The following charts come from physicist F. T. Dao who wished to share with the Community another Elliott view on the potential of the gold price.
It is important for you to know that the Prechterites - who again were condemning the gold price to obscurity in their normal "I told you so" way during this latest reaction, are not the final arbitrators of that discipline.
Thank you Dr. Dao
Please click on all charts to enlarge. For additional enlargement, place your cursor at the bottom right of the chart and click in the window that pops up.
THE USDX IS NOT EXPECTED TO HAVE AT BEST MORE THAN ANOTHER 50 TO 100 POINTS UPSIDE (.9830/.9880 )- IF EVEN THAT. THE USDX IS EXPECTED TO NOW CHOP AT AND ABOUT ITS HIGHS OF THIS PAST WEEK FOR THE NEXT 5 TO 10 DAYS AND - AS SUCH - BREAKING ITS CURRENT UPSIDE RALLY MOMENTUM FOR A DOWNSIDE RE-TEST OF MID-JUNE LOWS AND POSSIBLY A BIT LOWER. THIS IS THE BASIS OF THE VERY NEAR TERM INTERNALS. THE LONGER TERM INTERNALS CONTINUE TO STRONGLY INDICATE THAT - EXCEPTING SUCH A NEAR TERM ROLLOVER AND PULLBACK - THE USDX SHOULD SEE A SUBSTANTIAL RALLY LIKELY TO LAST APPROXIMATELY 6 MONTHS FOLLOWING THE EXPECTED PULLBACK.
EQUITY FUTURES
WE HAVE A CONTINUOUS, INCREMENTAL DETERIORATION OF INTERNAL FIGURES BUT WITHOUT A VERIFICATION OF A REVERSAL OF INTERMEDIATE TREND. THIS CONTINUES TO SUPPORT THE SIGNAL OF A PRIMARY UPSIDE EXHAUSTION, THEREBY LENDING NO SUPPORT FOR ANY FURTHER SUBSTANTIAL UPSIDE MOVEMENT AT PRESENT.
WITHOUT A VERIFICATION OF A "REVERSAL" OF THE INTERMEDIATE UPSIDE TREND, VERY CHOPPY ACTION GENERATING BOTH RALLY AND CORRECTIVE SPIKES REMAINS LIKELY.
FINALLY, GOLD
A CONTINUATION OF INCREMENTALLY-RISING INTERNAL FIGURES WILL STRONGLY FAVOR A RISING MARKET AFTER TUESDAY NEXT WEEK.
As if on an eight-week schedule, gold moved smartly this morning above the next Fibonacci Resistance line and at time of writing was trading between $351 and $352. Selling came in from the usual suspects but did not persist in the face of firm buying interest.
Gold is doing all the right things to set up an assault on the $400 level which could in fact occur in the time space of the upcoming rally. I am publishing another chart from "Joe D" which clearly shows you what the gold price battle has really been about.
Not only is gold setting up a more distinct and long-term Cup with Handle, it also is constructing a new Reverse Head and Shoulders formation of a potential long-term nature. Both of these formations have the capacity to become completed bases for huge long-term moves above the recent highs.
One needs not go far to find the potential "why" in this. London's prestigious "Financial Times" in its excellent weekend editorial "Acknowledge your debts-all of them" said: "If governments were less dishonest, at least their citizens would have a chance of taking responsibility for themselves."
This article concerned entitlements and fixed growing costs that have not been taken into account in the US and elsewhere in public accounting for future deficits. When the value of paper money is based on government figures that are deceitful, astute people shift toward honest money. The only money that has no liability attached to it is gold. The only money that has no national agenda attached to it is gold. Money is defined as a storehouse of value, a medium of exchange, and a measure of value. Gold is reasserting itself as it did in the 70's as the money of choice.
As the bond market top is recognized by more people, the gold market becomes attractive to them. As the total confidence in the Chairman of the Federal Reserve is lost, the bond market top becomes more solid. As more people see the Chairman provide lame responses to questions from Congressmen and Senators, the more he becomes a man and less a god.
As the expense of the Iraq war increases and more of our young soldiers die, Americans are losing confidence in the present Administration's honesty, clarity and intentions. Add to that the fact that in the last reporting period General Motors made more money in home mortgages than it did making cars and you see where the US economy is headed.
Each time you and I go to Wal-Mart or Home Depot, the more we recognize that the US no longer manufactures much of anything. It all comes from China. What the US does well is akin to the bad guy that always tied the damsel to the track in the silent movie after foreclosing on her home. We have become a nation of Shylocks and loan sharks.
In time, the distance between the "haves" and "have nots" will become more extreme. Politics are also going to run against the Federal Reserve and its Chairman who clearly constructed this environment to please the money lenders of this temple.
Since old trend lines never die, please note the down channel of gold, which is almost parallel, marked A to A to A to A. You need to understand that the topside of the down channel just described is the overbought line.
Many get bullish when they see this and they should not. Overbought lines repel the upward course of an appreciating item within a down channel. At the point that the price of gold hits such a major technical point, the fight that gold has had is natural. It is also necessary to remember that the longer the formation, the more formidable hitting a line is and therefore the more important breaking out and up is.
Well, gold is doing just that today as its price again moves above the formidable downtrend line which represented the top side of the 16 year downtrend line and down channel.
At $363.50, gold will be 3% above this 16-year over-bought downtrend line top of the down channel once again. I believe gold is now setting up its move above $400. Gold now has two more Fibonacci Resistance lines above it which are at $353.59 and $361.55. Both of these will be taken out in time.
Kenny Adams has this comment regarding the above: "The best case the Bear can now offer is a chop sideways for a short time before a break to the upside." For my money if they wish to try, I am a buyer.
Add to the technical picture already described, a Reverse Head and Shoulders formation plus a major new Tea Cup with Handle and we are locked and loaded for the emergence of what will be recognized as the birth of the long term bull market in gold.
So contrary to last week's chart reader of the HUI - a polluted indicator saying much but meaning nothing - let me point again to the technical condition building in gold itself - the final arbitrator of the value of gold shares.
Get ready if you are not because we are about to blast up and out to $400 and possibly higher. For those that bailed out of their gold shares, be ready to re-enter based on simple trend line analysis.
Take your shares and go to www.bigcharts.com. Then compare each of your shares to whatever situation takes the front running position. As we approach $400, especially $408, let go of the weaker ones based on that comparison and hold the stronger. Be ready to sell down by at least 1/3 with major emphasis on the non-performing shares as gold moves into the low $400's plus.
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