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

Sat, Feb 18, 2017 - 10:20am

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

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


Feb 19, 2017 - 9:45am

Man, I'm sorry about that

Did the site do that to you or did your fingers just move too fast?

Either way, that sucks. We've all been there.

Feb 19, 2017 - 9:00am


Thanks. I appreciate all the summary responses and your willingnesss to clarify.

Feb 19, 2017 - 9:00am


Thanks. I appreciate all the summary responses and your willingnesss to clarify.

Feb 19, 2017 - 8:26am

I think I have addressed most

I think I have addressed most of the questions. (I didn't expect so many but I do push some buttons with a forthright and little unusual way of talking about markets)

Which is too many posts and too much of my input for good effect.

I'll step out now and leave it to you guys.

We have visitors and family coming for Sunday dinner and good times and there's much to do

Have a nice weekend.


"... What is wrong with putting people in jail for manipulation. What is wrong with having a Constitution. What is wrong with having a legal system. Why do we have to adapt our investments to correspond to corruption. Why do we grant the playing field to those that will only play if it's rigged. How many more so called markets do we surrender. Are there any left to surrender. Simultaneously we are surrendering our personal rights as search and seizure, right to property, freedom of speech, sovereignty and then life itself ...To those who feel they have a "right" to manipulate markets as an entitlement.

When does it stop. How does it stop. ..."

Here's the reality. You are living in a time and place when empire and state is strong, and the individual is weak. When enough individuals get motivated enough they will demand justice loud enough tha the strong state must respond. That hasn't happened yet. It's not fair. I know. That's power and the lack of it and good vs bad. Hey you could have lived 600 years ago. The christian church with it's sharia system of eccleciastical law was torturing and burning people who disagreed or stood out against the powerful. Sound familiar to what states do today, or alternative churches do in other places? So in 600 years the west became what the middle east used to be and vice versa. The sharia-civil swing, or church-state dominance swing swung to opposite extreme. There are smaller versions of that cycle nesting within the period I mentioned. Go to work and find out where has the political-civil balance you like and move there. Or wait 15-20 years for the short term swing to reverse where you currently are.

You could try to motivate the counter swing. Unfortunately, the pigs currently in control of the trough don't like that. There are case studies. MLK is a good one.

Feb 19, 2017 - 8:11am


" ... I think I have asked this before and received the standard response ..."

The standard response, eh? I wonder what that was? I failed to begin with: "Oh great B22, please let me try to do my best offering you free counselling etc ..."

It's ironic that you have the neck to "ask" and then describe a reply as "The standard response". You are bringing snarkiness to a positive discussion.


" ... a simple yes or no would be sufficient .." Heh heh. Try it for size yourself and see how it fits. Where exactly are you going to be at 21:15 this day in three years? A simple reply will be sufficient.

Key Economic Events Week of 9/21

9/21 8:00 ET Goon Kaplan
9/21 10:00 ET Goon Evans
9/21 Noon ET Goon Brainard
9/21 6:00 pm ET Goon Williams & Goon Bostic
9/22 10:30 ET Chief Goon Powell on Capitol Hill
9/22 Noon ET Goon Barkin
9/22 3:00 pm ET Goon Bostic again
9/23 9:00 ET Goon Mester
9/23 9:45 ET Markit flash PMIs for September
9/23 10:00 ET Chief Goon Powell on Capitol Hill
9/23 11:00 ET Goon Evans again
9/23 Noon ET Goon Rosengren
9/24 1:00 pm ET Goon Bostic #3
9/24 2:00 pm ET Goon Quarles
9/24 10:00 ET Chief Goon Powell on Capitol Hill
9/24 Noon ET Goon Bullard
9/24 1:00 pm ET Goon Barkin again & Goon Evans #3
9/24 2:00 pm ET Goon Bostic #4
9/25 8:30 ET Durable Goods
9/25 11:00 ET Goon Evans #4
9/25 3:00 pm ET Goon Williams again


The big traders dominate in the shortest term. I think it's silly to attempt to compete in the hourly to daily game. Test it for yourself and find out.

Try plotting a chart of eg 5000 price bars of gold.

Then set up a percentage change indicator in the window pane under it.

Set the timeframe for %change for first 1 bar, then 2 bars.

Now choose 10 minute timeframe and see how many isolated spikes there arem vs how they cluster. Isolate spikes will take your money. Clusters are trends of volatility whether up or down and can be traded.

Do it again for eg 1 hour, 2 hour, 4 hour, 1 day, 2 day(2 day price bars), 1 week, 1 month, 3 months.

Choose the game that has "consistency" vs apparent randomness. Because that randomness is not actually random, it's stops of the Noddies getting harvested and their money flowing to the big traders.

Leave leverage out for good until you know how it affects success. Truly understand that. What is your success with or without leverage using the same expertise?

Now look at markets differently after than before. Search for other things and features you haven't noticed before.

YOU are a trading algorithm. Stop complaining about other peoples' algorithms (you can do nothing about it) and make a good one fro yourself. An edge, a real edge is harder to find than you think. If you don't have one and know exactly what it is how can you trade profitably? So, study algos. But why not study them in a timeframe you can actually trade or invest in? Don't worry about market makers front running you in the millisecond frame. You can front run central banks in the monthly frame!

Feb 19, 2017 - 7:46am


I have said that early 2019 or late 2018 have a likelihood to contain a major low for gold.

