Good as Gold

Gold has surreptitiously been completing inverse head and shoulders patterns all the way around the bowl it has been forming since 1996. Some are a bit odd - with tiny shoulders. Others are more normal-looking, particularly towards the end of the series.

6 examples are shown below - there are actually more to be found if you look closely.

The first did precede a very obvious spike roughly corresponding to its measured move - the height (or depth) of the head at the centre in dollars, added to the point where the pattern completes at the neckline.

Of the remainder it is the last two, which have occurred in quick succession, that are the source of current interest. These predict a measured move of about $465.

Gold 6-pack

It seems as though gold has back-tested the neckline breakout and is ready to surge - in fact the surge may have commenced. The measured move for Head and Shoulders No. 5 is around $465. No 6 is interesting since the measured move of 465 will complete another H & S with a neckline parallel to, and about $25 higher than the lower neckline.

Gold test 'n' go

With this closer look we can indeed see that gold has crossed and tested the big neckline (green line). However, on a more local scale we can see a series of breakouts and tests - culminating in this last breakout that has not yet been tested. A return to between 400 and 405 may be needed to launch. Obviously our target rail in the first instance will be the upper black line, currently at a little over 450. Of course, the rise will not be vertical, and so gold should be quite a bit higher before the rail is reached. Maybe $465? (The trend rise rate is increasing all the time, and at present is around $8 per month.)

CAVEAT

There is the small matter of the potential Head & Shoulders top formation awaiting any serious breach of up-trend resistance (neckline = red line). However, the larger green neckline buffer zone, plus the similarity of price action & oscillators to previous pre-breakout conditions suggests upside rather than downside is in order.

Gold Prospectrum

Spectra or mirrors are an interesting adjunct to conventional technical analysis. By correlating events about a central point with reflection symmetry it may be possible to project previous chart patterns forwards in time.

Of interest are certain points and features of the above chart.

1) The central line fits spectrum and trend-line turnaround. Therefore the spectrum is centred in the switch from secular bear to secular bull.

2) The spectrum centre also fits with those for the HUI, XAU and many other individual stocks I have studied.

3) The point where the Cross Channel resistance meets Uptrend Channel resistance reflects from a peak in the chart (albeit in the temporary lower channel) and corresponds to around $465 - the same target given by conventional H & S T.A.

4) Power uptrend support, Uptrend resistance, AND the upper frame harmonic thru pivot point 'A' all coalesce at point 'C'. Point 'C' is therefore well defined and must be a prime target, much as the 425+ Christmas 2003 peak was predicted in the somewhat more artistically presented editorial 'The Gold Detective' previously.

It will not be possible to reach point 'C' while constrained within the present rising wedge formed by Power Uptrend support and Uptrend Channel resistance. Therefore at some point we must break out of this wedge. If to the upside, I expect 'C' to be the 'test 'n' go' point on the macro scale. If to the downside, I expect 'C' to be hit from below. Whatever, the bigger picture is telling us there is MUCH more upside left in this gold bull....

Deja '72 all over again?

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