The above introductory comments are edited excerpts from an article* by Tom McClellan (mcoscillator.com) entitled Fishing Around For a Gold Cycle Bottom.
The following article is presented courtesy of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
McClellan goes on to say in further edited excerpts:
[My]…expectation comes from the fact that we have had “left translation” in this current cycle, meaning that the price top before the December 2013 mid-cycle low was above the price top after that mid-cycle low. Whenever left translation occurs, the expectation is that the price of gold will dip below the level seen at the mid-cycle low when the major cycle bottom arrives.
Late Blowoff Expected
There is another feature of some of these cycles which I believe is making an appearance this time, and that is the tendency to see a late blowoff move just ahead of the final cycle low. The blue arrows in the chart below highlight some examples of this behavior, and it is not just a recent phenomenon.
Here is a look back further in time, to show that this tendency for a late blowoff has been with us for a long time.
These late blowoff moves do not appear in every iteration of this cycle but they do appear often enough to allow us to understand that it can be a regular part of the cycle behavior. The difficulty, however, stems from the fact that it is really hard to differentiate a potential late blowoff move from the initiation of a new upward phase for the next cycle. This is especially hard, given that the real final price bottom can arrive up to a month early or late versus the idea date.
…Whether an up move is starting the new up phase of a new cycle or just a late blowoff at the end of the last cycle ahead of a plunge to a lower final low…is quite often very difficult to tell. [As such,] one way to deal with that is to take every buy signal when the major cycle low is near, accepting the risk that the market might suddenly move against you but the big up move will bail you out in the long run. I confess that I have trouble with that approach, because I like to be more precise, and that approach does not always work out in my favor.
Given all of the above information, my interpretation is that the June 2014 pop in gold prices is another example of this late blowoff behavior, and that we still have the final “thud” yet to come…
If we do not see a price low below that Dec. 2013 level ($1190/oz) at this major cycle low, then this would be the first time in 2 decades that there has been left translation which did not “work”.
It might seem to be extreme to look for a decline in gold price to $1,190 by the end of the month, but it is more extreme to make a bet that something which has worked consistently for at least the past 3 decades will suddenly fail this time.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://www.mcoscillator.com/learning_center/weekly_chart/fishing_around_for_a_gold_cycle_bottom/ (Copyright © 1996-2013 McClellan Financial Publications. All Rights Reserved.)
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