Showing posts sorted by relevance for query cup and handle. Sort by date Show all posts
Showing posts sorted by relevance for query cup and handle. Sort by date Show all posts

01 June 2016

Gold Cup and Handle Targets 1490 On a Breakout, With New All Time Highs Likely In Silver


A reader, David B, has suggested that I remind you all of the big cup and handle of 2010, with its subsequent breakout run higher in 2011.   The bottom of the first big retracement was on the August 2010 gold option expiration on the Comex.

I admit that being preoccupied with other things, and not wanting to get ahead of ourselves,   I have merely been plugging in prices for you, and not discussing the progress of the cup and handle.  Since I have had several emails about this, I thought a brief discussion now might be worthwhile.

First as a reminder, here is the cup and handle of today.  The target on a breakout is 1490.  I have included that notation, admittedly in the 'small print' for many months.

I will fill more things in, such as initial targets and retracements, once the formation is activated and confirms its viability with a breakout.  The fundamental driver could be a break in the free gold float in London and a short squeeze in search of physical supply, and a deleveraging of 'paper gold.'

In the very last chart I show how silver broke through 19 and ran to break above 40 in the same time period.  If we get a breakout in the weekly cup and handle in silver that is working itself out on the charts I think a new all time high is in the cards.

Let us not get ahead of ourselves.  The price must breakout over the topmost slanted trendline in green in order to be activated.  Thinking about what may or may not happen next sets us up for a disappointment and does not lend itself to 'get right and sit tight.'

So far I have not been particularly surprised by anything that has happened.  If you refresh your memory about the prior cup and handle you will see why.

Patience is our ally, and time is on our side. Change is coming, slowly but surely, and at the end, all in a rush.

And we'll always have rock n' roll, moondogs.



Below is a chart of that prior cup and handle from the year 2010 which initially targeted 1375 and then 1455.

And below that is a picture of its fulfillment early in the year 2011.

But we'll always have rock n' roll.



Speaking of being preoccupied with other things, I will be spending most of the afternoon at hospital with herself, getting her sorted out and prepared for the next steps, so there may be no updates tonight.




21 September 2012

Update on the Gold 'Shadow Chart' - Review of the 'Cup and Handle' Formation



A "Cup and Handle" is a bullish continuation pattern in an uptrend
 
The greatest factor working against this current gold chart as a cup and handle is that it appears during a consolidation pattern in a broader uptrend. 

The 'cup' is best shaped as a "U" and the broader the bottom the better.

The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.

The retracement usually does not exceed 1/3 of the advance of the cup to its second high, but can go as deep as 1/2 in a volatile market.

Here is a textbook picture of a 'cup and handle formation' from Investopedia.

Below that is the chart in progress of a cup and handle in gold that proved to be quite successful.





Here is the current daily chart of Gold. As you can see there is a possible cup formation. It will not be confirmed until we see a successful 'handle.'

I cannot stress this enough.  It will be in the nature of any 'handle' that is formed that the cup and handle formation can be confirmed.

Until then there remains the very real possibility that this will develop into a mere trading range between 1800 and 1550.  Gold may also hit the 1800 level and after some consolidation break away and just keep going higher.
 
The more I look at the possibilities the more I become convinced that this is just a long consolidation in a bull market.  That implies a breakout and breakaway to the next target price.   We cannot tell if it will break out on this attempt at the top of the range.  This is the third major attempt.  It does have the winds of QE3 at its back.  But there is significant trouble in the global economy that may pose a risk to all asset prices.  

And of course the western central banks have a vested interest in keeping the price of gold 'orderly' so it does not impair the confidence in their paper games of QE to ∞.

 One way to make yourself look good is to diminish the competition.  They have to be careful of being too heavy handed because at some point intervention becomes 'machine-gunning the lifeboats.'  Therefore it is likely that they will have someone else holding the gun, some favored bank or hedge funds.

I do not know what will happen.  No one does.  But we know what to look for.



19 May 2010

Gold Is In a Classic Cup and Handle Formation Targeting 1,450


A "Cup and Handle" is a bullish continuation pattern in an uptrend.

The 'cup' is best shaped as a "U" and the broader the bottom the better. The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.

The retracement usually does not exceed 1/3 of the advance of the cup to its second high, although it can go as deep as 1/2 in a volatile market.

Here is a textbook picture of a 'cup and handle formation' from Investopedia.



Here is the daily chart of Gold. It is in a classic cup and handle formation, with the handle having dropped down today near the 1/3 retracement target of 1183. A number of technicians have been watching it form. The advance to a new high, and the subsequent pullback, have made it now worth noting.

The handle has been shaping for four days from the peak at 1249.30. The handle generally takes from four days to two weeks to form before price advances again with fresh buying to retest the resistance around the prior high.

