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

silver66
Feb 18, 2017 - 10:44am

First

5th first

Now do you buy gold to trade? do you buy it to so additional currency units created out of thin air don't devalue your savings?

Do you time your purchases for the "best" price or because you have the fiat available and it is a good idea to have some?

Many factors go into the decision making process as you point out AM

Silver66

Feb 18, 2017 - 11:06am

I think we must acknowledge

I think we must acknowledge that if the printing of extra money units is constant, this is not reflected by a constant gradual and incremental rise in the value of gold in those currency units.

Therefore either the additional monetary units are not created incrementally, but in bursts, or the price of currency units and/or gold adjusts in bursts to take account for the additional units of fiat present.

In other words and speaking for myself here, I acknowledge that there is a wave form structure to the accounting process. That wave form structure can function as a savings turbocharger when I hedge my fiat exposure and prevent long term devaluation by the fiat increases by the other (sovereign-financier) side.

gold slut
Feb 18, 2017 - 1:27pm

Excellent essay Argentus

What with Craig's top notch Friday podcast and your outstanding piece here, TFMR has reached a real high this weekend (pun fully intended). Thank you both.

goldcom
Feb 18, 2017 - 1:28pm

Perspective of the market?

With all due respect argentus because I do think you are well versed in market knowledge, but current manipulation in PM markets and CB intervention in markets in general is a wild card that makes it difficult to predict anything.

The military strength to underpin the currency is also under stress like never before. The Petro Dollar is losing grip as more oil sales and trade transfers have the option to be traded for other currencies or gold. We will have to see how quickly the erosion of dollar trade instruments become in the months ahead. Military strength is important but I think TPTB know they better get us in a war with Russia or somebody before the dollar no longer can support that military strength.

gold slut
Feb 18, 2017 - 2:25pm

Argentus, I would love to hear

Argentus, I would love to hear your view of the metals manipulation. Do you think that the market cycles will eventually overwhelm the banks and any interventions will end up in a King Cnut-like failure holding back the inevitable market tides or can they cause real disruption to the cycles?

Thanks in advance.

lakedweller2
Feb 18, 2017 - 2:47pm

Ditto on the Follow-On Questions

Since I also believe markets are fully manipulated for the PMs, I am curious why technical rules have validity when historic fundamental rules are no longer of value.

I am more in TFs camp that neither historic fundamentals nor technical analysis have validity in a manipulated market. What does have validity is trying to technically determine what the new "rules" are under the HFT Algo universe that is fabricated by the Central Bankers with insiders being the only ones privy to this alternate universe.

It is like the Scientific Method where you control all variables but one uncontrolled variable, to determine if there is a correlation with that one uncontrolled variable with the issue you are trying to prove.

Our problem is we are given a market where we do not know any of the variables, either controlled or uncontrolled, and are left to our own devices to determine market direction and/or behavior.

On the other hand, the Central Banks, the Wall Street banks and possibly extensive hedge funds are give the "controlled variables" in advance while the Regulator's perpetuate the myth that there is a level playing field ... and if there is not, they are not going to do their jobs which were created to protect the people rather than the Central Banking system.

lakedweller2
Feb 18, 2017 - 3:50pm

"Since I also believe markets

"Since I also believe markets are fully manipulated for the PMs.."

Fully? Please prove your assertion. 100% please I remind you that you used the word "believe". Why that word. If you had done the work you would not believe anything but know whatever it is. Sources suspect? Or believe until you see further information. I've given that information and don't propose to bother doing it for the nth+1 time. Try reading Setup and seeing what happened after the posts. .

I can prove you're wrong with ease. The misinformation campaigns about the PMs have a cost. Staff, time, salaries, budget to incentivize publication, etc. If control was "full" that cost would be unnecessary and not get paid. Herding by information would be done fully by price if "fully manipulated" were true.

"...why technical rules have validity ..."

Well it stands to reason that a chart compares the activity of a period past, including manipulations and everything else, with a period current, with all the same. Unless you are thinking that the markets are fully manipulated now and were not 100 years ago, 100 months, 100 weeks or 100 days, 100 hours ago, depending on timescale. Maybe you are suggesting that market players of the past were more honest, more innocent? Ever read Reminiscences of A Stock Operator? I recommend it highly. Urgently.

"...we are given a market where we do not know any of the variables..."

We have access to far more information than you have noticed so far.

Look. If manipulation works to a significant extent, then it creates opportunity by pushing prices to a place where somebody wants them. When they no longer want prices there prices will move to a different level. Or they might manipulate prices to make them go to that different level. So, who do you want to trade with and who do you want to trade against? That's all there is. No mission. No Truth. No lies. Just: Force vs force; Direction vs direction. And a chance to watch and decide. Just a decision to play or not - and which way to play if that's your decision.

gold slut
Feb 18, 2017 - 4:59pm

@goldslut

When the cycles of which central banks are the constituent parts turn, the central banks will not wish for the prices and rates they used to want. This is a way of saying that they will see that the costs of old targets exceed the benefits. Then they must change.

They know this and it's well discussed in internal and published papers. From our point of view that is academic. All that's required is a good appraisal of the boundaries of their powers and trading strengths, the length of tenure of their officers, and also of the politicians and governments who coordinate with them.

Interest rate cycles are cycles of strength of sovereign ascendency/falls, reserve status of their FX, and of the linked central bank dominance rhythms. We have many past instances of these to look at. They themselves look at them for guidance. Right now they are looking back 37 years for similarity with present day. They also need to look back further imo. A few are.

lakedweller2
Feb 18, 2017 - 7:10pm

@AM

I wrote for 2 hours on the history of the stock market, deregulation and corruption on its face within the last several Administrations. It disappeared when putting an apostrophe to show John Corsine in the possessive...

The markets are manipulated. You can believe what you want. I am not starting over. Read Turd daily.

Feb 18, 2017 - 8:14pm

AM thank you

Always such terrific additional contributor content. Thank you, my friend.

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Recent Comments

Forum Discussion

by Green Lantern, Oct 16, 2019 - 9:53pm
by zman, Oct 16, 2019 - 8:51pm
by NW VIEW, Oct 16, 2019 - 7:31pm
by ancientmoney, Oct 16, 2019 - 5:23pm
randomness