"YOU AIN'T SEEN NOTHING, YET"
UPDATE: GOLD VS ARMSTRONG'S MODEL
MY ORIGINAL EDITORIAL
Back in the middle of February I wrote an editorial showing Gold's performance in relation to the last two bottom dates of Mr. Armstrong's Economic Confidence Model. At the time Mr. Armstrong had released two articles where he stated his expectations for Gold to correct sideways to down into the next bottom of his Model into June 13, 2011. At the time my fractal work off of the late 70's Gold chart suggested Gold would rise into mid-year. You can find a link to my original article at our website, below, or at the link to Lorimer Wilson's site, also below.
Since my original editorial on the subject, Mr. Armstrong has released an article that appears to respond to some of the basic content included in my original editorial. You can read his new article at the link, below.
Mr. Armstrong is considered to be one of the best, if not the best, market prognosticator in history. Thus, his opinion on any of the markets is well considered by many market participants. My original article showed that Gold rose aggressively up into each of his last two Model bottoms. In fact, in both instances the price of Gold bottomed right at each period's Model top. Thus, my conclusion was that we will see Gold rise into the Model's next bottom that comes into June 13th. Such a move for Gold would match my fractal Gold expectations into mid-year.
Mr. Armstrong's new writing presents a clear and fairly comprehensive picture of his expectations for Gold over the coming months as he discusses the movements of Gold in relation to his Model. The new article appears to be open to the possibility of higher Gold prices in the near term, though he expects to see a bottom in Gold from some level into June. In fact, the article lays out the potential for many of the Gold price targets I have previously suggested, though Mr. Armstrong does not seem to feel confident that those targets will be reached in the near future within the frame-work of a healthy Gold Bull Market. The article also notes the potential for Gold to rise up to the $12,000 level- the high end of the potential range I had laid out in my 2009 editorial based on the fractal relationship of the Gold:Dow ratio as seen in the 1970's Gold Bull Market.
SOME THOUGHTS ON MR. ARMSTRONG'S
In his new article Mr. Armstrong clearly states that one cannot compare any single market including Gold to his Model- that his model provides timing such that any single market that bottoms when his Model bottoms tends to do well going forward. He also states that if Gold were to break too far to the upside above his stated price points, now; then Gold would be going through a "phase transition" where Gold might rise to a point that prevents the future price of Gold from reaching his higher potentials unless Gold trades down into his Model's bottom into June 13th. He does open up the possibility that Gold could trade higher and still correct down into his Model's bottom from a higher level. These are generalized statements as I read them so I would strongly suggest that you read his new article on Gold for yourself. There is no doubt that Mr. Armstrong is brilliant, yet those of us who are less gifted need to find the best way we can to frame-up the investment environment going forward using all of the investing reference points we can find.
SOME QUESTIONS I HAVE ABOUT THE NEW ARTICLE
THE "HOW" OF PRICE FORMATION
Sometime back in 2002 my work with technical analysis involving the charts of the Precious Metals Sector led me to consider the fractal nature of the long-term chart of Gold. Eventually, in early 2009 I read my first Martin Armstrong article that was named "It's Only Time." I was pleasantly surprised to read that Mr. Armstrong's very successful market work was based on fractal relationships. If memory serves, I think he described his point of realization of the fractal nature of the markets by noting his observation that he would see "price patterns repeat in first the daily chart, then the weekly chart, and then the monthly chart." I thought this was a wonderful way to express the fractal nature of how price patterns repeat over time.
In his new article Mr. Armstrong seems to suggest that the "When", or time component of a cycle can be scientifically determined; yet the "how", or the price pattern that forms, can only be foreseen based on subjective analysis and the level of experience of the operator. If so, then what happened to the concept of fractal patterns repeating in similar form in the daily, then the weekly, then the monthly charts? The fractal work that I do with the current Gold Bull off of the 1970's Gold Bull has seen nicely recurring price patterns off of the late 70's Gold Bull Chart, and the pattern at this point suggests a strong rise in Gold into mid-year.
THE RELATIONSHIP OF GOLD TO THE ECONOMIC MODEL
In his new article Mr. Armstrong suggests that Gold can only reach his potential target of $12,000 if Gold trades down into his Model's bottom into June so that Gold will be in sync with his Economic Model. This comment gives me pause. He states that the real problem, today, is the huge level of debt- which certainly makes sense. The huge deflationary backdrop of debt which continues to rise forces the Fed to accelerate the Inflation of the US Dollar. As the US Dollar is devalued, the US debt is also devalued since the US debt is fixed in price and denominated in US Dollars. The form of Dollar Inflation, today, is debt monetization in the form of QE. This type of Dollar Inflation does not directly increase the amount of newly printed Dollars reaching the economy so the economy continues to deteriorate- generating the need for more US Debt and even more Dollar Inflation. The falling value of the US Dollar drives the price of Gold in the US Dollar higher, though higher in lesser valued Dollars.