One might watch for the current Comex option expiration to pass next Tuesday, given the large concentration of calls around the 1200 level before gold can make its move higher. There is always the possibility of a counter squeeze, but it is difficult to fight paper with paper given the wide availablility of derivatives, and the laxness of regulation by the CFTC despite recent noises made about reform. Nothing has changed yet.

There is a possibility of a triple top, although this is why it is important that the cup have a broadly tested bottom.



The target for a breakout in this cup and handle formation above would be a minimum of 1450. The breakout should be accompanied by increasing volume. The more volume the more bullish the post breakout run will be.

This is consistent with the weekly chart which we posted a few days ago that shows an inverse H&S continuation pattern targeting 1350 as a minimum objective. In fact, one could draw the cup more conservatively, ignoring the intra-day spikes, and strike a target much closer to 1350.

And what makes this gold manipulation such a perfect con is that they are bullying the public using money taken from the Federal Reserve and the Congress, the public's own money.

What levels might be expected after the intermediate targets are reached?

My friend Brian at the Contrary Investor has produced a series of targets based on the prior high deflated by a number of measures. Here is one that I thought had a certain 'ring' to it. Keep in mind that M2 is a moving target, and moving lower for now. If it turns around and begins to expand again, the price could be much higher. But for now it is in a firm downtrend. So it conceivably could be lower.

Gold Deflated By M2 Projects to $3,912 to Match Its Prior High



Here are targets for gold and silver based on their prior highs but adjusted for inflation using the Bureau of Labor Statistics CPI, and John Williams' (SGS) unadjusted CPI estimates.

If Silver were to reach $450 per ounce, and gold to $7,500, the junior miners might provide a quite impressive performance. lol.


19 October 2012

Gold Shadow Chart 'Cup and Handle' - Metals Dealers and Market Complexity


A 30% correction would be reached at roughly 1710. A handle correction in a cup and handle formation is generally 20% to 30$, measured against the rally from bottom to rim. These measurements are rarely precise, given the fluctuating nature of intraday prices.

The handle ought not to go deeper than a 50% correction, which is around 1665, in order to be properly called a 'handle' on a cup and handle. Intraday moves are not significant.

As an aside, I am also watching the SP 500 December futures which have support between 1415 and 1425 depending on timeframes and measurements. The correlation between the SP and gold is there, probably because of the weighting therein of the financials. Gold likes money printing for bailouts, and unfortunately gold acts as a thermometer for this type of financial engineering, to the dismay of the central bankers engaging in it.

If that 50% correction level in gold is broken successfully then we are looking at a trading range and the 'cup and handle' is not activated. A trading range is likely to be a continuing consolidation unless there is a market liquidation event.

A 'cup and handle' would be a suitable way to end this long consolidation in the gold bull market, which is now more than a year old. But we cannot quibble about timing, since that is something the market will decide, accommodating quite a few macro factors besides the gold market itself.

Lies, Damn Lies, and Modern Financial Speculation

Charts are merely reflective of the underlying reality. They don't "do" anything. They are more in the manner of a symbolic representation of many things, like a good road map. And in this case the road map is subject to short term disruptions designed to confuse and befuddle, as though people were changing street signs and putting up barriers on the road while you were trying to read the maps.

I linked to Sinclair's piece on Metals Dealers today because it helps one to understand the depth of these markets and the schemes that move them. Sinclair obviously knows what he is talking about. A large firm does not merely make and take a uni-directional market position in gold, rather it is taking more complex positions.

As Jim says they are not straight betting the ups and downs of those markets, but working on spreads and hedges, and their expansion and contraction. This is what gives rise to what I like to call the 'wash and rinse' or 'wax on wax off' technical trade in the market that whipsaws the unidirectional specs.

And even moreso today than days gone by the bigger players are making multiple markets, and trading relationships and spreads amongst those different markets, if they are more than mere day traders and scalpers and pool operators.

Even the system which Jim Sinclair describes is a bit simplified as it must be for his audience, given the activities of the 'quants' and their complex algorithms.  The recruitment of mathematicians and physicists and engineers by certain Wall Street firms is still hot and heavy, and particularly Goldman and to a lesser extent JPM.

We're not in Kansas anymore Toto. Fraud has risen to a whole new level, the like of which we have not seen in a long time, and never in this particular set of clothes.

They are not doing this massive investment in complex algorithms and computing power in support of simple schemes, but rather more elaborate and esoteric arrangements.  But as John Kenneth Galbraith pointed out some years ago, innovate as they will, the substance of the schemes and often their fraudulent nature is essentially unchanged, and relatively simple at their core once all the baroque accouterments of modernity are stripped away. One bribes and browbeats officials, befuddles the public, distorts the markets, and then cashes in for themselves, at least while the system that feeds them remains standing.
"The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced."
But they do get quite a bit better at concealing and sustaining those frauds at least at the organizational level. Madoff was a relic, almost atavistic, of days gone by. Modern banks and funds are to Charlie Mitchell's National City Bank and the stock pools of the 1920's what the space shuttle Discovery is to the Ford Tri-motor airplane. They operate on the same basic principals, but the complexity and capability are profoundly different.

Flying devices fly according to certain principles of flight, and fraudulent financiers bully, bribe, steal, and cheat according to certain propensities of human nature.

The trades of today are increasingly complex, as different as calculators and high speed computers.  They are designed to capture both long term and short term profits, but in this case 'long term' is probably not more than a calendar quarter at most.  The front running of HFT and its defenders are shamelessly abusing the public trust, but this is only one simple example of the use of complex computing.

The complexity is used to invent opportunity and market imbalances, and to hide that activity from the other market players, from regulators, and less so the public who are well behind the curve.  And most general economists are well behind them given their backward looking bias, or acting as shills and spokesmodels and consultants if they are specialists in money and finance.

As you know, I am convinced that the system is going to blow up, blow itself up no matter how the Wall Street banks and funds try to assign the blame.   How and when is very much an open question. 

The solution is what some call ultra-transparency, and a change in the tax policies that incent speculation with subsidies.  And of course effective enforcement of regulations to achieve reform.  Regulations do not stop crime; regulators do. 

And because of the credibility trap and the corrupting power of money we are not likely to get it until something very bad happens.  And perhaps not even then.

The pursuit of the perfect system, whether it be in charts or the COT analysis or any other indicator is useful for making money for those who sell those systems, but really they are just aids in reading the likely tilt of the map, of figuring out where you are at any given point in time.

The bigger issue is the nature of the market and the fundamentals for it in the longer term. Are you in a bull or bear market? What time frames are you pursuing?  Unfortunately the markets are now the tail wagging the dog, as we saw in the case of Enron and their manipulation of the energy markets, particular

And as you know, I have said that in this market, given all the front running, gaming, spoofing, and lack of sound regulation a private person has no place in trading for the short term. This is a market dominated by machines, which is too bad, not because the amateur punters cannot make their quick and easy money from it, but because it distorts the real economy, hurting everyone.

We live in a land of lies and the misery they bring because we do not love the truth, more than our own selfish desires. And that is the oldest story of all.



09 June 2010

Gold Bulls Are In Their Cups and the Bull Market in Confidence Games and Voodoo Economics


A friend and correspondent over at BullionVault reminded me the other day that some have been watching what they consider to be a larger cup and handle on the gold daily chart going back to 2008.

My depiction of that longer term chart formation is below.



I had carefully considered that interpretation last year but the handle formed much higher relative to the cup than I would prefer. Further, it did not form like a classic handle on the retracements. Instead I considered it to be a simple inverse Head and Shoulders continuation pattern in this bull market, from the extreme selling in the liquidity crisis.

The patterns have similar pricing objectives, unless you draw the lines as diagonals and attempt to measure off the top of the handle. Either way, each is a chart formation that is active and working with objectives north of where the cash price is today.

There are two reasons to use a cup and handle versus an inverse H&S. The first is that the breakout action on the handle is more easily charted and evaluated. A breakout through the neckline of any H&S is merely a binary event, whereas a handle permits more gradation. Head and Shoulder patterns are simple creatures. The second reason is that some people do not believe that an inverse H&S is an appropriate continuation pattern, and can only be used for a clear 'bottom' of a downtrend. I obviously do not agree with the latter. They can often act as continuation patterns after a severe selloff in a bull market trend that remains intact.

And there is of course, with the advent of modern computerized charting tools, the temptation to overcomplicate a chart and fill the page with far too many lines and circles and diagonal relationships to the point of obscurity, as though a Euclid of Alexandria had thrown up a lifetime of drawing on a basic price chart.

As an aside, sometimes readers will say things like 'So and So is a respected chart authority and he says...' And this is provided without justification, on the basis of authority. Well, one must always listen respectfully to learned opinions, but then look carefully at the empirical evidence, in a scientific manner, which in my book trumps theory and the 'rules' made by men.

When I was working at Bell Labs a very learned and internationally respected authority (and my boss' boss which was the ultimate power of that bureaucracy) told me that I "obviously did not understand information theory" when I presented the case for developing higher speed modems (> 9600 bps) , Digital Subscriber Line technology, and high speed local area transmission over unshielded twisted pairs, well in advance of their formative discussions on the CCITT and US IEEE committees. In other words, I have made my career in not accepting the conventional wisdom and authority of the day. Sometimes what you think you know prepares you for a world that no longer exists, because it was an illusion.

And that goes double for macroeconomics, which seems now more like marketing than mathematics, more astrology than physics. The US financial system is largely a confidence game, or more appropriately a racket dominated by rival white collar crime gangs.

Far too many economists tell people what they wish to hear, or what their masters are promoting, and attempt to give it the trappings of respectability with professional jargon, self-referential theories and elaborate faux proofs, with the trappings of equations based on falsified assumptions. If you want to measure a contemporary economist, see what they are saying, if anything, about reforming and restructuring the financial system.

A government needs to decide first what sort of nation it wishes to be, and then use economics as one means of sorting out more granular choices among policy decisions. To treat economics as a primary determinant of social policy is to perpetuate the hoax of the efficient markets hypothesis and the inherent goodness of 'free trade.' But it does helps economists to gain funding from the plutocrats, and serves to divert the public from the discussion of meaningful reforms.

Finally, at this point in my third career, I AM a 'chart authority' of sorts in my little circle, and it is my money on the line when I am investing, so I think I have some say, at least in my own kitchen, as long as she-who-must-be-considered is out front. lol.

Here is a picture of the pullback on the cup and handle we have been watching for the past few weeks. So far it is as expected.




19 November 2012

Closer Look at Gold's Potential 'Cup and Handle' Formation


There is an inverse head and shoulder formation within the developing handle of the cup and handle formation.

The inverse H&S pattern measures to 1810 as a minimum objective. That is also the point at which the handle would be at a breakout to validate the entire cup and handle formation.

I would expect gold to break out and run to that point, with resistance heavier around 1790-1810. There may be some time to actually break out, as the shorts will attempt to hold a strong line there and at the next major objective at 2100 or so, which is the first objective of the cup and handle.

In a major liquidity event, all bets are off of course, as everything gets sold, and some extraordinary deals may be had for the longer term investor, what we call 'buying opportunities' on the charts.

For those who are not comfortable with trading, establishing a strong long term position is the best strategy in a bull market. Some do both, hold a long term core position that is never touched, and also use a smaller amount of capital to 'trade around' the intermediate term swings and dips.

The most important thing is to never panic and lose your entire position while the bull market remains intact, because it is very difficult for most people to summon the will to buy back in. I have seen many who sold out, and who have never gotten back in because they kept waiting for some extreme 'bottom' that never arrives.

They often fall into 'trading their egos' with paper trades on chat boards, seeking company in their misery of having been right, and then losing their way. Their bitterness is best to be avoided since it weakens and distracts.

A wise trader rarely seeks to obtain 'the bottom' or 'the top.'   This is a mug's game.  An experienced trader waits to find the true trend, and not exhaust their account in pursuit of trading perfection, 'secret knowledge,' pride and 'followers.' The truth is what it is, and it reveals itself to us in its own time.

We are now in a period of 'hysteria' when the unworthy will be blinded by their own pride, and will thrash about in fear and loathing.  Lies will abound and the love of many people will grow cold. 

When in doubt, look to see if a person's words are crafted in love and caring, or in pride and contempt.  This is not certain, of course, since nothing human is without error, but it is a way to avoid the most common of deceptions.   Self-deception is the most dangerous, and the cure for that is humility.  I have learned that lesson, many times alas.

Always look for that rarest of qualities, genuine love of others, because the great deceivers have none but for themselves. 

There will come a time to sell, but I do not think that we are there yet. Is the economic crisis over? Has the financial system been reformed? Is the debt well founded and under strong management? Is there transparency that appeals to our 'common sense?' Is the global currency regime well-ordered and robust? These are some of the signs that we will look for in seeking to find the next plateau.



14 February 2011

James Turk On Silver, and A Possible Twist of My Own


James Turk is extremely knowledgeable on the precious metals markets, and I always pay attention to what he says. He is sometimes a little more aggressive in his forecasts than I am, being of a more timid sort about dates and that sort of thing. He serves as a good counsel to me when I wish to test my own theories and knowledge of certain aspects of the metals markets, and am grateful to him as well as several others for this.

And so here is something which he just put forward that struck my eye, and I thought you would like to see.   The timeframes on this chart are a bit intimidating.  I think that if and when silver breaks out you can toss timeframes out the window.  This market is like a compressed spring with a long and heavy weight on it.


"This chart shows a massive accumulation pattern, marked by the green lines. This pattern is a story of strong hands and weak hands, specifically, of silver moving to the former from the latter.

From its $50 high in January 1980 to its $3.50 low in February 1991, the weak hands were shaken out. At that point, the accumulation by strong hands – who were buying because the recognized that silver was an exceptional bargain – became the dominant force. Their buying power was stronger than the selling pressure of the weak hands, and the price of silver responded by starting to climb. It was classic stage one action, but here’s the important point.

Silver is still in stage one. It won’t advance into stage two until $50 is exceeded, just like gold did not enter stage two until its previous high of $850 was hurdled.

I expect that silver will exceed $50 this year, which is a point of view I first mentioned in my outlook for 2010

Admittedly, I was a little early with my forecast about when gold would enter stage two. So perhaps I will again be early by forecasting that silver will enter stage two of its bull market this year. Regardless of the accuracy of my timing, one thing is clear. Because it is still in stage one, silver remains good value."

James Turk
February 14th, 2011

Here is a slight expansion and twist on James' chart of my own. I suspect his thoughts are along the same lines.

