Gold Price - Where is it heading?

Richard Russell: Dow Theory Buy Signal

Richard Russell: Dow Theory Buy Signal

http://www.tradersnarrative.com/richard-russell-dow-theory-buy-signal-925.html

Were you watching April 20th 2007? if not, did you catch it on April 25th 2007? I’m talking about the Dow Theory buy signals that occurred on both those days. Richard Russell didn’t miss them. He’s dedicated his life to the study of the markets through the prism of the Dow Theory and for the past 50 years written a newsletter called the Dow Theory Letters.

Recently he wrote:

“We saw something that is extremely rare. In fact, I can’t remember ever having seen this before. What I’m referring to is that on those two dates all three Dow Jones Averages Industrials, Transports and Utilities — closed at simultaneous historic highs. To me, a fellow steeped in Dow Theory for over half a century, this was like a clap of thunder… My take on the situation is that the stock market (and the Dow Theory) told us that an unprecedented world boom lies ahead.”

This is an astonishing about face since Russell has been bearish, almost non-stop, for the whole duration of this bull market! I say almost non-stop because he has taken a few short “trading” buys here and there. But for him to finally acknowledge that this is indeed a bull market is quite remarkable. For me, it crystalizes that whatever logic you bring to bear to your analysis of the markets, ultimately, you can not argue with the most powerful element: price action.

But what I’m curious about is how Russell has resolved the primary reason why he was so bearish: valuation. As he says on his site:

"All other Dow Theory considerations are secondary to the value thesis. Therefore, price action, support lines, resistance, confirmations, divergence — all are of much less importance than value considerations, although critics of the Theory seem totally unaware of that fact."

I suspect that he still doesn’t feel that the market is “cheap” but has issued this buy signal because of the undeniable price action. We should remember that the Dow Theory is not perfect. It has given wrong signals before (which theory or method hasnt’?) but you can’t deny that it is yet another vote of confidence towards this market.

Finally, I wonder what this means for the gold market.

http://www.tradersnarrative.com/gold-bulls-will-be-disappointed-again-876.html

While Russell has been bearish on the market, he has been staunchly bullish on gold. I wonder if this means that he has also changed his mind about that.

Things may get interesting with the Fed meeting tomorrow. Will we have another spike up? or will it be the end of the party?

Re: Richard Russell: Dow Theory Buy Signal

BlueDaze said:

Richard Russell: Dow Theory Buy Signal

http://www.tradersnarrative.com/richard-russell-dow-theory-buy-signal-925.html

Were you watching April 20th 2007? if not, did you catch it on April 25th 2007? I’m talking about the Dow Theory buy signals that occurred on both those days. Richard Russell didn’t miss them. He’s dedicated his life to the study of the markets through the prism of the Dow Theory and for the past 50 years written a newsletter called the Dow Theory Letters.

Recently he wrote:

“We saw something that is extremely rare. In fact, I can’t remember ever having seen this before. What I’m referring to is that on those two dates all three Dow Jones Averages Industrials, Transports and Utilities ”” closed at simultaneous historic highs. To me, a fellow steeped in Dow Theory for over half a century, this was like a clap of thunder… My take on the situation is that the stock market (and the Dow Theory) told us that an unprecedented world boom lies ahead.”

This is an astonishing about face since Russell has been bearish, almost non-stop, for the whole duration of this bull market! I say almost non-stop because he has taken a few short “trading” buys here and there. But for him to finally acknowledge that this is indeed a bull market is quite remarkable. For me, it crystalizes that whatever logic you bring to bear to your analysis of the markets, ultimately, you can not argue with the most powerful element: price action.

But what I’m curious about is how Russell has resolved the primary reason why he was so bearish: valuation. As he says on his site:

"All other Dow Theory considerations are secondary to the value thesis. Therefore, price action, support lines, resistance, confirmations, divergence ”” all are of much less importance than value considerations, although critics of the Theory seem totally unaware of that fact."

I suspect that he still doesn’t feel that the market is “cheap” but has issued this buy signal because of the undeniable price action. We should remember that the Dow Theory is not perfect. It has given wrong signals before (which theory or method hasnt’?) but you can’t deny that it is yet another vote of confidence towards this market.

Finally, I wonder what this means for the gold market.

http://www.tradersnarrative.com/gold-bulls-will-be-disappointed-again-876.html

While Russell has been bearish on the market, he has been staunchly bullish on gold. I wonder if this means that he has also changed his mind about that.

Things may get interesting with the Fed meeting tomorrow. Will we have another spike up? or will it be the end of the party?

