Home—Online trading—Spread betting explained—Spread betting blog—Has gold topped for 2012?
Jul 06, 2012, 03:23
Posted byJohn C Burford
Comments (17)
In yesterday’s MoneyWeek Trader, I left you with the comment that I could see some interesting things on the short-term gold chart.
Take a look and I’ll talk you through what I mean:
(Click on the chart for a larger version)
As I was writing that issue yesterday morning, gold was trading just under the $1,620 level, near the tip of my green arrow. I could then draw in my first tramline across Monday’s low.
A parallel line above took in the recent highs, including Tuesday’s $1,623 high, and the equidistant parallel line beneath very conveniently crossed the major $1,550 low. How about that?
These solid touch-points have given me confidence that these tramlines really do represent solid support and resistance – at least in the near-term – which is the fundamental value of tramlines.
That is powerful information to have – knowing when (in time) and where (in price) the market is likely to reach and then to bounce. Are you using this yet in your own analysis? Let me know in the comments at the end.
So with my tramlines in place yesterday morning, the market later on did break through the centre tramline, where I was waiting with my short sell orders.
The market then broke quite sharply, but where did it stop falling? Right on my lowest tramline, of course! How pretty is that?
With tramlines in place, anyone with this information could have forecast this. This is the power of tramlines!
Isn’t it great to have a forecasting tool that is simple to use and can be generated in a flash on your charts? No expensive software, no black boxes, and no waiting! That’s what these techniques can do for you and that’s what I’ll be focusing on in my upcoming workshop.
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OK, I then expected a bounce of some sort – but it has been weak (so far) and as I write, the market is attempting to break below my lowest tramline in the $1,600 area.
So how does this action fit into the bigger picture for gold?
Remember that I had pencilled in Elliott wave labels for the decline off the 19 June $1,632 top to the $1,550 low and I found five clear waves down.
With that correctly identified, I managed to take my latest swing profit near the $1,550 low as it was in the fifth (ending) wave.
Now, to confirm my labelling, any rally had to stop short of the $1,632 high. A push above that level would cancel out my forecast for a big move down – because my five-wave labels would be wrong.
Trader tip: Do understand that this is no mere theoretical fancy! If the market rallies above the $1,632 high, it would indicate further strength ahead. The $1,632 level thus is acting as the line in the sand – and is the definitive marker for either a bullish or a bearish stance.
Not many methods of analysis can give you so clear an answer – bullish or bearish! That is just one of the many benefits of learning Elliott waves – and that’s why I cover them in my workshops. I strongly recommend you learn to use Elliott waves in your trading.
So far, the market rally has stopped short of the $1,632 level, and also has an A-B-C form with a negative momentum divergence at the C wave high (red arrows on the chart below):
This is playing as a textbook Elliott wave market – motive swings (those in the direction of the larger trend) possess five waves in that direction with three counter-trend waves.
If I’m correct, the $1,632 level should hold and the market should now head down towards the critical $1,530 support zone I have shown in previous gold articles.
And that implies that we have seen the highs in gold for a very long time, and this action here described will help answer the question in my headline.
So $1,530 is my main target on gold for now.
Of course, a move above $1,632 would radically alter this scenario! But with the Elliott waves lining up as they do, this is less likely.
By the way, I stress again: I’m not giving trade recommendations here. These are my thoughts and trades and I’m using them to show you my methods. I hope that by following them, you’ll be able to find your own trades. And if you’d like some higher level education, do consider my next workshop. Details coming soon.
That’s all for this week. Do let me know if you have any thoughts or comments on this issue here.
Have a great weekend.
• If you’re a new reader, or need a reminder about some of the methods I refer to in my trades, then do have a look at my introductory videos:
• The essentials of tramline trading • Advanced tramline trading • An introduction to Elliott wave theory • Advanced trading with Elliott waves • Trading with Fibonacci levels • Trading with 'momentum' • Putting it all together
• Don't miss my next trading insight. To receive all my spread betting blog posts by email, as soon as I've written them, just sign up here .