The potential cup and handle formation is not valid until there is an active and confirmed breakout as we saw in the big cup and handle formation from last year that served on the breakout through 20.  Cup and handle formations are generally accumlation patterns, with a subsequent breakout that confirms and defines them.

Since there is a monetary element to silver, I am not so confident in this scenario.  And if the dollar does lose its place in the world and start dropping harder, then this chart may look like a wiggle in what is to come, if there is a panic to grab dwindling supply.  But one cannot plan on that sort of thing happening.  And it is certainly not a constructive or desirable outcome, as most insurance policies are generally not harbingers of constructive and desirable outcomes when they pay off.   Unless you are engaging in an insurance fraud, that is, with the underwriter being AIG.

Please keep in mind that this is a logarithmic chart, and distorted in the part which I added below.  Also bear in mind that gold has already broken out and over its previous nominal highs from that same time period.  So those who say it is not possible are not considering what is already occurring in other related markets.

There is little doubt in my own mind that the silver market has been manipulated, and that we probably know who has done it, and the ways they have done it, and why.  Only the eventual outcome and settlement seem to be in question.  And to say that this contains some great mothering exogenous variables is to barely capture the fullest extent of it.



Illustration of a Classic Cup and Handle Formation


28 April 2016

The Next Battleground for Gold Will Be At 1550 If the Cup and Handle Formation Completes


If and when gold breaks out of this cup and handle formation, which is a matter of probability and not certainty, the next real battleground in a new bull market will be around $1550. One of the more interesting variables will be the manner of any breakout, and the 'time' it takes to reach a minimum measuring objective.

This is quite appropriate as 1550 marks the major support level for the channel in which gold had been moving prior to the recent bear market.

A successful cup and handle formation, should this occur, would mark a bottom for gold and quite possibly a resumption of another leg of the bull market.

It will be interesting to see how the future movement of gold as a cross to the US dollar may unfold. If the money masters were wise, they would permit it to rise back into the old trend channel and seek to find a balance in the wagers with the available physical supply.

However, wisdom so often being overlooked by power and overwhelmed by it, we may have to consider that a 'break' in the market may precipitate this activation of the cup and handle and therefore the next move higher, and a challenge to 1550 that completes rather more quickly then might otherwise happen.

In seeking to extend control and overreaching, people sometimes bring about the very circumstance that guided the fear that led to their overconfidence and misjudgment.
O, what a tangled web we weave when first we practise to deceive!

Walter Scott, Marmion
And this is what continues to muddy the waters in too many markets these days.  That there has been and continues to be manipulation of prices of too many important benchmarks and assets is no longer a serious question for open minds.    There are still too many minds that remain stubbornly, or wilfully, closed to the necessity for reform.   It is not the original offense but the overreach and coverup that knocks holes in the edifice of established power.

Rather, what remains puzzling are the details: the extent of it, the actual players who are involved besides the usual suspects, and of course, any motivations that may exist then the mere greed for illicit and outsized trading profits.






05 November 2012

Daily Gold 'Cup and Handle' Chart Update



A "Cup and Handle" is a bullish continuation pattern in an uptrend.

The greatest factor working against this current gold chart as a cup and handle is that it appears during a consolidation pattern in a broader uptrend.

The 'cup' is best shaped as a "U" and the broader the bottom the better.

The 'handle' is a retracement when the right side of the 'cup' reaches its prior highs. The handle often resembles a bullish pennant.

The retracement usually does not exceed 30% of the advance of the cup to its second high, but can go as deep as 50% in a volatile market.

The cup and handle formation will not be activated until the price of gold rallies about the 'rim' of the cup which is at 1790.

If this correction exceeds 50% then we must consider that gold is in a broad trading range.



25 June 2010

Gold Daily Chart: The Cup and Handle Is Now Fully Formed; Longer Term Projections


As the 'handle' of the cup and handle chart formation formed, it slowly yielded enough points to finally place 'the lid' on the cup and hand, and firmly label the rims.

This allows us to set the minimum measuring objectives. There will probably be a run higher to about 1375, with the usual back and forth noise, after the breakout is achieved with a firm close above 1260 that sticks for a week.

Then we will experience the first major pullback, most likely back down to the 1330 level. And then the market will continue to rally up to the 1455 level.

I cannot furnish time frames for these moves at this time. But I suspect the move to 1375 will be fairly expeditious once the breakout is clearly accomplished.



All forecasts are estimates assuming some 'steady state background conditions. If the fundamental conditions of markets change, then the forecast must change to accommodate that.

As an aside, I can see where some chartists might try to feature the handle of this cup as a bearish rising or ascending wedge. This is a weaker interpretation given the greater substance of the cup and handle. It should also be remembered that bearish wedges only resolve lower about 50-60% of the time, and really are not safe to play until there is a clear breakdown. I have paid dearly to learn that lesson when trading stocks from the bear side.

