PREMIUM ARTICLE RELEASE TO MARKET ALPHA BRAND NEWSLETTERS GROUP AND SeekingAlpha.com
ARTICLE NOW AVAILABLE ONLINE FREE GLOBALLY
GOLDINVESTORWEEKLY.COM AND GOLDPIVOTS.COM AND ETFPIVOTS.COM AND COMMODITYPIVOTS.COM AND MARKET-PIVOTS.COM
"A Time For Gold Caution, Or Time To Buy More?"
This Week's EchoVector Pivot Point Chart and Analysis And Active Advanced Position Management OTAPS-PPS Approach For The Gold Metals Market: 2/25/14
BY KEVIN JOHN BRADFORD WILBUR,
Chief Market Strategist And EchoVector Analysis Methodologist
PROTECTVEST AND ADVANCEVEST BY MOTION DYNAMICS AND PRECISION PIVOTS
Gold's dramatic price decline in the first half of last year has been big news. Since then, gold has found support on a GLD ETF basis at about $115, and is in its second bounce from this price level. The second bounce started in late December. The first bounce started at the end of June at the low of last year's dramatic first half decline.
The bounce from there ran into resistance in late August at $137.50. The price then fell all the way back to just under its first bounce starting price, before starting a second major bounce at the end of the year. Up 18%, then down 18%; a traders' dream, but not a very kind trek for investors. This second major bounce we are now in seems well underway, with the GLD trading this week above the $129 for a gain of over 12% since its start near the end of December.
A good question this week is whether or not to add to long positions into gold's recent strength, particularly on any signs of daily price weakness, or to consider turning cautious on gold again and perhaps to start lightening up, or to even switch orientation, that is, position polarity, altogether and go net short? Will this second major bounce hold up, and will it move gold's price on to higher highs than occurred last August? Or will this latest bounce fizzle as the one before it did? Will it perhaps even fizzle at lower highs, setting the stage for a longer term technical decay, and fizzle even before gold has a chance to close above the $130 level this quarter? How should all this gold market be approached given gold's recent price history
KEY FUNDAMENTAL PROS AND CONS
The news is full of discussions of current fundamentals that support either the long or the short position arguments for positioning in gold.
1. China overtakes India as the primary consumer and has consumption at an all time high. Many believe this trend will continue.
2. Political and economic turmoil in other emerging countries may spike addition safe haven interest in gold there.
3. The process of US Federal Reserve Bond Tapering may give ceteris paribus lift to gold buying interest.
4. The US return to forecast economic vitality may lead to commodity price stimulus, and this positively impact gold prices within the general commodities structure.
5. The US dollar's future directional uncertainty may continue to provide some marginal safe haven interest in gold.
1. Although gold miners' stocks were crushed last year, and have bounced back this year so far, these gold sector leaders may not be finished with their cyclical washout, a continued directional indicator for the precious metals themselves.
2. Interest in gold futures open interest remains in its 2-year downtrend.
3. Political and economic uncertainty in china's outlook may actually begin to dampen otherwise robust demand for gold there.
4. As gold prices rise, the short term stimulus in quantity demanded at the margin from the prior dramatic price drop may begin to reverse.
RESPONDING FORWARD: A LOOK AT IMPORTANT ACTIVE CYCLES
In December I issued an important price reversal alert calling for a bounce in gold into mid-January, and possibly beyond. I held that such a short-term bounce could and should be positioned into, on a trading basis at the very least. But, more importantly, also positioned into because of the possibility that gold might find longer term presidential cycle echovector support in 2014, and that this support might not necessarily materialize at lower absolute price levels. As mentioned, the price of gold has moved forward very nicely since December.
On January 12TH 2014, when the GLD had moved forward and closed just above the $120 level, I published my article "Revisiting Gold" featuring a close look at the charts. I emphasized how waiting until the end of June had been a very good annual risk-on risk-management strategy for gold since July 2009, and how exacting chart work also indicated early February and late July/early August proved to be significant inflection points in gold's price direction in 2010, and how a close watch in those periods this year might be prudent, keeping in mind the potential for the presidential cycle echovector symmetry to continue.
The late July/early August inflection point also proved active and significant in 2012, within the subsumed congressional cycle occurring within this current presidential cycle, which is also significant. This inflection point continued to prove operant in each of the subsumed annual cycles within this presidential cycle as well, which is further significant.
I highlighted how important, from an echovector analysis perspective, the period going forward into January's primary option expiration was, and how important the three week's following options expiration was, on a cyclical echovector analysis basis.
Last year, as well as the last several quarters, the period following the January quarterly option's expiration cycle did little in forwarding gold metals price levels, and actually proved quite precarious to prices into the first week of the following month, and in some instances, more so even beyond. However, the power of the 4-year presidential cycle echovector and the 2-year congressional cycle echovector could easily trump nearer term quarterly patterns that accrued during the recent down-pressure period.
