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Chart Symmetry

Daily Gold; Durban Deep; US 30-year Bond Yield; S&P500

March 1, 1999

Chart Symmetry is designed around the observation that prices tend to change direction along certain preferred gradients. Different preferred gradients are linked though the Fibonacci ratio. When a preferred gradient has been identified and confirmed, it and its derived gradients can be used to search for patterns that help to describe the shape of the chart, which then enable the analyst to anticipate certain developments.

The values shown for the lines are the values of the lines at the next time interval after the chart close. It is not a prediction that the price will suddenly move to reach that line overnight, but provides the reader a measure of the move that could take place if the price pattern does develop in the direction of that trend line. The steeper the line, the greater will be the change in the line value over time.

Gold: Daily PM fix

The master line is the main bear resistance line of the past 30 months. Channel A-B-C is the inverse shallower derivative of M. The spacing of A-B-C follows the Fibonacci ratio – a factor that assists in the correct location of the lines.

On the weekly chart of the gold price, shown here some time ago, the value of the steep resistance line, X, for this afternoon (25 February) is $285.80. A PM fix of above about $287.5 is needed to give a definite break on the weekly chart.

Scenario 1: One possibility based on the chart patterns is a break higher from the daily chart in the course of next week, ending the week on Friday, 5 March well beyond the weekly resistance of line X at $285.0 to record a major break.

Scenario 2: Gold fails and breaks lower out of the narrow triangle between lines M and C. This would imply the POG will remain in the steep channel on the weekly chart for some time to come.

Preference: Scenario 1. The alternative is too horrible to contemplate!

Durban Deep

The updated daily chart of Durban Roodepoort Deep in US cents/share is the same that was shown last week. Its main feature is a large megaphone, M-F2. Line F2 is the second shallower derivative of M. The evenly spaced shallow bull channel A-D has a gradient equal to the fourth derivative of M. The US price of Randgold is moving into a narrow triangle, just as the gold price is doing. Due to break at the same time? Direction??

Natural megaphones – broadening formations with boundaries that can be derived from each other – are very strong formations and are not easily broken. No wonder the price here has recently turned downwards as it approached line F2 for the fifth time.

Scenario 1: The price, calculated at $2.35 for Thursday, has just bounced off support at line D at $2.24. A break lower through line D would be very bearish indeed and would mean either a complete collapse in the value of the rand or a steep fall in POG. Or both.

Scenario 2: The price has reversed its bearish trend at support at line D and should soon break higher at line F2 ($2.41 for Friday 25th). The break through the megaphone is likely to be explosive, with line C, currently at a value of at $4.61, as likely first target. Resistance at line C, when reached, should hold for some time at least.

Preference: Scenario 2. Reason – as for gold!

US 30 year Treasury bond yield. Daily closing yield

At the end of its bull market, the yield on the US 30-year bond yield developed a (near) flat-topped triangle, F4-I, where F4 is the fourth shallower derivative of M. The break higher from the triangle took place after leg 5 had started. The break higher on leg 5, instead of reaching line I and breaking lower, is abnormal. It also took place at a cross-over of prominent trend gradients, which adds to the high volatility expected from an abnormal break from the pattern.

Now that the yield has reached market support at line B, the two possibilities are:

Scenario 1: The yield reverses direction at B, turns bullish and moves back down to test market resistance at line F4.

Scenario 2: The yield holds market support at line B, then remains in close contact with the line while it consolidates – probably between 5,50% and 5.65% - before later breaking higher through B on its way to market support at line A.

Preference: Because of the break from its main bull channel on the weekly chart – shown here in an earlier report – the new bear trend is not expected to end at line B, even though this level is also market support on the weekly chart. Scenario 2.

Standard & Poors 500

When shown previously, the break below line B was seen as bearish. The S&P broke higher at the cross-over of B and I, but then failed to reach new resistance at line A before turning lower and closing a fraction below support at B. Line N is the neck line of the Head & Shoulders pattern. It is a very significant trend line.

Scenario 1: The index soon recovers from the break below line B returns to bull channel M-B and continue higher.

Scenario 2: The break from the recent bull channel, M-B, is confirmed and a new bear trend or at least a major correction is under way – to be confirmed with a break lower through the cross-over of lines N and I.

Preference: Scenario 2 – the S&P leaves the bull channel and begins a bear trend.

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