If the above is true, then I would expect Gold to trade inversely to the Economic Confidence Model and to rise as the continuing deterioration of the economy generates the need for more Dollar Inflation. In fact, this is true for most nations who are now simultaneously devaluing their paper currencies, creating a period of Global Competitive Currency Devaluation. Doesn't this world-wide condition create Capital flows into Gold across the world attracting hot paper money to Real Money Gold as the world-wide economy continues to deteriorate? If so, then don't world-wide Capital flows into Real Money Gold tend to move opposite the cycle of world-wide Economic Confidence? If so, I cannot see Gold moving in lockstep with the Economic Confidence Model in this GCCD environment; but would expect Gold to trade inversely to the Model.
"GOLDBUGS WANT THEIR CAKE AND BE ABLE TO EAT IT TOO"
I think the above quote by Mr. Armstrong is simply unfortunate. This comment might be seen as a slight to everyone investing in Gold, Silver, and the Precious Metals Stocks at this time. This comment is especially interesting in the light of his new, higher price target for Gold being offered- one potentially up to $12,000 an ounce for the current Gold Bull. Investors are rushing into anything with intrinsic value these days. Don't we have "copper bugs", and "corn bugs", and cotton bugs", too? This is what makes a market- different investors looking for different price movements at different times.
The bottom line to me is that the price of Gold rises directly proportional to the rise in Dollar Inflation that devalues the US Dollar. The true revaluation of Gold, higher, is created by investor demand for Gold as paper chases Real Money. So, what difference does it make in the end whether investors vote for a higher Gold price, today, or after June 13th? The decisions made by investors create the market. And as Mr. Armstrong has reminded us in this latest article, "The market is never wrong." Ironically, I do think that it does make a difference in this case since the parabolic price movement of Gold represents the collective parabolic change in psychology of the people moving to buy Gold.
SOME FINAL COMMENTS
A period of aggressive US Dollar inflation turns many things on their head since "price and value diverge" in this environment as the value of the Dollar drops. This becomes a world-wide phenomenon in the rare instance when paper currencies all over the world are simultaneously being aggressively inflated and devalued. The huge debt at all levels of government, and in the economy, left only two choices as we entered K-Winter- Either the debt levels collapse into a deflationary heap, or the Fed aggressively inflate the US Dollar. I am sure that it was a difficult decision for those in charge who became responsible for the indiscriminate spending piledup over many decades. The program of Dollar Inflation still has a long way to go considering the sad "state of the States" and the huge unfunded liabilities that remain in the system. Some say that the markets are discounting mechanisms as investors start to recognize what the future will bring. If so, then I suspect we will see a sharp rise in Gold, sooner rather than later, as an increasing number of investors turn to Gold as it climbs up its parabolic path.
The above material is only a small condensed version of what I will be posting for subscribers to our site. Mr. Armstrong has simply been the best with the markets for many years. I certainly wish him all of the best into the future.
FRACTAL GOLD VERSUS THE MODEL
The green lines on the chart represent "Economic Model Tops" while the red lines represent "Model Bottoms." I have placed the red line in the current time period in the middle of May which represents the 2011.45 date on Mr. Armstrong's Model- though he states that date as coming on June 13th. The time to the Model bottom might be longer than the chart represents.
At this time Gold is rising similarly to what we saw at the previous two periods. A rise into mid-year would match the fractal work I do off of the 79 Gold Bull Chart.
CURRENT LOG CHART OF GOLD
Notice that in the 2005/ 2006 fractal time-frame how Gold moved higher. This is the analogous time-frame to the Model Chart, above. We can see that in the 2005/ 2006 time frame, Gold launched higher from the same angled black dotted line where Gold has recently found support. An analogous rise in Gold at this time could see Gold rising up to the black line at around $1860 with the possibility that Gold could overshoot that line to the higher dotted line target. I am expecting Gold to move higher this week with the PM stock indices following suit similar to the move we saw back in 2005/ 2006.
We are currently in the process of building content on our new website at GOLDRUNNERFRACALANALYSIS.COM. If you have any questions about our new site, I can be reached at the e-mail address listed, below.
For the moment
March 20, 2011
Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put:
The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. In the interest of full disclosure, GOLDRUNNER is personally invested in the Precious Metals sector including various Precious Metals and other individual stocks. GOLDRUNNER reserves the right to modify or eliminate any or all positions at any point in time.