a phase transition from the “Basement” phase (bear trap) to the “First Floor” phase with a sharp advance wave from point 14 toward point 15 according to George Lindsay’s original model (click the graph to see a larger image). The “First Floor” phase is projected around 1360 for the S&P 500 index. The current pattern tracking with model stands true until proven otherwise.

Chart for week-ending November 11, 2011 (Close 1263.85)

Chart for week-ending November 4th, 2011 (Close 1253.23)