ST Outlook – 11 February 2012

Today we’ll take a look at Gold, a particular favorite of mine. As a South African, the price of Gold has always played an important role, and Hurst dedicated an entire lesson in the JM Hurst Cycles Course to Gold. He proposed that the cycles in Gold “run longer” than the cycles that he discovered in the US stock market (the Nominal Model that we work with).

As you will know from reading ST Outlook, I take a different approach to my analysis of Gold by assuming that the peaks of the cycles are synchronized (as opposed to the troughs). Today we will look at the big picture of the Gold analysis.

The long term picture

This remains my preferred analysis, which has the 6 September 2011 peak as a peak of the 18-month cycle, placing us now in the third sub-cycle of the 4 & 1/2-year cycle which last peaked on 17 March 2008. The current 18-month cycle is 5 months old, and we have been expecting the market to form a peak of the 20-week cycle, which it might have done on 3 February 2012 (last Friday). There is a subtle imperfection in this peak as can be seen in this chart:

The FLD picture

Note how the peak on 3 February 2012 actually occurred beneath the 20-week FLD. Price crossed the FLD over the following weekend, and the slightly lower peak on Thursday 9 February 2012 occurred above the FLD. Purists might argue that the 9 February 2012 peak should be considered as the peak of the 20-week cycle in preference to the peak on 3 February 2012 because of this FLD interaction, but I favor the simpler approach of tagging the more obvious peak and not getting complicated about it. Of course it is possible that price will push up to form a higher peak soon which would resolve this imperfection in the analysis.

Also notice how the 40-week FLD is forming a peak this weekend, implying that the 40-week cycle is forming a trough, and therefore the 20-week cycle is forming a peak, information which is not new but does corroborate the analysis and our expectation of a 20-week peak.

The FLD Pattern Projections (those red and green boxes) for the 40-day cycle show that price is expected to move down into the 1600’s again once this peak is completed. How will we know when the peak is completed? Or whether it was completed on 3 February 2012? By watching the FLD’s and VTL’s:

Awaiting confirmation

Price is toying with the 20-day VTL, and close to the 40-day FLD. Crossing either of those lines would confirm the peak of the 40-day cycle had been formed, and that 40-day cycle peak must be synchronous with the expected 20-week cycle peak.

The shape of the next 20-week cycle as it unfolds should shed light on the magnitude of the 6 September 2011 peak, and either give further confidence in our expectation of a higher peak for Gold in the next year or so, or dash Gold-bug hopes for several years.

About David Hickson

I have been trading for over 20 years, but only had any success after discovering Hurst's cyclic principles. Unable to find any software to speed up the analysis process I created Sentient Trader software, which now pretty much does all the analysis for me. I am a film maker and a TV director, but nowadays I mostly provide consultation services to professional traders and fund managers, helping them to integrate Hurst analysis into their trading. I'm South African and live with my family in Italy.

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