Saturday, November 28, 2009

Gold Roadmap


The always informative Trader's Narrative blog had an interesting comment on the Sentiment in Gold which really got me thinking.....

"Gold Sentiment
Finally I wanted to add a tiny nugget to the
exhaustive sentiment analysis of gold I wrote at the start of the week: the Daily Sentiment Index for gold has now spent more than 17 consecutive days above 90%.

A feat it only narrowly beat in 5 years ago when it spent 20 consecutive days, from early November to early December 2004, above 90%. It managed to create a top at $457 that lasted almost 10 months. And to think, back then it was only 12% above its long term moving average while now it is 23%."



And given my predilection for historical rhymes and the fact that I'm still struggling to reconcile a potential dollar strength/ temporary deflationary case with the developing relative strength in gold, I found this 2004 Rhyme more than revealing.






This potential roadmap align it all
  • Sentiment Extreme in Gold
  • Flow Extreme in Gold
  • retest of the Triangle breakout in Gold
  • steeper 2 months (+/-) correction in Gold
  • relative strength in Gold sustains in the medium term
  • breakdowns of key pillar of the recent rally (see here and here)
  • 1 yr Dollar strength
  • 1 yr deflationary tendencies for the entire Risk trade
This could be a high Probability Roadmap as long as we don't see major deviations.


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