Saturday, May 20, 2017

Gold: GATA & James Turk with His “Smoking Gun”

The DJIA (Dow Jones) and its step sum below peaked on March 1st of this year, after which the venerable Dow saw heavy selling. The collapsing step sum shows us that. But the price trend of the Dow Jones has weathered the selling better than expected.

I am about ready to declare the Dow Jones and its step sum is forming a Bull box, but not just yet.

What makes this a bull box? Historically, the price trend is a better predictor of future market trends than is a price series’ step sum. Think of the price trend (Blue Plot) as the market’s reality, and its step sum (Red Plot) an indicator of market sentiment. A step-sum box (either bull or bear) identifies those times when a market’s emotions are out of phase with a market’s reality.

Right now, the market’s reality for the Dow Jones looks bullish as its step sum collapses under the weight of day after day declines.

Usually, these bull boxes terminate as daily advances begin overwhelming declines, causing the step sum plot to reverse upward, which then results in a nice advance in the price trend. Should that happen for the Dow Jones below, my readers won’t need me to tell them the bull box is closed (terminated). That could very well happen here. In a best case scenario, I wouldn’t be surprised seeing the Dow Jones over 22K by mid-June, maybe before.

Not all bull boxes resolve themselves in the bull’s favor.

In other words, they fail. In the chart below, gold and its step sum have seen three bull boxes form in the past two years, and all three of them have failed. It’s very unusual seeing so many bull boxes form in a market during a two year period.

Seeing all three of them fail is even more unusual.

But if one is going to be a bull in the precious metals markets, one has to realize that the government and its regulators, as well as the global central banking cartel, are on the other side of the trade. So it’s not unusual seeing strange things happen in the market, the least of which are the three failed bull boxes above.

Now we wait to see what happens.

Can the “policy makers” take gold down below its lows of March 9th ($1,199), or down to $1,125 from last December? I don’t think they can. But if they do, they’ll once again provide another excellent opportunity to purchase gold and silver.

Here’s gold’s and the Dow Jones’ step sum and 15 count table. The price of gold was down every day this week. Its 15 count is down by six from last Friday. That’s a lot of selling pressure. But seeing the price of gold down by only $30 proves the bulls are only retreating, not running away in a panic – at least not yet.

The “policy makers” aren’t finished with the gold bulls. But if the gold bears continue their attack on the bulls as we see below, they’ll become exhausted in the next two or three weeks. That’s when we will see what the bulls can do; hopefully something impressive.

Ideally, I’d like the current selling to drive gold’s 15 count down to -9, or lower as the bulls successfully defend the lows of last March ($1,199). That would create a good base from which the gold market could make some really solid gains in the months to come.

Looking at the Dow Jones side of the table below, since March 31st, we see exactly this when it had a 15 count of -9. But as seen in the Dow’s step sum chart above, we’re still waiting for the bulls to do something impressive with the Dow Jones. So far the bulls have had only two days with a nice advance (April 24th & 25th).