Gold Weekly Chart



I think we can safely assume that the next 24 months will be extremely interesting.

Here is a very long term gold chart showing the entire inception at the end of the twenty year bear market.

The next leg which we are now entering projects to about 2180 - 2200 before we would expect to see a major protracted pullback.



I do not think that this bull market will be limited to only 'four legs,' which is just a bit of anthropomorphism, but I do strongly suspect that it will continue until about 2020. So we seem to have almost ten more years of upside ahead of us, and could be considered to be at the halfway point.

Gold has been gaining, on average about 70% every three years. So what is the end point?

Just for grins, I would expect gold to hit $6,300 near the end of this steady bull run, but will the bull market will end in a parabolic intra-month spike towards $10,000. This is likely to occur around 2018-2020.

Long term forecasts are fun, but there are so many exogenous variables that it is very hard to say what will happen even a few years out. Let's see how this breakout goes, and where we are at then end of this year first. The charts will inform us of any major trend changes. Charts provide perspective more than prediction.

29 May 2010

Gold Daily Chart: The Handle Forms, a Reader's Questions, and Felix Zulauf on Gold


With regard to the cup and handle formation on the gold chart, a reader from Italy asks, 'Are you so sure?'

The short answer is jamais, 'never.' Only saints and fools approach certainty with reckless disdain; the experienced hedge with caution.

All charting is based on probabilities. Only fools are certain of what will happen next, and the market soon separates them from their money. In fact, 'knowing what will happen next' is the greatest single indicator of failure in trading that I have seen. All charts, all data, are selectively twisted and formed to support the outcome that one believes in. And when the like-minded collect, groupthink soon follows.

At the feast of ego, all leave hungry.

Right now this formation is indicative, a 'potential' thing that will be confirmed IF gold can break out higher. I would put the probability at about 65%, so it is a decent wager, but not more than that. As the price approaches a breakout point, the odds improve substantially.

The greatest negative is the possibility of a market meltdown in which everything is sold, at least temporarily.

This same reader from Italy suggests that gold is a Ponzi scheme. That is hardly probable since a Ponzi scheme requires a person, or small group of people, to concentrate and promote it. In the case of gold it is quite the opposite case, that the shorts hold concentrated power. I think he meant to suggest that it was a bubble, and was being a bit provocative. Although you could make the case that it is an 'anti-Ponzi' phenomenon, to the except that a fiat currency that was based in a debt Ponzi scheme is collapsing.

Well, is gold in a bubble? Gold is the 'mirror' of fiat currencies. Are governments and central banks doing a good job of protecting and maintaining the value of their currencies. Is spending well in balance with taxation? Gold is the barometer of profligacy and corruption. This is why corrupt statists fear and despise it.

Here is an interesting interview with Felix Zulauf on the global currency crisis and the gold bull market which is worth listening to carefully.

If people look back to the last great credit collapse worldwide which was the 1930's, and sees what happened to currencies and gold, they will obtain some knowledge that could very useful to them now. Stubborn ignorance can rationalize amost anything, and there is a peculiar tendency among people to resist the data that does not support their assumptions, until they are overwhelmed. They still have some hope due to the somewhat arbitrary nature of fiat currencies today, but increasingly less so for the very good reasons that Mr. Zulauf outlines in his interview.

Gold has no liabilities if you own it, it is sufficient in itself. It is also relatively stable in supply, and cannot be increased at will, as a fiat currency can be printed almost at will by a central bank but with increasingly lower marginal value in a free and transparent market.

Pierre Lassonde offers another interesting, although less rigorous viewpoint in this interview.

As a reminder I do not subscribe to the pure hyperinflationary outcome yet, which I think is not likely in the US at least. For my way of thinking, organic hyperinflation is a function of a currency with an external reference point. At the moment, the US dollar has no legitimate external standard as a reference point, except something soft, indicative, like gold. This is a truly fascinating and almost unprecedented historical development. I cannot think of a comparable economic example.

I suspect we will see powerful deflationary forces that will be countered by monetary inflation and devaluation that is not quite sufficient to break it, because quite frankly Bernanke is no Volcker, and the monied interests will resist a deterioration of their inordinate share of the dollar wealth of the world. That is not to say that various countries and even regions will not be economically 'trashed' in the process by a predatory financial sector based largely in New York, Zurich, and London.

Within eight years I would see the US dollar financial system resolving into a currency collapse and the issuance of a new dollar with a few zeros, two or three, knocked off as was seen with the rouble. It will look somewhat similar to the collapse of the former Soviet Union, not with a bang, but a whimper.



Here is a closer look of the current 'handle' being formed, and next to it the idealized example from an illustration of a classic cup and handle formation.

I would have preferred to have seen that lower bound set with at least one more test. Obviously at this point a retest would certainly try the longs. This would most likely occur if there was a major selloff in equities. Otherwise it appears that the orchestrated selling around Comex option expiration was the near term low.