Click to expand...

Ok, this is it, when the Bears concede defeat and get Bullish, this is time to sell up and head for the hills...

Game Over...

Interesting comment by Henry To:

http://www.safehaven.com/archive-175.htm

"Bearish sentiment or bullish sentiment - if the Shanghai Composite goes "kaput," then it is over for gold, the Yen carry trade, and the dollar bears as well. Buying gold or gold mining stocks is just like buying Chinese stocks or shorting the Yen against the Euro at this point."

Re: Game Over...

BlueDaze said:

Interesting comment by Henry To:

http://www.safehaven.com/archive-175.htm

"Bearish sentiment or bullish sentiment - if the Shanghai Composite goes "kaput," then it is over for gold, the Yen carry trade, and the dollar bears as well. Buying gold or gold mining stocks is just like buying Chinese stocks or shorting the Yen against the Euro at this point."

Click to expand...

Couldn't find the story but....

In so far as some of the 'hot' money from the YCT has found it's way into gold there will probably be short term negative pressure on gold, but then when every central bank starts intervening in their currency to remain competitive then what are we left with as a store of value, if fiat currencies lose even more of their value?

Same for the commentator above who sold all his NEM shares. It's likely that there will be a short term buying opportunity but the fundamentals for gold are still there - after all, the 36 year capitalist experiment with fiat currency is looking shakier by the day.

I would think that in the event of a Chinese market crash that those with any money left would not trust official currency & would revert to their traditional trust in gold, so it could work in golds favour.

Still, it's not in anybodies interest for a crash to occur, but there is certainly some irrationality in the Chinese market now, and not even the commies can prevent that happening if something triggers a panic (except maybe shut the markets down). The force of a billion people buying shares pales when compared to a billion people selling shares.

I Hope He Is Wrong!

Liquidity Boom & Looming Crisis
By Henry C K Liu

http://www.atimes.com/atimes/Global_Economy/IE09Dj01.html

"The global commodity bubble of the past three years has increased costs of living and production, adding more than 5% to global GDP growth. Although commodity inflation has been absorbed through low-interest consumer borrowings and lower-wage labor in the past, it is now finally showing up as higher-cost factor inputs. China has kept the global cost of manufacturing artificially low by not paying adequately for pollution control and worker wages and benefits, including inadequate retirement provisions. Domestic political pressure within China is forcing the government to normalize full production cost, which will boost global inflation.

Global inflation has picked up by 60 basis points in the past four quarters. If the trend continues, major central banks will have to focus on fighting inflation by cooling the liquidity boom. To avoid a drastic market collapse, anti-inflation measures will need to be implemented at a "measured pace", which means it may take as long as two years to take effect. The problem is that the system, which operates on ever rising asset values, cannot weather a two-year-long anemic growth. Thus even a soft landing will quickly turn into a crash.

Bonds will be the first asset class to decline in market value in this anti-inflation cycle, which will eventually also affect other asset classes. As the flat or inverted yield curve spikes upward back to normal, making the spread between long-term and short-term rates wider, the commodity bubble will burst, followed by the stock market in a general deflation. Such a deflation cannot be cured by the Fed adopting inflation-targeting through printing more dollars because inflation-targeting is merely transmitting price deflation to a monetary devaluation.

The five-year global growth boom and four-year secular bull market may simple run out of steam, or become oversaturated by too many late-coming imitators entering a very specialized and exotic market of high-risk, high-leverage arbitrage. The liquidity boom has been delivering strong growth through asset inflation (property, credit spreads, commodities, and emerging-market stocks) without adding commensurate substantive expansion of the real economy. Unlike real physical assets, virtual financial mirages that arise out of thin air can evaporate again into thin air without warning. As inflation picks up, the liquidity boom and asset inflation will draw to a close, leaving a hollowed economy devoid of substance.

Massive fund flows from the less experienced non-institutional, retail investors into hot-concept funds such as those focusing on opportunities in BRIC (Brazil, Russia, India and China) or in commodities, or in financial firms involved in currency arbitrage and carry trades, have caused a global financial mania in the past five quarters that has defied gravity. It will all melt away in a catastrophic unwinding.

Inflationary pressure in the US and other OECD economies makes a cyclical bear market inevitable and an orderly unwinding unlikely. Central banks cannot ease because of a liquidity trap that prevents banks from being able to find creditworthy borrowers at any interest rate. Banks could be pushing on a credit string and global liquidity could decline, causing asset-risk valuations to contract suddenly and sharply. A liquidity trap can also occur when the economy is stagnant and the nominal interest rate is close or equal to zero, and the central bank is unable to stimulate the economy with traditional monetary tools because people do not expect positive returns on investments, so they hoard cash to preserve capital. Capital then becomes idle assets.

As the decade-long US consumption collapses from exhaustion, a secular bear market arises in which the bullish rebounds are smaller and do not wipe out the losses of the previous bear market. Because Asia's growth has been driven by low-wage exports, it will not be ready to fill in as the global growth engine in time to prevent a global crash. China is just beginning to change its development model to boost worker income and household consumption and may take as long as a decade to see the full effects of the new policy. China's only option is to insulate itself from a global meltdown by resisting US pressure to speed up the opening of its financial markets. China's purchasing power is too weak to save the global economy from a deflationary depression.

A global financial crisis is inevitable. So much investment has been sunk into increasing commodity production that a commodity-market bust, while having the effect of a sudden tax cut for the consuming economies, will cause bankruptcies that will wipe out massive amounts of global capital. A financial crisis could trigger a global economic hard landing. Global financial markets look suspiciously like a pyramid game in this overextended secular bull market. The proliferation of complex derivative products catering to short-term trading strategies that aim to get the biggest bang for the buck creates massive uncertainty surrounding leverage in the global financial system. A commodity burst could cause correlation trades to unwind in other markets, which could snowball quickly into a massive financial crisis."

bean said:

AGREE BUT I AM SEEING THE DOW MOVING WITH GOLD.
AND I SEE THE DOW MAKING A TOP
AND BOTH WILL BE DROPPING TOGETHER
BUT THE DOW WON'T STOP

Click to expand...

DOW up, gold down - because of oil, not the DOW.

Or is this a one off?

DOW NEW CLOSING HIGH - GOLD DOWN

I HAVE BEEN SHOWING OVER THE LAST MONTH THAT THE US GOLD INDEXES AND
S&P
500 (US MARKETS IN GENERAL) HAVE BEEN FOLLOWING EACH OTHER.

I HAVE ALSO BEEN SAYING THE I AM IN THE GOLD CAMP THAT EXPECTS A
CORRECTION

I EXPECT THE CORRECTION TO INCLUDE THE US MARKETS

LAST NIGHT THE US GOLD INDEXES FINISHED UP!!!

SO THE TOP IN THE DOW IS THE CLOSING TOP???


IF GOLD IS INDEED FALLING THE THE GOLD INDEXES SHOULD FALL AND
WILL THE US MARKETS FALL / OR RISE?

SO IF GOLD INDEXES GO ONE DIRECTION AND THE US MARKETS GO THE OTHER


I WILL SAY NO MORE !!!

bean said:

DOW NEW CLOSING HIGH - GOLD DOWN

I HAVE BEEN SHOWING OVER THE LAST MONTH THAT THE US GOLD INDEXES AND
S&P
500 (US MARKETS IN GENERAL) HAVE BEEN FOLLOWING EACH OTHER.

I HAVE ALSO BEEN SAYING THE I AM IN THE GOLD CAMP THAT EXPECTS A
CORRECTION

I EXPECT THE CORRECTION TO INCLUDE THE US MARKETS

LAST NIGHT THE US GOLD INDEXES FINISHED UP!!!

SO THE TOP IN THE DOW IS THE CLOSING TOP???

IF GOLD IS INDEED FALLING THE THE GOLD INDEXES SHOULD FALL AND
WILL THE US MARKETS FALL / OR RISE?

SO IF GOLD INDEXES GO ONE DIRECTION AND THE US MARKETS GO THE OTHER

I WILL SAY NO MORE !!!

Click to expand...

Bean, if the US market tanks there's a high probability that the Aus market will as well, which will take down gold stocks with it. This is not rocket science. I am really not sure why you are going on about this in capital letters. Can you please just stick to normal fonts so we can have a normal conversation without the yelling. Cheers.

Have drawn in a tentative W4 completion, although it may drop further yet, can't see any acceptable R/R trades developing at the moment so will watch and wait for the time being.
Incidentally if you overlay the $US over the gold chart you will see that they travel in opposite directions for approx.80% of this year so far, but as an indicator to take a trade it is not of much use as they usually turn at the same time, much the same as lining POG up with the DOW etc???? Have also noticed that posting in CAPITALS doesn't seem to have much effect on the market either???

Kimosabi said:

I was trying to work out when to post this video, but now I think think is the appropriate time.

DOW vs Gold

...or...

Investment Price vs Investment Value

http://video.google.com/googleplayer.swf?docId=9084947195585759605

Must be about time to visit the Perth Mint...

