Perspective and Scale are The Hardest Things In A Short Term Market Environment

33
Sat, Feb 18, 2017 - 10:20am

Next time is the one according to Adam Hamilton of Zeal Intelligence.

https://www.zealllc.com/2017/gsvoldiv.htm

It's an interesting, if technical, read into the volume of gold stocks traded during the 2016 rally, and worth a few minutes imo. Adam's work usually is, and I like the way he creates what might be called fresh- ways-to-look-at-it charts.

This matches with my long expressed views that we need to see a longer term retest of lows (end 2015) before the long term bear can be assaulted successfully.

So ... was end of 2016 it? I'm not sure about that. A retest needs to be some cyclic period later after the original high or low. If I chose a business cycle (as it remains after coordinated central bank attempts to overcome it) then the retest would be 3-4 years after the first low. If alternatively the dual political cycle (parties dominate propaganda and money so well that they get two terms instead of one before the public wakes up and chucks their asses out) is the dominant one, then a period of eg 8 years may be required after the first low to create the retest and/or possibly divergent second low. There's that eight year period coming up again.

But the attention span of gold trading people is so short that eg a four year rise followed by eg a four year fall will always be designated as a bull market followed by a bear. In fact, the observable tendency is to lose perspective after less than twelve months. Which means that the rally off the 2015 lows gets to be a bull swing. But inside I'm, like, "Hmmmm, that's a nice bear market pullback there".

And so it all goes back to perspective and scale, as it always does. I can't remember who said it but the gist of the old market saying was "When you're in doubt, throw your chart on the floor and get up and stand on your desk. Then look down at the chart to see what you couldn't see before."

Which in my view is bearish for gold for a little longer (for the short of attention span) and bullish then bearish then very bullish for gold (for those who are in my particular timescale or preferred groove in Setup For The Big Trade). But since we all make mistakes, it's unwise to sell all at the tops in case it takes off (on a bigger scale). For the same reason it's also unwise to decide there will be no more bottoms where good value can be found (in which case we go crazy and sell the house/car/wife/kids to buy gold immediately as the bullion dealers (and their article-writing-podcasting-bull-analysts) perpetually provide motivation for us to do .

So what is "acceptable" perspective? Well, the last big gold bull took 11-13 years depending on which low you count from. And we got two major highs depending upon which currency you prefer to use to value gold. I know 95% of everybody out there uses the dollar only but I think that's myopic. Say we use 2011 for the high. An 11 year bull. Now if we add (only 2/3 of that) eg 7-8 years down, that would take us to 2018-9. So if both a four and an 8 year cycle had been, shall we say "cancelled" by the central bank alliance, when might their battles with reality be expected to next occur? Well our attention might fall upon 2011 + 4 = 2015 (check, gold low visible) and also 2011 + 8 = 2019 (not there yet, be patient and don't panic).

And what we also see is the dollar index playing games with alternate fiat currencies for breakout or not. But that is a see-saw mechanism. - fiat USD one side:fiat other FX other side- I have proposed that the dollar is merely half of the equation vs gold. The other non-dollar USDX currencies are the other half not to be put opposite the dollar, but to be added to the dollar and all fiat together to then be weighed vs gold (and other commodities).

Now the Freegold people say we should look at gold vs oil. That is the gold:oil ratio is persuasive for them. This is implying that oil = all fiat currencies, and in particular the dollar, while they are strong and = gold when FX strength fails. Or it will revert to that every "x" many years. Hmmmmm. Methinks this is dependent upon military might enforcing reserve currency-ness. So it's historical and/but may or may not be presently applicable. I have referenced a few Freegold proponents here at Setup, interviewed BelangP on Youtube for this blog, but I never endorsed the thesis unconditionally, while considering it always worth considering. I watch that ship closely but haven't yet stepped aboard, you might say. I have consideration for it.

You see I never forget that gold is a commodity as well as a currency. Freegold focuses upon the FX side a little too much for my preference, while admittedly not denying the commodity side. I find my thoughts drifting to military strength, territory controlled, territory recently acquired or recently lost, state of empire and such matters at this stage within a Freegold discussion.

But Freegold will assert itself in some newly invented fashion when currency crises arise. Ideas of certain types return to the fore when situation requires it. And Bretton Woods is now 2017-1945 = 72 years ago. What periods matter around that cyclic duration? Seventy two, seventy four, seventy five and seventy six in my view. So: 2017, 2019, 2020, and 2021. OK then.

Back to the gold and the best times to buy some, or not buy some: I posit that these times will be at two year anniversaries of the gold high for the currency you prefer to use, and also at an anniversary at which gold is observed to be making lows with accompanying low sentiment. End of 2015 followed by end 2016 are only one year apart. As 2011 and 2012 were. A double top followed by a double bottom? There is a kind of symmetry there...

