Is Gold Stomach Full?

Any pattern assumes predictive power when it repeats, is cyclical. Another way to understand this is through buyer – seller psychology. Buyers can not be always in charge and vice versa. Even psychology itself is cyclical, patterns are connected to psychology. Today we look at a pattern called ‘the full stomach’. Candlestick theory states that after about eight to ten new highs or lows, without a meaningful correction, the odds are strong that a significant correction will unfold. Each new high or new low for the move is called a “new record high” or “new record low” by the Japanese. Thus the Japanese will say there are ten record highs or lows, meaning there were a series of ten higher highs or lower lows. If there are, say, eight new highs without a meaningful correction, the Japanese refer to the market by using the expression “the stomach is 80% full.” What is interesting about the gold chart below is that prices have 10 year successive gold record highs.
This suggests that Gold may be with a stomach 80% full. These are yearly charts and the current 2012 price chart is barely half way through. In any case a negative year does not seem like an impossibility. Now that prices are below 1,600, further negative confirmation might take Gold to 1,400 levels or even lower. There is another thing one has to understand. Though a stomach full pattern might suggest a reversal (upward or downward) a reversal can be even a sideways price action. In case a reversal becomes deep and more than 61.8% of the previous move, we can even consider it a reversal in trend. The current report has taken a few Indian and global equity and commodity Indices to understand their respective outlooks.
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Our Jiseki Time cycles are seasonal patterns of strength or weakness in assets. They are derived from percentile rankings from 1 to 100. The higher the percentile more the chance for an asset to weaken and worst the ranking, better the chance for the respective asset to outperform. 100 is top relative performance and 1 is worst performance. The idea is that performance is cyclical. A top performer will underperform in future and vice versa. A top relative performer is also the worst value pick and the top relative underperformer is the best value pick. Jiseki is another name for Performance cycles, time triads and time fractals. The signals are illustrated as a running portfolio and as Jiseki Indices. These signals can be used by fund managers for relative allocations, traders for leverage bets and high net worth clients for selective trades.
Jiseki Interpretation. Signals are interpreted as crossovers between various Jiseki Cycles. All three Jiseki cycles (Jiseki 1,2 and 3) depict different time frames. Example: An asset is ranked above 80 percentile and all the three Jiseki cycles are pointing lower, this suggests a running SHORT SIGNAL. Our Jiseki Indices use different kind of exits based on price and Jiseki Cycles. We have color coded the (Jiseki 1>Jiseki 2) SHORT zones with brown sandy (burlywood) and grey (Jiseki 1>Jiseki2) for LONG SIGNALS.
Coverage India: CNX100, BSE500 traded stocks and Indian Indices.

Michesan Anna-Maria, discovered her interest of markets immediately after completing her graduate studies in Economics. She followed it up with post graduate studies in corporate finance. A host of research work in behavioral finance, option strategies and quantifying market sentiment followed. Anna covers Indian equity and combines Elliott, Time Fractals and Time Analytics to deliver accuracy across time frames.