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Eyeing A Bottom On Gold

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I’ve received several emails regarding my thinking on gold.

GLD (and gold) knifed lower last week after failing to get upside traction from what looked like a bullish big picture monthly setup and as mentioned in last week's report, a break of the pattern should lead to a flush out/clean out assuming I am correct about an important buy setup.

The lifetime high on gold was made in August/September 2011 and I continue to think that sets up a 540 degree/18 month possible cycle low in late February/early March 2013.

Clearly, gold has moved down hard into this time frame which underscores this potential: when a big cycle or square-out is on the clock and a market moves with authority into that turning point, in my experience it enhances the probabilities that an important turning point is at hand.

The Square of 9 Wheel enabled us to identify 1921 in the summer of 2011 as an important high. We had no idea at 18 months after that time, following an initial decline, that gold would remain in a relatively wide and loose trading range for the next year plus.

September 6th is 90 degrees square a price 0f 1921. The high price on gold was 1923.70 on September 6th, 2011.

Here are some potential levels of interest:
1587/88 is 720 degreed down from the all time high.
1547 ties to September 6th which makes March 5th (opposite Sep. 6th) a timeframe of interest.
900 degrees down from the all time high aligns with 1508.

9 squares up from the major 2008 low gives the precise 1923 lifetime high. Since then, gold has been dead money for the big picture bulls.
This points out the value of the Wheel of Time & Price.

If a larger flush out plays out, then 6 squares up from the November ’08 low ties to around 1432.
Interestingly, 1080 degrees (3 revs of 360 degrees) is also 1431.

Bottom line, there is a range between around 1430 to 1540 that currently ties to a potential bullish backtest of a Live Angle  from the 2011 highs (point C on the chart).

So, there is some nice symmetry for a 540 degree move in time and a 1080 degree decline in price from high…a 2 X ratio.

On the monthly chart of gold note that the all time high in the 3rd quarter of 2011 tied to a slight overthrow of a rising channel.
The recent decline in gold was set up by what in hindsight was a bearish backtest 6 months ago on a turn up of the important 3 Month Chart (point A in October ’12)

The recent slide also coincided with a failure of a turn down of the 3 Month Chart (point B in January) to define low---gold buckled last week when the January low failed to hold.

It is interesting that as some big guns are being fired in currency wars, that gold is getting hit. The normal expectation is that gold would rally.
Is it possible that one or more Central Banks is ‘stepping’ on gold which is a natural enemy of money printing?
Are they trying to ‘kneecap’ a presumed referee?

I continue to believe that gold is ultimately headed higher and if I am correct, the probabilities are that the next few weeks should prove pivotal for the yellow metal.

In the meantime I am flat, waiting for a sign from the final arbiter---Mr. Price, to confirm a turn up and change in the intermediate trend before the end of the first quarter.

Editor's Note: The above note is a free edition of Jeff Cooper's Daily Market Report. For a two-week FREE trial of his daily commentary and nightly day and swing trading picks, click here.
POSITION:  No positions in stocks mentioned.