Gold & XAU Reinforce Potential for ‘5th’ Wave Advances; Gold Could Surge into Early-Jan. as XAU Projects New Multi-Year Highs!
12/11/19 Weekly Re-Lay Alert – Cycle Fractals: 2-Month, 2-Year & 4-Year Parallels: “Fractals unfold in both timing and price indicators. Before getting into this, it is probably helpful to reiterate the definition and application of ‘fractals’. (A head of broccoli is often used as an illustration for this principle.)
The Oct. 2017 INSIIDE Track delved into this when discussing the multi-year outlook for Gold…
It had been forecast to see a 6+-month advance in 2016 – signaling a multi-year bottom and what was projected to be a 3 – 5 year uptrend. Gold’s surge into 3Q ’16 was forecast to lead to a sharp drop into late-2016 – after which it should unfold in a fractal-like manner in 2017 and/or 2018… before a convincing uptrend could take hold in 2018/2019. To reiterate:
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.”
On a larger-magnitude basis, Gold traced out a I and II wave with its 2016 advance and subsequent decline.
From Dec. ’16 into Aug. ’18, it traced out a similar (fractal) (1) and (2) wave on one lower-magnitude basis.
And then, from Aug. ’18 into Feb. ’19, it traced out an even lower-magnitude 1 wave that was followed by a 2 wave decline into late-April ’19.
In Elliott-speak, that sequence of progressively smaller and smaller rally-and-correction patterns is also known as a ‘1-2, 1-2, 1-2’ – the ideal setup when anticipating an accelerated ‘3’ wave advance. The reason is that a III wave has been unfolding since the II wave bottom (late-2016) and a (3) wave has been unfolding since the (2) wave bottom (Aug. ’18).
So, the establishment of the 2 wave low (late-April ’19) ushers in the 3 of (3) of III wave rally – typically a dynamic and accelerated move. Gold experienced that from late-April into late-Aug. but that still leaves open the potential for a 5 of (3) wave rally and a (5) of III wave rally to unfold in 2020/2021.
So, from that perspective, at least two more multi-month advances are likely. The 5 of (3) wave rally could easily [reserved for subscribers]…
The Dollar Index is increasing the likelihood for an overall drop into Dec. 23 – 27 after trigger daily & weekly trend sell signals in late-Nov. It has entered a 3-week period when the inversely-correlated 21 MARC is accelerating higher (part of an overall ~3-month advance in that weekly 21 MARC) – projected to spur a new sell-off in the Dollar.
That comes after the cash Dollar Index provided a textbook reversal sequence, rallying up to its weekly 21 High MAC and reversing lower twice in November. The ideal scenario was for it to now sell off and give a weekly close below the weekly 21 Low MAC (~96.97/DXH on Dec. 13) as that channel is turning down – reinforcing the outlook for a drop into Dec. 20 – 30.
A sell-off into that period would perpetuate a ~50-week low (late-Jan. ’17) – low (mid-Jan. ’18) – low (early-Jan. ’19) – low (late-Dec. ’19) Cycle Progression and arrive 180 degrees from the June 24/25 low…
Gold & Silver reversed higher on Dec. 10, as Gold fulfilled its daily trend pattern and daily cycles – including a 30-day/30-degree low-low cycle that produced lows on Sept. 10, Oct. 11 & Nov. 12. It was also in sync with the daily 21 MARC discussed last week – which had the potential to turn bullish on Dec. 10.
Its daily trend pattern projects a retest of 1489.9/GCG but Gold would need to close above that level to signal additional strength.
The XAU pulled back and twice neutralized its daily uptrend while correcting into daily cycles on Dec. 10 and right down to multiple levels of ‘resistance turned into support’ as well as its ascending daily 21 High MAC.
That perpetuated a recurring 14-day low (Sept. 16) – low (Oct. 1) – low (Oct. 15) – low (Oct. 29) – low (Nov. 12) – low (Nov. 26) Cycle Progression that next comes into play on (Dec. 10) and an overlapping 28 – 29 day low (Aug. 19) – low (Sept. 16) – low (Oct. 15) – low (Nov. 12) Cycle Progression (Dec. 10/11).
Based on its weekly trend pattern, the XAU remains on track for a rally back to xxx.xx/XAU as its primary (minimum) upside objective. This week’s price action is showing that could include a spike above 104.00/XAU in the near term.
Based on fulfilling its Dec. 10 cycle lows, the XAU increased the potential for a rally into Dec. 20 – 24.”
Gold & XAU fulfill analysis for quick pullbacks into Dec. 10 followed by new multi-week rallies. Gold’s bullish trend structure could spur overall advance into early-Jan. ’20 – fulfilling and/or inverting multiple weekly cycles. Precious metals action reinforcing potential for ‘5th’ wave advance following the bottoming phases in Oct./Nov. ‘19. Intermediate cycles provide intriguing potential for 1Q 2020.
What is in Store for Gold after early-Jan. 2020?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.