Scale. Fractals. Symmetry. Asymmetry. Perspective. If I throw a gold chart, metaphorically, on the floor and climb, also metaphorically speaking, upon my desk and look down. That's a single top and a single bottom. Where is the retests? There's no big retest of the top (so we may go back up someday to see how high that is) and there's no retest of the 2015 bottom (uh oh, early gold bulls may get spanked by the various market bear factions out there).

So it's back to bottoming pattern construction, upon a big scale. And let's not get overly choosy about which spike downwards must be designated at "THE ONE" . Go back to that 8 year pattern, and never forget the presence of one year cycles (stocks and bonds) while doing it. I posted on the eight year cycles many times, with extended descriptions here already in the AM blog. For example this one: Gold & 2nd Term US Presidents posted 2 1/2 years ago August 2014. It's still worth a look. Look at the average shape it forms. Different every time. But average. Note the tendency for late pullbacks well after the idealized low.

Those proposed paths forwards for the gold price, set out back then, are currently being followed approximately. In particular, multiple lows usually required to see an eight year gold weak price period through. Think in 2, 4, 8 year periods and range trade accordingly. There's more to it than that of course. But it may help to keep a person out of trouble.

For readers enjoying a long weekend this week. Have a nice break. See you all next week.

Argentus Maximus

.

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmAndPrice. The author advises that he trades and holds market positions in accordance with his own opinions.

About the Author

  33 Comments

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chrtoo
Feb 20, 2017 - 7:09pm

Thanks for your help

Very much appreciated!

bookers126
Feb 20, 2017 - 7:05pm

So

Only logical thing for me to do is to sell my phys tomorrow and buy it back in 2019 for cheap.

chrtoo
Feb 20, 2017 - 6:10pm

@chrtoo Thx.

@chrtoo

Thx.

chrtoo
Feb 20, 2017 - 4:17pm

@AM - SGTReport.

Nice to see this article get cross-posted on another major website, SGTReport.com. When I came across this, I notice that the authourship was wrong; pointing instead to our illustrious leader.

I dropped Sean a note and pointed out the error. Sean is always good and responsive to communications. Licky-split, this correction is in place and Argentus has his proper credit! Enjoy.

CHR.

billhilly
Feb 19, 2017 - 11:34pm

Great article AM !

Thanks !

And great commentary too from everyone ! Lively debate is always enriching and stimulative.

My 2 pennies...I am very wary of putting too much faith in technical's, and even fundamentals these days. I mean, how much can we really know about supply/demand when SO MUCH info is kept secret ??? How much Gold is in Ft. Knox ???? How much unencumbered is in GLD ??? How much is China really buying, and how much do they have ??? etc, etc...

We peon's are incapable of making informed decisions because the info just IS NOT THERE !

And for technical's, the sky is dark with all the black swan's flying about so trying to get a grip on the future trends is wrought with danger and uncertainty. A simple Tweet nowadays and all the technical's can be destroyed.

There are two types here...stackers and traders (or a combination of them).

The stackers have the edge on odds of being right. They/we do not worry about time frames, and really shouldn't even worry about price (although of course we do). If the price goes up, good, if it goes down, even better. We stack because we KNOW the price is terribly disconnected from what (we believe) it should be. In the end, we will be right ! ALL MANIPULATIONS COME TO AN END !

Traders on the other hand (of which I also am one) view a shorter time frame so direction is key. But trading = gambling. You place your bet and the wheel gets spun. You can analyze till the sun rises in the West but with all the HFT/Manipulation/ Dark pool influences, it's still a roll of the dice...imho.

These days and months and years ahead of us are unprecedented in their uncertainty. I appreciate articles such as this one because it gives me another POV (as a trader mainly) and we can hardly go wrong by giving them some consideration. Yet, as a stacker, I am not willing to wait around very long and hope that price will go to my advantage because the risk of ending up not being able to get physical at all is too great.

As a trader I often say "if only I had....".

As a stacker I NEVER want to have to say that, so this is why, when I have spare fiat I STACK. Because someday, we will all look back and say one of two things..."Whew, I sure am glad I stacked when I had the chance" ; or, " damn, if only I had... " !!!!!

lakedweller2
Feb 19, 2017 - 5:08pm

As Long As I am Irritating Everyone

Help me with this one. Back in the old days when earnings were important, I think they were considered a fundamental in determining their stock value. Ignoring the change in the rules of accounting and fluff tricks like share buy backs, isn't a key fundamental altered when indiscriminate algos are applied to the price of gold and silver, mainly considering the COT and adjusting PM prices for the purpose of maximizing bank profits and using a paper derivative to determine price. Since the algos are applied across the mining sector without differentiation as to all the variations in mining companies, then indiscriminate Algo pricing is used as a predetermined variable to determine price to all mines without respect to individual differences in production. In other words, GM can determine their list price for a Chevy or a Cadillac, but the price of gold and silver is determined by COT #s and banker profits.

