Gold On The Move

Chart Symmetry is designed around the observation that prices tend to change direction along certain preferred gradients. New readers are advised to read the first article in this series to discover how Chart Symmetry works. The link to this article is : https://www.gold-eagle.com/south_africa/regional_analysts/joubert020699.html

The prices shown for the lines are the values of the lines at the next time interval after the chart close. It is not a prediction that the price will suddenly move to reach that line overnight, but provides the reader a measure of the move that could take place if the price pattern does develop in the direction of that trend line. The steeper the line, the greater will be the change in the line value over time.

The key point to remember throughout is that the gradients of all secondary lines were derived from the gradient of the master line. The scope for the analyst to 'do his own thing' and develop a pre-conceived pattern is therefore quite limited. The patterns that are shown in the analyses are inherent in the charts, but these are not the only patterns that can be derived.

Gold Price. Weekly PM fix. (Last = $302.40)

This weekly chart of the gold price should by now be very familiar to readers of Chart Symmetry. It has been used nearly without change from early 1999, except for the addition of a trend line or two to the existing pattern.

The newest addition is line I – the current support line of the gold price.

The steep bear channel, Y-X, has been in place since 1995.

After breaking below support at line D – which initiated a period of some concern about the future of POG – a there was the break higher at the cross-over of lines D and X, which was a bullish signal. The steep break up through the cross-over reached significant resistance at line B – the center line of the 11-year bear channel. Gold failed to hold the marginal $2 break above line B and has fallen back to just above $300 where support from inverse line I came into play.

Scenario 1: POG found support at line I on Friday, 22nd October, and begins a new bullish move during the week that ends 29th October. The target is line B again, which would complete leg 3 of the triangle B-I.

Scenario 2: POG breaks below line I ($303.3) and proceeds to test support at line C ($290).

Preference: The steep rise from below line D to resistance at line B may well be the first leg of a bull trend that requires the usual triangle as the intermediate consolidation pattern. If this triangle is destined to develop between lines B and I, the first two legs have now been completed. A rise towards resistance at line B to complete leg 3 of the triangle is therefore expected. Scenario 1 is preferred.

Gold Fields in US currency (ADR). Weekly JSE close. (Last = $4.98)

A prominent feature of the long term view of Goldfields is the very large megaphone, T-S. Megaphones are notorious for very volatile price trends, as has happened here over the past 11 years. This applies both to the moves within the formation and the reaction of the price after the break from the formation.

By the weekly close on Friday 22nd October, the ADR price had retreated from the top resistance line at $5.87.

This multiple top formation is a major resistance level. A break higher to above the top line, T, will be very bullish for the longer term.

Scenario 1: The price fails to break higher through resistance at line T, and extends the bearish reversal at T.

Scenario 2: The price breaks upward through resistance at line T to launch a major bull trend.

Preference: For the time being and until proven wrong, the top resistance line has to be considered inviolate. Scenario 1 has to be preferred while resistance at t holds.

Dow Jones in Ozz of Gold. Weekly close. (Last = 31.31)

Some time ago there were a number of posts on the Forum about the ratio of the Dow to POG. This weekly chart of the Dow priced in ozz gold shows the extent to which Wall Street had out-performed the gold price over the past 5 years.

For a long time previously, the ratio showed a gradual increase in favour of Wall Street, but by 1996 the weaker POG and a rising Dow had started a major bull trend on this ratio.

However, the ratio developed as a steep megaphone pattern – a chart formation that is noted for volatile price behaviour.

From its high near resistance at line F – the steeper derivative of M – the ratio had plummeted to find support at the bottom of the megaphone.

Scenario 1: The ratio reverses direction again to break back below line M at 31.71, with POG rising and the Dow falling.

Scenario 2: The rebound from line M holds above support at M, which implies a static to weaker POG, with a steady to rising Dow Jones index.

Preference: The sharp reversal at line M could not have been anticipated by goldbugs and by believers in a Wall Street debacle. However, it has happened and now the reversal lower to break back below line M has to happen within the next week – two weeks at the outside – else the above pattern will begin to assert itself in the form of a firmer Dow and unsteady to weaker POG.

Wait to see what happens this next 5-10 days to see which Scenario is selected.

Harmony in US currency. Weekly JSE close. (Last = $6.46)

The weekly chart of the ADR price of Harmony displays a very large triangle, A-M, with line A the shallower derivative of M.

A-C and P-M are two sets of channels.

These lines show probable resistance lines for Harmony should POG rise far enough for the price to challenge them progressively.

The ADR price has broken well above channel P-M to show that a new bull trend is under way.

Resistance at line C has held and the ADR price is now expected to look for support at line P – in the form of a goodbye kiss – before the bull trend resumes. A weekly close above resistance at line C would set the ADR price free to reach towards line B, not far short of $10 per share.

Scenario 1: The price consolidates between lines C and P, later breaking lower.

Scenario 2: The price breaks higher above resistance at line C to extend the bull trend.

Preference: It is difficult to be bearish about POG and gold stocks now that so many factors for a rising POG seem to be in place. The charts shows however that something has to happen soon – within the next week or two – if POG and prices of gold stocks are to resume the rising trend.

For the time being, Scenario 2 – but then the break higher has to happen before about 10 November.

Conclusions

Everything hinges on what gold does this week, and perhaps next week too. And also on a weaker Wall Street. The Dow in ozz gold is in an unstable chart formation, but with the potential to move sharply higher while support at about 31.7 holds. A break below this ratio – which would require a combined move in excess of 8.7% through a lower Dow and higher POG (from 10470 points and $302.4) to break below the megaphone at line M. This combination of developments- weaker Dow and rising POG – has a time window of not more than two weeks to materialize.