Mon Jul 28, 2003
Gold Market Summary/Cool Hand Luke
Gold:
This morning was so strong from the US opening that it took the bulls by surprise except for you & I. The internal strength in gold is formidable. I believe that this is a market where you make perfect sales or none with quick buy-backs or simply out stare the bears. I have already told you that in my opinion this is the big move so far in this just fundamentally completed born gold bull market. The objective is above the $400 level and the flight of stairs to $503 is in place.
I gave you a little quiz on TNX in order to work into a discussion of a measured move as it applies to the immediate & long term gold picture we will review together today. As part of reading the market one sees the implication of the shorter formation on the bigger formation as you build your case for the future. You know my goal is not to simply tell you what I see but rather to open your eyes to how to see for yourself. When you have no need of me, I have succeeded. I seek no following or notoriety, just an informed and powerful gold community that cannot be stampeded.
The order of review just given you does not contradict my instruction to you to look very long before you look medium-term and short-term. We are talking about after having done that, reversing the process for a specific reason you wilI see today.
However first:
Measured Moves: There are certain formations that have shown a good relative capacity to forecast the size of the move up or down once the formation is completed by a clean breakout.
JES comment: The answer to Friday's quiz is contained herein. You were looking at a triangle formation. Please check the size you measured for the measured move is the minimum price objective of the break out. I want you to correct yourself this time.
The following are the names and the expected MINIMUM price objective produced by a clean break out of those formations:
1.Triangles: The measure is height of the triangle measured by its first reaction in the triangle.
2.Rectangles:The measure is the height of the formation from base to top.
3.Head & Shoulders: The measure is the distance from the top of the head to the neckline added to the neckline.
4.Reverse Head and Shoulders: The same as above in reverse.
5.Pennants: A continuation formation always on a pole in which the measure is the size of the formation.
6.Flags: A continuation formation always on a pole in which the measure is the size of the formation.
Chart #1 Medium Term Gold Picture:
Here we have a neat triangle which is defined as A to A to A.
The down trend line is the top line of the triangle. This triangle, IMO (in my opinion), will break out to the up side giving us a minimum price objective on the up side of the move from A to A on your left side of the formation of solid lines. The size of that move is $87. A break out from this triangle
tomorrow would be at $368.50 close. You should check every day so you know what closing price on that day would give you a clean break out. Therefore, assuming the break out was tomorrow, you would add $87 to $368.50 for a minimum price objective of $455.50. Further confirmation of this potential would exist as resistance at the previous two tops fall to the upward price movement of gold. Now what does that mean to the bigger picture?
Chart #2:
Here we see the acceleration of the basic uptrend we have been working with. This chart will help us modify the upside prediction to present circumstances by respecting the over-bought sides of the potential with higher angle of attack of gold up channel at which the up trend seems to be assuming.
Having completed that cautionary review to be made daily from new, on we go to the next chart of the big picture.
Chart #3:
Wherein we review the longer term and super bullish long-term Reverse Head and Shoulders plus super bullish long-term new Tea Cup with Handle on both sides now. A close at or above $391.90 would break up and out of both of the super bullish long term charts with their own price measurements. We are fortunate that we have both formations in one as the
Reverse Head & Shoulders is the one with the most reliable minimum price objective measured move history.
Going back to the first chart we have a minimum price objective potential of $455.1 would say that a break out of this formation which I believe will occur puts a break outlet the super bullish long term two major formations in this bag. That is because $455 is a heck of a lot bigger than the few points required between a break above $368.50 and $391.90.
Now let's refer to the large long-term Reverse Head and Shoulders formation for a measurement for a minimum Price objective of a break out on a close at or above $391.90. The distance as measure in the Reverse Head & Shoulders from the bottom of the head to the neckline is $112. Therefore we will add $112 to a breakout of the $391.90 for measuring the minimum price objective declared by a break out from this Reverse Head & Shoulders. The resulting price objective becomes $503.
Now you can see that there is inherent in a closing high higher than the intra-day high of today is one heck of a price objective.
No, this is not what Kenny does but it is as close as the community needs to come once our resident wizard Kenny the mathematician declares as he did a rare set up that we witnessed only on occasion when we were at war with the bears in the period 1970 to 1980.
Remember always be kind to our resident Wizard (Kenny the Strange) unless you want an ugly wart on your nose or worse.
I believe that this is the big one of this gold bull market so far. Kenny has given a broad $395 to $430 price objectives for this phase and I have given you a $408 from way back. Regardless all we need to do no is stare down the opposition arid do not let them stampede you. A short seller that bangs a market and gets no follow through to cover usually hits the panic buy-back
button. So how about it? Do you have the courage to play this move as Cool Hand Luke, the professional gambler that dead eyes his opponent and can't be read? I think you do because I know how hard this community is working to mature and be able to handle themselves professionally.
I believe in you!
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