Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20
AMD is KILLING Intel as Ryzen Zen 3 Takes Gaming Crown, AMD Set to Achieve CPU Market Dominance - 13th Oct 20
Amazon Prime Day Real or Fake Sales to Get Rid of Dead Stock? - 13th Oct 20
Stock Market Short-term Top Expected - 13th Oct 20
Fun Stuff to Do with a Budgie or Parakeet, a Child's Best Pet Bird Friend - 13th Oct 20
Who Will Win the Race to Open a Casino in Japan? - 13th Oct 20
Fear Grips Stock Market Short-Sellers -- What to Make of It - 12th Oct 20
For Some Remote Workers, It Pays to Stay Home… If Home Stays Local - 12th Oct 20
A Big Move In Silver: Watch The Currency Markets - 12th Oct 20
Precious Metals and Commodities Comprehensive - 11th Oct 20
The Election Does Not Matter, Stick With Stock Winners Like Clean Energy - 11th Oct 20
Gold Stocks Are Cheap, But Not for Long - 11th Oct 20
Gold Miners Ready to Fall Further - 10th Oct 29
What Happens When the Stumble-Through Economy Stalls - 10th Oct 29
This Is What The Stock Market Is Saying About Trump’s Re-Election - 10th Oct 29
Here Is Everything You Must Know About Insolvency - 10th Oct 29
Sheffield Coronavirus Warning - UK Heading for Higher Covid-19 Infections than April Peak! - 10th Oct 29
Q2 Was Disastrous. But What’s Next for the US Economy – and Gold? - 9th Oct 20
Q4 Market Forecast: How to Invest in a World Awash in Debt - 9th Oct 20
A complete paradigm shift will make gold the generational trade - 9th Oct 20
Why You Should Look for Stocks Climbing Out of a “Big Base” - 9th Oct 20
UK Coronavirus Pandemic Wave 2 - Daily Covid-19 Positive Test Cases Forecast - 9th Oct 20
Ryzen ZEN 3: The Final Nail in Intel's Coffin! Cinebench Scores 5300x, 5600x, 5800x, 5900x 5950x - 9th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

XAU Gold Stocks Rising Wedge False Breakdown?

Commodities / Gold & Silver Stocks Mar 15, 2009 - 01:04 AM GMT

By: Brian_Bloom

Commodities Best Financial Markets Analysis ArticleThis analyst has been watching the markets in the past couple of weeks with a fascination akin to that associated with watching a snake charmer in action. In particular, he has been watching the rising wedge on the chart of the $XAU which caught his eye a few weeks ago and gave rise to an article with the same title as above, published on February 23rd. (See http://www.marketoracle.co.uk/Article9090.html )


Typically, rising wedges break down. Sometimes (under a combination of special circumstances) they break up. The chart below (courtesy decisionpoint.com) “appears” to have broken down.

Of particular interest is the green Relative Strength line at the bottom of the chart above. Not how, although the $XAU index itself penetrated below the lower rising trend line of the wedge, the rising trend line of the relative strength chart remained intact.

This can be more clearly seen by reference to the following Point and Figure RS chart (courtesy stockcharts.com)

Note how the ratio of the $XAU to Gold is still above its rising blue trend line.

Now look at that green line in the first chart once again. It is giving a tentative buy signal flowing from two facts:

1. It is peeking up above its 20 day moving average
2. It has evidenced a saw tooth pattern of rising bottoms and rising tops over the past four days.

Why would the $XAU reverse from a “false” breakdown and then move to break up? At face value that would make no sense. Surely, if it has broken down then it has broken down; end of discussion?

One possible reason might flow from the chart below which shows that whilst there may be room for further consolidation of the gold price, the target of $1045.60 per ounce is yet to be met. The reader should also bear in mind that if that target is eventually met, it will represent a strong incremental buy signal because the price will have risen to a new high. Such a breakout will likely presage the commencement of another run-up; but the reader is cautioned to recognize that this chart offers no clues as to timing.

There is possibly another and more far reaching explanation. Whilst the long term impact of the various government stimulus packages is almost certainly going to lead to an aggravation of our economic problems flowing from yet more debt and yet more mal-investment, the short term impact may be that the economy will sputter upwards – as evidenced by the chart of the Industrial Index below and its various Price Momentum Oscillator charts.