Because of this risk, I suggested positive caution going forward, and the application of advanced triggered OTAPS switching applications in current open position management. For context see the following chart.
In the chart above the horizontal blue-purple extension vectors running about 2 months worth of trading days long from the light green oval areas in December of 2013 and December of 2012. The lower horizontal price level and time period following December of each year represents the currently active lower threshold OTAPS-PPS price level target switch, and the upper horizontal price level represents the upper threshold OTAPS price level target switch. Price movement up through the upper threshold generates a double-double open long at that trigger price and time. Price movement down through the upper threshold closes any open long positions and generates a double-double open short position at that price and time. Directional tick is very important here. Effective directional position polarity switching can also be accomplished by setting the effective open and/or close trigger prices one cent on either side of the initial base target trigger price threshold.
Additionally, movement down through the lower threshold OTAPS trigger switch closes any long positions that may otherwise be open, and generates a double-double open short position. Price movement up through the lower threshold switch will close any short position that may be open and generate a double-double long position open. The double-double leverage positions can be accomplished by utilizing related and highly liquid gold metals ULTRA ETF's on margin.
The $120.25 GLD proxy price equivalency level and echovector pivot point and otaps-pps upper band switch level was particularly important. On one side of the switch, gains from the $114.55 level were locked in. On the same side of the switch additional gains could be accrued in case of a rally. While having been penetrated upwards, further gains could also be accrued upon re-penetration to the downside in case of market price weakness. As it turned out, the bias in favor of the presidential cycle echovector and the congressional cycle echovector for relative strength right up into the last week of February occurred. And this proved very profitable for adherents to the analysis and to the active position management strategy discussed. See the chart below.
GLD ETF 4-YEAR DAILY OHLC
PRESIDENTIAL CYCLE ECHOVECTOR ANALYSIS PERSPECTIVE
(Click to enlarge charts)
FURTHER ANALYSIS, STRATEGY, AND EFFECTIVLY MANAGING WHAT'S AHEAD
This brings us back to the main question, "Is it now time for caution in gold to the extent of position adjustment; that is, is it time for position cover or even time for position polarity reversal now that momentum price lift into this part of February has been fulfilled? We have collected $15 on the GLD, over 13%, and about four times that on an open double-double position, over 50%, in just 2 months!
Or does the positive price lift from the December lows to current price levels portend further strength ahead this year, and should we think about adding to our position, and not trimming it back?
If it is time again for position adjustment, and if so, then which adjustment?
Reviewing the chart above, we see that the bias on the active presidential cycle echovector (white), the congressional cycle echovector (yellow), the annual cycle echovector (shorter white), and the bi-quarterly cycle echovector (shorter yellow) from Tuesday's close leading to each of their respective echobackdates does not appear to support near-term relative strength.
The blue extension otaps-pps position polarity switch signal vectors transposed from the forward pivot point cluster in 2010 to the corresponding echo-forward dates in 2014 provide a formal forward analytical context for symmetrical support and resistance pricing and timing indicators and position polarity switching actions moving forward through the quarter of 2014 into the middle of May, given present presidential cycle echovector momentum.
We can identify relative price momentum weakness going into and through many of this March's equivalent periods from the echobackdates of the key echovector cycle lengths we have been examining. For this reason it would be prudent to utilize the key active otaps-pps position cover and position polarity reversal vector highlighted on the chart above to effectively response trigger, and position orient and compliment into, whatever price action the market may bring. This otaps-pps vector currently puts the otaps-pps position cover and/or position reversal price trigger at around the $129.30 level this week. That means a drop through $129.30 on the proxy GLD ETF price equivalency basis for the gold metals market would put net short. Staying above this price, or moving down through it and then back up through it, positions net long gold. Moving down through this price closes long position at it and opens up short below it. See the zoomed chart below.
GLD ETF 4-YEAR DAILY OHLC
PRESIDENTIAL CYCLE ECHOVECTOR ANALYSIS PERSPECTIVE
CHART ABOVE ZOOMED TO FIRST FIVE MONTHS OF 2014
(Click to enlarge charts)
This active advanced position management strategy will enable us to capture and consolidate our well-earned capital gains from late December 2013 while positioning us to take advantage of both further price gains or sudden cyclical price weakness that can occur in the presently volatile gold metals market. Simply remember, when using this active advanced position management strategy it is important to update echovectors and related otaps-pps switch signal vectors generated by them regularly.
For further information on constructing and calculating echovectors, coordinate forecast echovectors, and echovector pivot points, see "The Simple Single-Period EchoVector Pivot Point Calculation".
For further information on constructing and calculating otaps-pps position polarity cover and/or switch signal vectors and their trigger points, see "The On-Off-Through Vector Target Application Price Switch And Position Polarity Cover And/Or Switch Signal Vector Trigger Points".
Thanks for reading, and godspeed in your gold market investing and trading.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.