Supply and demand for gold and silver is not a direct player and could even be a factor in downward price manipulation to hypothecate and leverage physical in government or market maker possession.

This relatively unrelated price control predetermines miner success or failure quarterly as miners are not permitted to determine price relative to cost of production. This problem is compounded by the manipulation of the price of oil which is an essential player in mining cost but also the price of oil can be manipulated for greed, politics, competitive advantage or even supply, demand and seasonality and also involve the banks again. The fact oil can be manipulated is also not a pricing consideration the miners themselves can add or delete to the current price and therefore earnings.

Analysts establish their earnings estimates on growth and when miners have suffered "price Manipulation directly in gold and silver and indirectly through manipulation of the price of oil", isn't it possible that miners fundamental earnings do not represent performance, but rather a self fullfiling prophesy generated by the unrelated paper price of digitally created paper prices of PMs and oil.

If it does appear that miner earnings are a result of fabricated digital paper prices, and the markets react in a fundamental way of punishing companies for failing to meet earnings expectations, despite the miners inability to set price based on cost of production and supply and demand, then it negates the use of fundamentals when there is unrelated price manipulation of PMs and oil, with lack of oversight and regulation by government agencies charged under statute to preclude the above situations under statute.

Where have I gone wrong.

Newager23
Feb 19, 2017 - 2:00pm

My 2 Cents

Cycles (multi-year), technical's (day/weekly/monthly MAs), fundamentals, manipulation.... These four factors all come into play. That's why I am on this site. Turd does a good job informing us of the technical charts and manipulation. I think it's foolish to rely on one of these four factors, and also foolish to ignore one of them.

I think fundamentals (macro and micro economics) are the most important, closely followed by the technical charts. The fundamentals influence the technical's, although manipulation can impact both factors. The cycles are always lurking in the background creating their own influence.

As Argentus implies, cycles are the beast that won't be denied. To a certain extent this is true, but just like the technical's, they cannot always be relied upon.

I tend to ignore cycles (perhaps my ignorance), and focus on the fundamentals and technical charts. However, if a cycle reinforces the fundamentals and technical charts, then it gives me much more confidence.

What I usually do is constantly gather and analyze the fundamental information and then look at the technical charts for confirmation, or vice-versa.

For instance, today many of the technical charts (gold/silver/HUI) are all close to breaking out above the 200 DMA. However, this breakout is not supported by the fundamentals. For this reason, I do not expect a breakout to last very long or be sustained.

Conversely, the fundamentals currently do not support a break down in gold/silver prices. For this reason, we are stuck in a trading range. I think it is too early to predict which way the fundamentals will break in the near term. We will have to wait a few more months to know which way we go. My hunch is the the dollar and the economy will begin to breakdown by early summer. That would support a breakout in gold/silver.

As for the future price of gold. I firmly believe that once gold crosses $1450, it will trend to a new high without looking back. My belief in this outcome is based on the gold technical chart, which shows very little resistance from $1450 to $1935, and I do not believe we can get to $1450 without weak fundamentals and a failure of manipulation.

brokerk22
Feb 19, 2017 - 1:22pm

@B22

Hi, Your summary is spot on.

Cheers, AM

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lakedweller2
Feb 19, 2017 - 11:33am

@TF

I had gotten from the Criminal causes of the Great Depression and resulting regulations and was up to MF Global, JP Morgan London and was discussing the need for a criminal investigation of Corsine and Dimon. After writing Dimon I noticed I used an italics instead of an apostrophe as I was using the possessive in regards to both.

I backspaced on Corsine"s and eliminated s..." and added...'...When I hit the apostrophe, the whole screen did like a reverse erase and was gone. I concluded that it was illegal to use Corsine and Dimon in the same sentence.

Edit: maybe it was the use of the words criminal investigation with those"other two names".

brokerk22
Feb 19, 2017 - 10:16am

@AM

Ill dispense with the snarkiness. Your willingness to respond to the question attest to your gentlemenship (Is that a word?). Obviously, you think a big deflationary blow has to happen before we have some sort of hyperinflation. Much like Mike Maloney and many others. Sounds logical. It fits well with your cycles. Also you leave the possibility for some sort of wild ass event that throws it all off. Only God knows what that can be. There are certainly many factors that could do this. A breaking of the Euro union this year would fit the bill and throw your cycle out of whack and everything happen much sooner. Does this sound like an accurate synopsis? Maybe a little easier to understand for the average guy. Your response is appreciated. Blessings to you.

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