The PMO itself is showing rising bottoms (March 2009 relative to November 2008) and over 90% of all underlying PMO’s are rising. Almost 50% of these PMOs have given cross-over buy signals, and 100% of the underlying PMOs are below zero. In combination, this may be interpreted as an oversold market which is wanting to bounce.

But, if the gold universe breaks out to new highs whilst the industrial universe is merely bouncing up from a savagely oversold position, what might this mean?

In this analyst’s view, it will likely mean that the little guy’s skepticism of the Establishment’s ability (fear of its inability) to bring the world economy under control is becoming visible. In a previous article it was articulated that, at around $250 trillion a year, the US$ currency market is roughly twenty times the size of the market for physical gold bullion. The whales cannot possibly be swimming in the gold fishpond and any breakup of the gold price will necessarily have been facilitated by a stampede of smaller investors who will be moving to bypass third party financial advisers and take control of their own financial affairs.

Conclusion

If the breakdown from the rising wedge in the $XAU turns out to have been a false breakdown, and if the $XAU subsequently moves to break up from the rising wedge, then this will likely suggest a growing propensity on the part of small investors to break ranks and to start to play by their own rules. At the point that the gold price breaks to a new high – should that happen – that will be a signal that the world economy is beginning to spiral out of control because the loss of faith in the financial system by ordinary investors will have become visible.

Author’s Note

It is well understood by those whose lives are devoted to problem solving that no problem can be solved unless it is understood (diagnosed) and clearly defined. Once a problem has been defined, its solution will be a function of addressing, neutralizing and/or reversing the causes of that problem.

Many of those in decision making positions who do not fully understand the underlying problems have a propensity to focus on symptoms; and their remedial actions are typically intuitively designed to suppress those symptoms. The reader should understand that this is largely what is happening as our various governments move to “stimulate” the various countries’ economies.

Unfortunately, such behavior can be extremely dangerous because a suppression of symptoms often masks a deterioration of the underlying problem. In turn, if this happens then, ultimately, such ill informed and irresponsible behavior might lead to the death of the patient. To head this possibility off at the pass there needs to be a groundswell of upward pressure from voters on our political leaders to force them to start behaving responsibly. Sometimes, no decision at all is better than an ill-informed and erroneous decision.

In my recently published factional novel, Beyond Neanderthal, (published June 2008), the current financial turmoil (one of several symptoms) was anticipated and its causes (the drivers of the real underlying problems associated with this symptom) are clearly articulated.

Some of these causes are not directly related to economics and finance. In particular, the core underlying problem being faced by the world economy is that that the economic engine is no longer sufficiently powerful to drive the economic vehicle. Fossil fuels and their related technologies have passed their use-by date and the machinations of the world’s most powerful politicians over the past decade or so have blocked the emergence of new replacement energies and associated wealth building technologies. The world is now in catch-up mode and is scrambling when it should be cruising. “Money supply manipulation”, “interest rate manipulation” and “buckshot deficit spending” are symptom focused. Any buckshot actions of this nature are likely to cause more harm than good to the broader population. Only a few pellets are likely hit the target and the balance are likely to pass the target and give rise to enormous collateral damage.

Through its light hearted and entertaining fictional storyline, Beyond Neanderthal seeks to clearly define the problems in a manner which is understandable by the average person and also seeks to put forward one possible open-minded strategic approach to solving all these latter problems. The reader should bear in mind that it was written and published well before the world’s financial markets began to implode. The author began drafting it in October 2005.

By Brian Bloom

www.beyondneanderthal.com

Beyond Neanderthal is a novel with a light hearted and entertaining fictional storyline; and with carefully researched, fact based themes. In Chapter 1 (written over a year ago) the current financial turmoil is anticipated. The rest of the 430 page novel focuses on the probable causes of this turmoil and what we might do to dig ourselves out of the quagmire we now find ourselves in. The core issue is “energy”, and the story leads the reader step-by-step on one possible path which might point a way forward.  Gold plays a pivotal role in our future – not as a currency, but as a commodity with unique physical characteristics that can be harnessed to humanity's benefit. Until the current market collapse, there would have been many who questioned the validity of the arguments in Beyond Neanderthal. Now the evidence is too stark to ignore.  This is a book that needs to be read by large numbers of people to make a difference. It can be ordered over the internet via www.beyondneanderthal.com

Copyright © 2009 Brian Bloom - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Brian Bloom Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules