Monday, September 27, 2010

What’s Next For Gold’s Rising Wedge Pattern?

Obviously gold has not shown any price weakness in the past month or so but let's amuse ourselves with the unthinkable as a follow up to the last post. Gold is in the process of filling out a major multi-year pattern which is coming to an end within days or weeks. Something is going to give one way or another. It doesn't have to be a big "give" but this pattern is near a completion. If we see coming price weakness as we remarked regarding our cycle count algorithm, what are the possible price target zones?

Rising wedge patterns are bearish in nature. If gold breaks to the downside, this pattern has two downside targets. The first downside target would possibly-probably preserve gold's uptrend. The second downside target would damage the uptrend substantially and could lead to further weakness.. Regardless, the future of gold is dependent on future fundamentals.

Given the size and length of time of this rising wedge pattern, I suspect the chances of it completing to the downside are much greater. i.e., Shorter term patterns intraday or of some number of days or weeks are less indicative of repeatable human behavior and are often aberrations that resolve themselves without fanfare. Longer term patterns such as this one which has lasted two years are more likely to represent timeless human behavior that is manifested through recognizable patterns. In other words, these patterns are visual representations of the market's herd behavior.

Remember, gold assets have already shown us what they are going to do under crisis. They imploded back in 2008. The historical comparisons to what gold did in the Great Depression are pointless. What matters is how gold assets have acted under current fundamentals. As we have remarked ad nauseam, this environment is nothing like the Great Depression. At the onset of the Great Depression the U.S. was the richest country in the world. Today, the U.S.'s elitist crooks and their political stooges have bankrupted us.

The world's political idiots and elites have chosen to maintain a very corrupt global economic model with hopes they can keep the self-serving fraud intact. In an act of great irony, the fact that the status quo won't do the right thing simply brings more attention and sunlight onto the corruption we see today, rather than allowing them to sweep it under the rug as they believe they have. e.g., As an example, the more active the Federal Reserve is, the more people scrutinize it and begin to question its legitimacy as it acts in secret and outside of the view of democracy to perpetuate massive fraud and corruption. The more this happens, the more it threatens its very existence with greater and greater scrutiny in perpetuation of fraud. Ditto with the corrupt Republican and Democrat parties and the intertwined corruption of corporate welfare and fascism they perpetuate for their own greed and fraud. All of this works in a harmoniously energy of the universe to create a wonderful dynamic. That would be karma is a bitch.
For those who are having trouble understanding monetary policy or don't have the time to figure it out, and are therefore left to question who is telling the truth as to whether central banks are printing money, (and as we have said more times than I care to remember, they aren't. A fact that evades reason and sanity.) below is oil priced in gold. Do you see any inflation? There is no inflation in the global economy. The only thing propping up asset prices is financial speculation and the state handing other people's money to crooks in an attempt to keep their schemes going.
posted by TimingLogic at 5:55 AM

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