Classic Cup and Handle Illustration



Gold to $1800-$2000 this year, and $30 Silver - James Turk

There are many more skeptical holdouts and the merely unaware with regard to the unraveling of the global fiat currency regime that has been in place since Bretton Woods.

As the dollar reserve currency and the euro recede into history, the pricing of gold in these currencies will become quite high, as the price of gold in old roubles had been during the collapse of the former Soviet Union. One thing that puzzles me is to speculate on which, if any, currencies will remain standing and be the big winners. Few have any backing in specie.

Moscow Memories of 1997

As you will recall, the world did not collapse with the Russian Empire. Goods flowed around and out of that region to other parts of the world, creating severe shortages. Many were out of work, or not being paid as official payrolls were in default due to lack of funds. Debts were wiped out en masse. Where was the deflation?

The US may have the option to go the Japanese route of slow death rather than a purging. A decade of stagflation may be deemed preferable to an all out bust.

Few understand the difference between a recession and a currency crisis. And they tend to forget even the wisdom of their own cultural heritage, embodied in the little sayings that we so often repeat, but genuinely understand only at those rare moments in our own personal experience.

"...the harder they fall."

Indeed.

05 February 2016

Gold Daily and Silver Weekly Charts - Cup and Handle - How Sweet It Is


“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting.  Got that?  My sitting tight!

Those who can both be right and sit tight are uncommon. I found it one of the hardest things to learn.”

Jesse Livermore

I had such a feeling that these jokers were going get stuffed on the usual Non-Farm Payrolls precious metals hit.  And I may have had some modest wagers in that direction from this morning.

But for most of us, and for most of my own portfolio, we do not wager against The Bucket Shop and exhaust ourselves trying to play their short term wiggles, dodges and headfakes with their synthetic gold.

We 'get right and sit tight.'  And I am seeing confirmation after confirmation that the fundamentals on the precious metals are solid, to be understated about it perhaps when so many will be going hyperbolic.

There are still difficulties, and things could turn rather ugly on the political fronts.  Who can predict that sort of thing?  But based on the knowable, things are unfolding in a very rational manner for those who can see past the noisome rantings of the financiers and their economic status quo.

One might take measures to get their metals into more appropriate places for 'insurance.'  And that means out of any unallocated accounts, or places presided over by the bullion banks and their associates, where ownership could become a debating point under duress, as in the case of MF Global.

If Nick Laird's analysis of the 'gold float' is correct, then we should start seeing fireworks on the physical front sometime later this year.

I have drawn the beginnings of the 'cup and handle' on the chart. The 'handle' will form on the right, and will take the shape of a retracement from wherever the top of the cup may be.

It will not be an active formation until the retest is successful, the handle is set, and the price of gold breaks back out to new highs.

That is a lot of things that may or may not happen from here.

But for now I will just say, have a pleasant weekend.












07 November 2012

Gold Daily and Silver Weekly Charts - Good To Be Back Again


“First you destroy those who create values. Then you destroy those who know what values are, and who also know that those who have already been destroyed were in fact the creators of values.

But real barbarism begins when no one can judge or know that what they are doing is barbaric."

Ryszard Kapuscinski

Sometimes one does not really appreciate what they have until it is gone.

It is good to be back again.

Gold has certainly had a volatile trade here in what appears to be the 'handle' of a cup and handle formation.

This is reflective not only of the volatility of a potential turning point ahead of a big move, but also the relative artificiality of the markets overall.

A storm has a gathered intensity within it that becomes unleashed in big events, as the northeast of the US has recently seen. The same can be said of the big changes that occur in the events of humankind.

The great events of life bring out the best and worst in people. I have seen this undeniably proven again and again, but especially in the last week.

People are the oddest mix of a strange transcendent nobility and self-denial, and a pure cussed meanness and ignorant aggressiveness, with a callous, almost brutish, disregard for others.

But even in the face of the most blindly self-destructive arrogance of a few, the goodness in life, its tender mercies, seems to appear again and again, and remains resilient. And this is what gives us hope, always.
"What keeps faith cheerful is the extreme persistence of gentleness and humor. Gentleness is everywhere in daily life, a sign that faith rules through ordinary things: through cooking and small talk, through storytelling, making love, fishing, tending animals and sweet corn and flowers, through sports, music, and books, raising kids—all the places where the gravy soaks in and grace shines through.

Even in a time of elephantine vanity and greed, one never has to look far to see the campfires of gentle people. Lacking any other purpose in life, it would be good enough to live for their sake."

Garrison Keillor
Let's see how the trade in precious metals progresses over the next few days, to see if the handle 'sets' and a cup and handle formation is confirmed with a breakout.

The area where the price swings settled today, around 1720, is a key resistance area. The breakout will be achieved if gold can break up and out through 1800.








01 July 2016

Silver Cup and Handles Project to a Price Target of $54


I know some of you have been projecting these nested 'cup and handle' formations on your own, because several readers have sent their examples to me and have asked for comments.

