Trade what you know, not what you wish.
Ross Clark of Chartworks began his career in 1974 at the heart of the bear markets for the equities, a point in which technical analysis was in its infancy. Ross looks for signals that occur within a trend or a consolidation that are similar to ones that have occurred in the past. Money Talks interviewer Michael Levy has been following the gold markets since 1968 and thinks Clark’s calls on the gold market have been “phenomenal, and his work which facilitated those calls has been nothing short of spot on.”
A summary of Ross’s latest comments from his 12 pages of charts and analysis below:
- The rebound rally in silver following the high Silver/Gold ratio in April called for a rebound and ‘false breakout’ in the 15 to 18 week window. Once in place the high was to occur within one to three trading days. The ‘breakout’ occurred on Friday, August 21st and within 1 ½ days of the reversal. Look for a 62% retracement to $37.60.
- Summer rallies in gold that start early and make new highs for the year in July top out in 32 to 34 trading days (Now six times in forty years). This year took 35 days.
- Tops generally occur within three weeks of a weekly Upside Exhaustion alert. This one took 2 ½ weeks and was coupled with a daily reading in GLD on August 22nd.
- The correlation with the TBonds of 1998 (and the PEI cycle) called for a high around August 17th. Occurred within three trading days of the optimum date.
- Even in the most bullish market (1976 to 1980) gold paused at the upper resistance line in July 1979 using a semilog chart. This week reached the upper resistance line at $1900.
- Seasonal patterns have shifted this year with a high due now. A six week consolidation/correction is likely.
- The Gold/Oil ratio is at the top of a forty year channel, implying profitability for mining stocks, however the stocks could easily correct by 20% before the next advance get under way.
- The XAU/Gold ratio is bottoming and suggests that the next phase of the bull market in gold will see an improving participation by the mining stocks.
- The Dow/Gold ratio continues in the theme of a secular bear for equities and a bull market for gold.
The most bullish scenario would call for a sharp five to nine day correction from $1917. However, if there is a slow erosion of prices, the consolidation/correction could stretch into October.
View Ross Clark’s 12 pages of charts and various technical studies HERE