Gold Adhering to ‘Fractal’ Outlook

Gold Adhering to ‘Fractal’ Outlook;
4Q ’17 Ushers in Dynamic Phase.
Early-Oct. Action Holds Key.


09/28/17 INSIIDE Track:


Outlook 2017-2018 – Fractals

     09-28-17‘The whole is greater than the sum of its parts’, so astutely observed Aristotle.

That simple statement sums up the principle of synergy – describing the combined effect of multiple collaborative factors or components and their holistic impact.  In very simplistic terms, 2 + 2 + 2 + 2 > (greater than) 8 – when each of those ‘2s’ is working in concert with the others.

When a trader isolates one cycle or one technical indicator and attempts to utilize it in a vacuum, so to speak, it is far less reliable than when used in tandem with multiple corroborating cycles or indicators.  The collaborative effect of those reinforcing factors strengthens the reliability of the overall structure (or analysis).  That is the same principle observed by King Solomon when he stated ‘A cord of three strands is not easily broken’.

Archetypes & Fractals

There is another form of synergy that might not always be recognized as such.  That is the ‘synergy’ of reinforcing events on a smaller or larger scale and/or on a preceding basis.  In the latter case, I am referring to archetypes* that serve as a preceding example of what could occur during an ensuing cycle or wave setup (*a ‘type’ of something or someone that is still to come).

In the former case, I am referring to fractals – where the whole mimics the pattern of its parts, often on multiple levels.  Conversely, the smallest observable increment of that item or cycle mimics the pattern of its composite entity that is still being developed.  Google dictionary describes fractal in this manner:

“a curve or geometric figure, each part of which has the same statistical character as the whole. Fractals are useful in modeling structures (such as eroded coastlines or snowflakes) in which similar patterns recur at progressively smaller scales…”

One of the most common examples of a fractal is a head of broccoli in which the pattern of the overall head (single stem, breaking into multiple stems & topped with florets) is mimicked by each of the main stems (single stem, breaking into multiple stems & topped with florets) & ultimately repeated in each small bite-sized piece (single stem, breaking into multiple stems & topped with florets).

If you gave someone a small piece of broccoli and instructed them to draw an entire head or plant of broccoli – using only that piece as the model, they could easily do it.  (In contrast, if you gave someone a bite-sized piece of orange or banana and instructed them to use that piece as a model for drawing the entire plant, it would be inaccurate.)

Market & Wave Movement

That fractal principle is at the core of at least one form of technical analysis – the Elliott Wave Principle.  In that approach, the larger macro-economic ‘waves’ (up and down movement) break down into interim waves, which break down into intermediate waves that break down into minor waves that even break down into minute & minuette waves – all of which follow the same pattern.

One of the market applications of this principle involves the outlook – and the confirming action – of Gold in 2017.  In the years leading up to 2016, that future year was described as ‘The Golden Year’ – with a very specific definition attached.  It was described as the year when Gold should signal a multi-year bottom by experiencing its largest & longest advance of the preceding 3 – 4 years (ideally, exceeding 6 months in duration).

At the same time, it was repeatedly warned that that advance would – if unfolding as expected – soon yield to a contrasting decline into late-2016, when a secondary (higher) bottom was likely.

When 2017 began, the intra-year outlook for Gold was published and explained in a fractal-like manner.  Gold was projected to see a ~4-month advance (similar to, but on one lesser degree than, the 6+-month advance of 1Q/2Q 2016).  That was projected to lead to a ~2-month drop into mid-2017 – when another higher low was projected (see diagram below, reprinted from Jan. ‘17 issue).

More recently, Gold was projected to undergo a similar sequence – this time on another smaller degree, seeing a 1 – 2 month rally followed by a 2 – 3 week pullback – leading into another higher low in ~Sept. 2017 (see diagram on this page, reprinted from Sept. ‘17 issue).  Intervening price action combined with daily cycles to slightly alter this scenario, with Oct. 2017 now the more likely month for a low.

40-Year Cycle Fractal

There is another – though somewhat more esoteric – application of this fractal principle, which also falls under the definition of an archetype (something that occurs and is a ‘type’ of something similar to follow).  My suspicion has been that the years of 2015 – 2021 (the latest recurrence of the 40-Year Cycle in the U.S., dating back to 1775 – 1781) could have been presaged by each 40-Year Cycle.

In this application, the individual phases of the 40-Year Cycle (1775 – 1781, 1815 – 1821, 1855 – 1861, etc.) provide an interesting parallel to the individual years of this latest phase – from 2015 – 2021.

In other words, the phase of the 40-Year Cycle that began in 1775 – 1781 is linked to 2015.  Subsequently, the phase of the 40-Year Cycle that began in 1815 – 1821 is linked to 2016.  The phase of the 40-Year Cycle that began in 1855 – 1861 is linked to 2017… and so on.

If that were the case, how might it look?

     For starters, 2015 might mimic some of the events of 1775 – 1781.  Let’s take a look: The 1770’s were the decade of the Tea Party and revolt against government over-taxing & over-control.  A decisive shot was fired in 1775 (2015) and the revolting party was emboldened to declare its independence the following year.  A major governing shift began in 1776 (2016) – an overthrow of the old order – but the battle was waged – on many fronts – until 1781 (2021?).

The 2010’s have also been the decade of the Tea Party and their revolt against government over-taxing and over-control.  A decisive shot was fired in 2015 (June 16, 2015 – when Donald Trump declared his candidacy – appealing to the populist & libertarian mindset of the Tea Party) and the revolting party (prematurely) declared independence (from government overreach) the following year.

A major governing shift began in 2016 but the battle is likely to be waged – on many fronts – until 2021 (and beyond).  The 1770’s also invoked a seismic shift in the love-hate relationship that had swung wildly between two ‘countries’ – the US & UK (even though America was not yet an established nation) – for hundreds of years

Likewise, 2015 invoked a seismic shift in the love-hate relationship that had swung wildly between two countries – the US & Russia – for hundreds of years.  (Remember, Russia had been an ally of the colonies in the 1770’s–1780’s and an ally of the U.S. in World War II).

2017 – 2021

Next month, I will continue this examination but at least one uncanny parallel is worth mentioning now:  In this unique correlation, 2017 is related to the period of 1855 – 1861.  1855 is when Bleeding Kansas fanned the flames of racial discord and exacerbated the split of the nation – a split that would ultimately result in the onset of the Civil War in 1861 (these conflicts actually began the year before – in 1854 – similar to 2016).

     Has 2017 seen anything similar?  And what will it lead to, into 2021??  More next month.  IT


Gold & Silver following 2017 – 2018 outlook for ~4-month rally & ~2-month decline into mid-2017 low.  A fractal of that – 1 – 2 month rally followed by 2 – 4 week decline was/is expected to follow.  Early-Oct. completes that phase and ushers in critical period in Gold!

See Weekly Re-Lay & INSIIDE Track for additional analysis and/or trading strategies.