My first comment is the most important and I wish you to take it to heart.

Projections such as this are not forecasts, because the chart formations in these examples for the most part have not been 'activated' and are therefore merely potential things, possibilities, lines on a page subject to a great many exogenous forces and variables, including human and institutional decisions.

Only the cup and handle 'a' on the chart below has been activated and achieved fairly quickly I might add.   We are now working on 'b' and it will not be activated unless the price of silver takes out 21.50 or so.

And then and only then if the price of silver in dollars holds that level with the kinds of retracements and pricing action one would expect to see as a confirmation of it can we say that the chart formation is active and 'working.'  And even then it could fail.

And then after that we would be watching and considering scenarios c and d.

Again, this is not a forecast because it cannot be since it is not an active chart formation.   It is a set of possibilities based on the mechanics of supply and demand and price.  And as we all know too well, these various aspects of the market can be led down a dark alley of leverage and willfulness and strangled.

Let us bear in mind that at this time the central banks, too often in concert with their associated multinational banks and camp follower hedge funds are openly engaging in market actions to move prices for the short term where they will, and that these actions are not limited to interest rates.  I hope we have moved well past this debate.

The question is how long can the financial engineers keep doing this type of 'pooling,' as the have done in the past, with assets that have ties to physical reality that tends to trump debate?   And what happens when the pool dissipates and the markets revert to longer term relationships as they always seem to do.

I will not be posting this chart on a regular basis.  But as long term readers know I keep several of these scenario charts going in the background for my own pathfinding purposes.  And that is all it is. It is a sketch of realms still unknown.  But it is nice to keep sketching out a map of where one has been and where one might be heading.

So let us consider this a diverting look into what might be possible on a slow Friday afternoon rolling into a three day weekend on which we celebrate the sacrifices for freedom of those who have come before us.



10 May 2016

Charts at 3:30 PM - Fractal Cup and Handles - Hard Tutelage of Lessons Unlearned


"Our mistakes have become our secrets. Editors and journalists tear up with a guilty air all that reminds them of the party promises unfulfilled, or the party ideals reproaching them. It is true of our statesmen that socially in evidence they are intellectually in hiding. The society is heavy with unconfessed sins; its mind is sore and silent with painful subjects; it has a constipation of conscience.

There are many things it has done and allowed to be done which it does not really dare to think about; it calls them by other names and tries to talk itself into faith in a false past, as men make up the things they would have said in a quarrel. Of these sins one lies buried deepest but most noisome, and though it is stifled, stinks: the true story of the relations of the rich man and the poor in England."

G. K. Chesterton, Eugenics and Other Evils

Taking visitors back to the airport.

Notice how the gold chart looks like it might be forming a little 'fractal' cup and handle on the larger handle. And even this bottom formation appears to be embedded in a much larger cup and handle.

For you non-technicians, this merely means that gold may be forming an epic bottom that will result in a push to much higher prices.

But let's take this one day, and one chart formation, at a time. Right now the push through the psychologically important $1300 level is more important.

Silver is looking particularly attractive on the charts.

Someone remarked to me yesterday that gold was following the USD/JPY almost tick for tick. I have not looked at it but it would not surprise me since gold is being traded as a currency by speculative traders and central banks in the 'crosses' as I have noted.

But unlike paper money, in which a sovereign technically 'can never default' because they can print more and often obtain enough power to make their actions into laws, those who engage in the longer term abuse of gold will find that they cannot so easily manipulate a money that endures and exists in its own substance, and which cannot be replicated except by deception and the abuse of power.

 History is littered with the practical defaults of sovereigns through inflation and devaluation.  But these are lessons unlearned by a generation of willful moderns.

Have a pleasant evening.






26 May 2010

Gold Daily Chart: Cup and Handle Formation on Track


Gold set its low for the handle with an intraday spike down to 1166 compliments of the heavy handed bear raids ahead of option expiry, but put in the daily close at an almost perfect 38.2% Fibonacci retracement.

Since then gold has been rallying, breaking through the key 1200 level right after the expiration where so many call options had been concentrated.


h/t lemetropolecafe.com

It has already reached what might prove to be the upper bound of resistance for the handle, although I would expect it to be a rough go higher from here until a breakout is achieved.

The target of 1400 to 1450 looks good. As the breakout gains shape hopefully a minimum measuring objective can be calibrated more precisely.

Once gold starts moving I would not be surprised to see a breakaway gap that does not get filled, but leaves many punters on the sidelines waiting for a pullback.



The usual caution is that if there is a market crash and a liquidation panic, gold will be sold along with almost everything else, at least temporarily, but then should rebound strongly as the central banks act to bolster confidence and liquidity by devaluing their currencies even more aggressively tha they have already been doing.

Classic Cup and Handle Chart Formation



See also Gold Is In a Classic Cup and Handle Formation Targeting 1,450: May 19th