Click to expand...

Could someone do an XAO vs Gold Chart like what is demonstrated in the above movie?

I'd be interested to see how the XAO compares to gold.

It would be interesting to do an Investment vs Investment analysis of the XAO during our recent Bull Run.

Have now got an a=c Gartley type pattern forming on the trend channel support, also where a typical W2 usually completes at 50% retracement.. wonder if it will hold??

kennas said:

DOW up, gold down - because of oil, not the DOW.

Or is this a one off?

Click to expand...

Only whispering but today I only see
Green in the US$ and oil
Red appears to Everything

And I have been saying for thr last month that the US Gold indexes and US markets are moving in the same direction.

I also said that Gold was going to correct and the indexes would follow Gold
So if the Gold Indexes were going down as well
Guess who is leading the Markets
GOLD

Kauri said:

Have now got an a=c Gartley type pattern forming on the trend channel support, also where a typical W2 usually completes at 50% retracement.. wonder if it will hold??

Click to expand...

I think it will, 665 was the critical level for me. I've got a GOLD mini open long. This could be the turning point where GOLD decouples with the DOW, which it has been tracking a bit lately (as Bean will tell you for sure LOL!)...but i think its oversold now, and its holding the trendline so far....Today and tonite should tell.

Cheers,

CanOz said:

I think it will, 665 was the critical level for me. I've got a GOLD mini open long. This could be the turning point where GOLD decouples with the DOW, which it has been tracking a bit lately (as Bean will tell you for sure LOL!)...but i think its oversold now, and its holding the trendline so far....Today and tonite should tell.

Cheers,

Click to expand...

Your long looks good, the setup looks like a Harmonic pattern, or Gartley222 bullish according to Pesavanto... or a simple ABC correction for me...
Last one I traded on the daily gold was in Dec/Jan.. it panned out well. May look down to shorter timeframe charts to see if there is a good entry there.
Cheers

I am in the camp that believes Gold and Gold stocks are going down
I have shown that the US markets and US Gold indexes have been moving together.
If a bounce occurs in Gold tonight - Then US market up
If that was the case then US markets may pick up steam and go higher.

I however believe that the closing Top for me was Wednesday night.

And hopefully another one or two down days might convince everyone
That this is indeed a severe correction in US markets
That will spread
On the way down watch the market in China

At some stage yes Gold will break free
Hopefully I get $800+ by end of year

bean said:

IIf a bounce occurs in Gold tonight - Then US market up
If that was the case then US markets may pick up steam and go higher.

Click to expand...

A bore US gold stocks up US markrts up.
Yawn follow each other but the calling is down

Gold (daily spot) is at an interesting stage again..

I am at the stage where I need more data
Can Gold go higher on Monday and Tuesday the answer is yes
It bounced Friday night because it had a big drop on Thursday
However I am expecting it will be a lower price that what it fell to last week by this Friday.

If Gold is up on those two days the US markets DOW will be making a new high.

Then Monday will be down and so will Tuesday and possibly Wednesday?

If Gold is up on those two days the US markets DOW will be making a new high.

Code:

But if last Wednesday was indeed the high in the DOW

Then Monday will be down and so will Tuesday and possibly Wednesday?

Click to expand...

Like a broken record
Gold indexes & Gold and the US Markets are moving with each other

Last night Gold down all US Markets down except the DOW which just finished in the Green.

However the HIGH I SAID LAST WEDNESDAY IS STILL THE HIGH IN THE DOW.

Gold is going down and the US markets are going down.

On the way down we will watch CHINA because any acceleration in there market could cause an 87 stye Crash

bean said:

Like a broken record
Gold indexes & Gold and the US Markets are moving with each other

Last night Gold down all US Markets down except the DOW which just finished in the Green.

However the HIGH I SAID LAST WEDNESDAY IS STILL THE HIGH IN THE DOW.

Gold is going down and the US markets are going down.

On the way down we will watch CHINA because any acceleration in there market could cause an 87 stye Crash

Click to expand...

What's with you guys and thinking china will end the world for us!

The Bank of China will never let their market lose more then a certain amount they hate unstable volatile situations in any thing they do.

When it hits a point they will poor in the cash until it stabilises.

Our markets will fall when they reach the point were no one is willing to pay that price and they will bounce straight back as long as people see the oppertuity is great to buy.

China is not going to be the reason for a bear market I am sorry to say.

We only had a sell off last time cuz the market was looking for any reason to sell and the china sell off was the right excuse!

my