I mentioned back in April 2014 that gold was currently in "left translation" for this current cycle, and that this implies we should see a price low at the cycle bottom which goes below the December mid-cycle low. That means a dip to below around $1190/oz.
There is another feature of some of these cycles which I believe is making an appearance this time, and that is the tendency to see a late blowoff move just ahead of the final cycle low. The blue arrows in the chart above highlight some examples of this behavior, and it is not just a recent phenomenon. Here is a look back further in time, to show that this tendency for a late "
Please note that all sell signals occurred in either September or October (more about that later).
October 2008 was not the most opportune time to buy, although buying worked out better for buy-and hold investors than selling. The September 2001 and October 2002 sell signals were just plain wrong. They occurred within days of fairly significant lows.
According to data from SentimenTrader, there were 14 similar sell signals from 1930-1990. Six months later, the Dow Jones Industrials traded higher nine of 14 times.
If you come across a research piece highlighting the validity of the recent Dow Theory sell signal, you may be better off ignoring it than exploring it. Now may not be the time to rely on the “bell bottom” of market guides.
Perhaps the most important message of the above chart is that some of the best buying opportunities occurred in September or October.
Could this September/October be the same, or will this year be more like 2007?
Tom McClellan
Editor, The McClellan Market Report
'via Blog this'
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