29 August 2014

Coppock Indicator: An Intermediate Term Bottom For Gold Is In

The data wrangler, Nick Laird from Sharelynx, sent these long term technical charts of gold in US dollars with a note saying, "I like the look of it Jess. It's a deep cyclical indicator and you can see from its past performance how it works for gold."
I have to admit that this is one indicator I am not given to using, probably since I rarely was a long term investor in the past, and this is a cyclical tool although certain chart functions will allow you to utilize it on shorter term charts, and probably incorrectly based on Coppock's intent.
It is an indicator that generates only buy signals by attempting to identify market bottoms after serious declines.  The indicator must turn negative into a trough.  That implies that it had previously been positive. And then it must begin an upturn and sustain it.
So if I am reading these charts correctly, the last buy signal we have had was in 2001 with a big bottom buy signal forming in 1998-99.  See what I mean about longer term?  For a trader, that is glacial.
For my own charting method, I think we are in a potential bottoming formation, but we need badly to break the cycle of lower highs and lows, in order to confirm any of the potential bullish patterns I am seeing.  There is a closer look at the relevant area on my own gold chart at the very end.
Confirmation after a breakout is the most meaningful thing that the metals can do at this point.  Everything else is just talk and speculation.  
I include a six sigma trend chart from Nick to give you an idea of targets for any intermediate move.

Just in case you were wondering, I have included a Coppock chart for silver as well.  And if you look at it closely you will see a little fakeout bottom with an upturn that failed in 2012.  Confirmation of a breakout is your friend.
Giving the amount of 'tinkering' being done with the metals on the Comex, I have a gut feel that says if and when we go higher, it will be with a breakout, with a vengeance.  This has been as much price thuggery as it is price discovery.
Until then it is cap and coil, with some downside risk hedged up by a bullion put from China et al.