And I have also said that the "pattern" for gold between now and then would be an expanding trading range, with higher or level highs and a strong selling decline at the end, during 2018? First two swings of the broadening pattern likely already done.

And I should have said at the time that this is all conditional upon gold not departing from a path it is currently on, and has been on for several years. But if gold does depart from that path, this could be a visible has happened within eg 3 to 6 months of doing so. Which has not yet taken place, to my eyes.

I have posted, probably three times by now but maybe more, at The setup for the big trade forum a chart of British Petroleum during the 1950s period. This is analogous to what the gold price might look like in the event the 2018 low should become a higher low than the 2015 low. But I have shown many people an extremely convincing case why that low can be a lower low, and therefore end up being counted as the lowest low of the 2011 bear. The various analysis methods don't agree, and that's nothing new. Scenarios are created which may play, or not, or switch between them.

(No offence intended) Your question is worded somewhat like a soldier in WW1 asking the general where the next bomb will fall. "Will it explode here or there, or where?" But I am more in the position of somebody thinking that if the enemy choose to attack here, that place will be contested and fail this much, and then the problem will cascade onto this other place, no details about exactness or individual cases. But if the enemy attack over there instead this completely different other scenario will play instead. I know there is an overriding constraining or limiting power structure which indicates many things the enemy are incapable of doing so I don't consider those. But if the enemy became rash or desperate and chose to begin doing one of those things I would revise my plan accordingly and not feel bad for being "wrong", because it is actually being realistic and reactive in the face of unknown and seeing unexpected inputs to the system.

And the chart of a commodity price like gold is a battlefield map with all the implied factors of such a similarity.

Cyclically,in my current opinion, and I can be wrong, odds are that 2017 may contain two highs for gold with a low in the middle. If I find a secondary high and can see it for what it is, I would be very careful after that until I see lower prices. If it doesn't work out that way I will get on with living in the world as it is and not be upset that it is not the world I thought it would be.

The great traders and successful investors have certain traits that help them in their job. One is an ability to recognize being wrong faster than the average person. This can be restated as an ability to get out of the way of harm sooner when less damage has been done to their portfolios. The big traders simply start running first, run faster and that leaves them with more funds, and confidence to get in afterwards, earlier than those who got hurt, after the adverse move is done. So they catch more of the "trends". This is well described in a book/ survey called The Futures Game: Who Wins, Who Loses, and Why by Tewles & Jones. It has also been confirmed by "books" of brokers and the fortunes of their clients, a few times, since that book was written.

Feb 18, 2017 - 11:49pm


I think I have asked this before and received the standard response. Do you think we will hit new highs in gold above $1923 before the year 2019? A simple yes or no would be sufficient.

Feb 18, 2017 - 10:59pm

My Problem

What Algos did they run Friday. What algos are they going to run Tuesday. Which historic fundamental or technical do I use to predict either. And why would I even think it would have a rational basis for either of their decisions. Does the SEC care. The only thing similar to the "old" days is the SEC didn't exist until 1934 or sometime about then. But neither did unregulated front running algos. At least Glass Steagall existed for part of my life.

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Key Economic Events Week of 9/21

9/21 8:00 ET Goon Kaplan
9/21 10:00 ET Goon Evans
9/21 Noon ET Goon Brainard
9/21 6:00 pm ET Goon Williams & Goon Bostic
9/22 10:30 ET Chief Goon Powell on Capitol Hill
9/22 Noon ET Goon Barkin
9/22 3:00 pm ET Goon Bostic again
9/23 9:00 ET Goon Mester
9/23 9:45 ET Markit flash PMIs for September
9/23 10:00 ET Chief Goon Powell on Capitol Hill
9/23 11:00 ET Goon Evans again
9/23 Noon ET Goon Rosengren
9/24 1:00 pm ET Goon Bostic #3
9/24 2:00 pm ET Goon Quarles
9/24 10:00 ET Chief Goon Powell on Capitol Hill
9/24 Noon ET Goon Bullard
9/24 1:00 pm ET Goon Barkin again & Goon Evans #3
9/24 2:00 pm ET Goon Bostic #4
9/25 8:30 ET Durable Goods
9/25 11:00 ET Goon Evans #4
9/25 3:00 pm ET Goon Williams again

Key Economic Events Week of 9/14

9/15 8:30 ET Empire State and Import Price Idx
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9/1 9:45 ET Markit Manu Index
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Key Economic Events Week of 8/17

8/17 8:30 ET Empire State Manu Idx
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Key Economic Events Week of 8/10

8/10 10:00 ET Job openings
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8/14 8:30 ET Retail Sales
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8/14 8:30 ET Cap Ute and Ind Prod
8/14 10:00 ET Business Inventories

Key Economic Events Week of 8/3

8/3 9:45 ET Markit Manu PMI July
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8/5 8:15 ET ADP employment July
8/5 9:45 ET Markit Service PMI
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Key Economic Events Week of 7/27

7/27 8:30 ET Durable Goods
7/28 9:00 ET Case-Shiller home prices
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7/29 2:00 ET FOMC Fedlines
7/29 2:30 ET CGP presser
7/30 8:30 ET Q2 GDP first guess
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7/31 8:30 ET Core inflation
7/31 9:45 ET Chicago PMI

Key Economic Events Week of 7/20

7/21 8:30 ET Chicago Fed
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7/24 9:45 ET Markit flash PMIs for July

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