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Leave a comment
(06 July 2012, 04:10PM) Complain about this comment
I know you are a short-term trader, but if you are long term investor where do you put your cash in a declining western economy? Governments are going to continue printing to try and bail out the sinking boat because they don't want to admit their economies are noncompetitive in a globalized world. We may have seen the lows for 2012 as your charts indicate but its hard to see how we are the end this bull cycle given the back drop and the trajectory of the world economy. I would like to think I am open minded about my bullishness on gold and I would love someone to change my mind and make me bearish, but I just cant buy the bear arguments. Your missive have failed to do that for now - sorry.
(06 July 2012, 04:13PM) Complain about this comment
the accuracy your methods keep amazing me ... excellent!
(06 July 2012, 04:57PM) Complain about this comment
I am a little more cynical than Peter Connelly above. Over the weeks, I note that you have drawn a myriad of tramlines, Elliot waves, Fibonacci levels and plotted these over various time scales. However, I note that you only predict the result after the event has taken place. Today, you predicted that gold was going to fall below the 1632 level. Your email landed in my inbox at 15:31 when the price of gold had already fallen to 1586. I will perhaps be forgiven for thinking that you only sent your email once you saw the market had fallen. I could sit around all day drawing lines on past charts and telling everyone where would have been a good place to trade. I would be much more impressed if you drew all these lines before the market move took place and then predicted where it was going. Then like Peter Connelly, I might also be amazed. As it is, I am afraid that predicting moves after they have taken places the mantle of charlatan firmly firmly upon you.
(06 July 2012, 05:46PM) Complain about this comment
Please recommend inexpensive or free software that will easily display those parameters named by "Graham Wadsworth" on july 6. I have bought a trial data source.
(06 July 2012, 05:53PM) Complain about this comment
JohnThanks once again for providing the reader with a running commentary of what an experienced trader like yourself is experiencing. Sharing any thoughts with others has its risks. Many people fail to see the value in being able to observe your thoughts and theory. Instead they choose to judge and criticise. I know you are thick skinned and having a scientific mind have no fear of being proved wrong. But everyone likes to be appreciated. I certainly appreciate you allowing me to share your inner thoughts on the market. It has proved to be the most valuable insight into the markets that I have ever received. Thank you. Specifically, in reply to other comments posted here, I do not have any doubt about your integrity and would never suggest, has been done here today, that you are posting after the event ridiculous. I don’t usually post but what I read here went too far. You have said before that gold generates heated responses like no other market. To be cont’d.
(06 July 2012, 05:54PM) Complain about this comment
Cont’dWhat i would add considering the your use of the Elliott wave and your other methods, in the gold market they are less valid than perhaps others. That is that the fundamentals which are deliberately ignored in your methods, are more valid in gold than any other. Whilst your method predicts human behaviour more than the actual stock, therefore if the EU and the Fed next month all start the printing presses we will get a large upward movement which will change the general human behaviour. Your method has no allegiance to any particular fundamental theory. It simple identifies very short term movements (where the money is in day trading). Many gold bulls don’t want to hear anything that opposes an upward movement. But this is often born out of frustration. Frustration that despite all the problems somehow gold remains below $2000 and threatens to drop to $1200.To be cont’d.
(06 July 2012, 05:55PM) Complain about this comment
Cont’d I have been holding gold since 2002. In those days gold accounted for 10% of my holdings now it accounts for 75%. That’s because it has done so well. Now I am extremely nervous about any downward movement in gold downward swing have a big affect on my holding. I need a large movement upwards to take profits. If it takes a dive then I will hold and swallow and wait for an uptrend. A paper loss only hurts when you have to sell and take cash. I know from very bitter experience that holding long term generates possible gain. Dipping in and out only causes pain. John your postings send a cold shiver down my spine (a gold bull). But how the market moves is the markets choice and has nothing to do with your predictions and theories. You are only commenting on the game. Was it John Motsons fault that England lost on penalties to Italy. Readers don’t shoot the messenger.The end.
(06 July 2012, 07:46PM) Complain about this comment
HiI really enjoy your e-mails and have studied the wave theory in them, however for the life of me i cannot see how you work out the 1st or the 5th wave, any chance you can help with this?
(06 July 2012, 08:36PM) Complain about this comment
I would ask Mark Eames why he bought his Gold in 2002. Did he buy it like me and others because he could see which way the wind was blowing for fiat money or did he buy it for trading, if so he's like John. Mark says he's nervous about a downward movement in gold if so perhaps this comment of mine which I posted before will steady his nerves.
(06 July 2012, 08:38PM) Complain about this comment
Lets try and put this current pullback into perspective in this ongoing Gold Bull Market. Since 2001 there have been five major corrections (this one not included) 16.2%, 27.7%, 18.2%, 15.6% and the last one in 2008 was again 27.7%. All added together gives an average correction of 21%. At time of writing its about 19%.... so nothing unusual there. Trading gold aside, all the reasons why us "gold bugs" have been exchanging our ever worthless paper for the real money are still there...ever more so. (If) gold does correct again to 27.7% it would be about $1400 and still be in a "normal" bull market correction and I will be waiting in line backing up with my truck.
(06 July 2012, 11:33PM) Complain about this comment
A lot of the comments on this blog are from people who are long term holders of gold, not traders. Comments should be about short term trading, not long term buying and holding. Even Mark Eames, who took issue with my previous blog, confesses that he is a long term holder of gold. John C Burford is a swing trader and he is trying to teach us all how to trade, be it in gold, Euro/ Dollars or the Dow. . He is doing this by looking back on the charts and then telling us where we should have bought or sold. Well any fool can do that. This is my challenge to you John. Open a Twitter account and post your charts and tram lines on your account and tell us why, where and when you are trading in real time, so that we can all follow you and understand what you are doing and why you are doing it. Are you up for the challenge?
(08 July 2012, 12:42PM) Complain about this comment
Graham's comments are valid and similar requests have been made repeatedly in the past but to no avail. Perhaps John can explain why he will not post details of the actual trades he has placed or otherwise allow some independent measure of his performance so that we are not constantly suspicious of comments made "after the fact"?It would be very easy to demonstrate success or otherwise, so why is this not shared with us?
(08 July 2012, 03:37PM) Complain about this comment
As a trader and Gold holder, I tend ignore the noise here. Holding physical gold has little to do with charts so don't get 2 emotional about it. I really don't care for the current short term picture as I believe the long term outlook remains the same.The deflationary outlook is bad for everything except cash. I also believe that what we are seeing is actually the reduction in the velocity of money rather than outright monetary deflation. I expect that in the next few years base money will continue to increase but it's velocity will collapse as things get worse and hoarding beds in.......In the end I think gold and cash will serve me better than most.......And lastly. When you take possession of gold you are poking a stick in the eye of the banks and Governments.
(08 July 2012, 03:46PM) Complain about this comment
Thanks John for sharing us your strategy in trading. I'm using John's tramline and momentum, and a little bit of Fibs. Not so much on Elliot waves, it's too subjective for me. I got my missus an ipad shorting gold last week. FYI, i bought maples, kangaroos, few sovereigns in 2009. So, I'll be ready to buy some more physical when its price goes down.
(08 July 2012, 05:27PM) Complain about this comment
Oh just one point. This pattern is showing itself in loads of markets and they're all syncing. You could just about short everything right now. Gold is currenly following the pattern of equities............Until a "real" crisis appears!Keep up the good work John. Your's is the only email I open these days.
(09 July 2012, 04:53PM) Complain about this comment
4. Graham - John writes MWT early and sends it in rough form to the MoneyWeek office, always before 9am. You can see from many of the charts where they stop – that is when John takes the screenshot.MoneyWeek Trader is educational. It is not intended as trading advice. What it shows is how John's methods can help him pick turning points and exit points. He uses them successfully. Hopefully, by learning how to use them, readers are too - or will be in time.It’s interesting that several readers want John to post a Trading Alert service in real time so they can follow his trades. In fact, we’ve been thinking about such a service. There’s nothing imminent. But keep reading MoneyWeek Trader. If it happens, you'll learn about it there.To re-cap, in John's emails he is showing how anyone can use his methods to be successful in trading – and he's grateful to the many who write to thank him for the knowledge that he gives them freely.Frank Hemsley – MoneyWeek
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