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The D-Wave Begins

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Published : September 26th, 2011
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( 13 votes, 3.8/5 ) , 6 commentaries
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Category : Gold and Silver

 

 

 

 

It's taken much longer than I originally expected, but we now have confirmation that gold's D-Wave decline has begun.

A D-Wave decline is a normal, regression to the mean, profit-taking event that occurs when gold gets too stretched above the mean. It is not a take down by an anti-gold cartel. Anyone with a modicum of common sense can look at the long-term chart of gold and tell that this is not a manipulated market. This is just a normal secular bull market, and it is acting exactly like a normal bull market acts.



 

Folks, these conspiracy theories are now bordering on the insane. I even heard the other day someone blame margin increases for the drop in gold. I guess they completely forgot that we've already had two margin increases in the last two months that had virtually no effect on gold.




Every bull market in history has its share of con men and scam artists. Think Bernie Madoff, Enron, WorldCom, etc. The gold manipulation nonsense is just one of the many scams that are going to hitch a ride on this bull. Actually it's one of the oldest scams in the book. You find a bull market, make a one-way bet on rising prices, tout these "to the moon" prices to suck in subscribers lured by the reward of gigantic financial gains, and then blame an invisible cartel every time a correction occurs that you don't foresee. It's a great way of not having to take responsibility when subscribers get caught in a normal corrective decline.

Needless to say I don't play those kind of games. I try to get subscribers out ahead of intermediate declines. Yes, I'm usually a little early. I have the same problem with tops that every other human being in the world has. They are virtually impossible to call in real time. Subscribers to the SMT/Gold Scents newsletter have sidestepped all of this D-Wave decline and instead have been 100% invested in the dollar index, which is the only asset initiating a strong trend higher.

Actually there is a fundamental reason for a D-Wave decline besides just a normal regression to the mean, profit-taking event. The dollar has now moved into the aggressive stage of the rally out of the three year cycle low. Deflation is starting to take hold in the world again. In a deflation defaulting debt collapses the money supply. There is a growing shortage of dollars in the world. That's the reason why the dollar index is rocketing higher. As the value of the dollar rises during this deflation it takes less and less of them to buy an ounce of gold. You can see this same process unfolded as the dollar rallied out of the 2008 three year cycle low.





On a much shorter timescale gold is now in the timing band for a daily cycle low. My best guess is that sometime over the next 1 to 2 weeks gold will move down to tag the 200 day moving average. That will trigger short covering and a very convincing snapback rally. However it's still too early for an intermediate degree bottom. There should be one more daily cycle down into November before the D-Wave puts in its final bottom.




I suspect the next daily cycle is going to be a volatile nightmare that will chew up bulls and bears alike before a final plunge down below the 200 day moving average -  somewhere between $1300-$1400. As all D-Wave declines have retraced at least 50 to 60% of the previous C-wave advance that would be a minimum target for the November bottom. At that point we should see a very powerful A-wave advance triggered by the extreme oversold conditions generated at the D-Wave bottom.
More in the weekend report...


Toby Connor

 Gold Scents  

  

 

 

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Toby Connor is the author of Gold Scents, a financial blog with a special emphasis on the gold secular bull market. Toby's premium service includes daily reports and an extensive weekend report.
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Mr connor; I am not trying to be a smart Ass, I always say the stupid Question is the one not asked. I see you say, we have no intervention. and you are a chart guy. why is it that every morning at 10 A.M. New york time, the gold market drops? like this morning and every morning at 10am gold droped 12 dollars on the open? It does not do this in every other market, just in the U.S.? could you tell me why? Is it Options? or Gold selling in the COMEX? I really would like an honest answer. Thank you for your time. sparrowlink
Thank you Mr. Connor!

In fact, I have been following your entire sequence of articles and everything came together as if you were reading in a crystal ball! and all of this without advertising for 12% daily returns nor pushing us to grab the essential part of your wisdom by paying a premium :)

My sincere thanks and looking forward to when you will issue a buy recommendation
whu are china india and top nations still buying gol .i dont believe china is that stupid.do you think that comex has all the silver they sell .i dont. is the U.SA.G.S. ingnorant when the say silver will be the first element the become extinct by 2020.they may be dumb but they cant be rhat far off. what about in a slowdown silver not being mined either because it is co-mined. i do believe that only the toby elite will be able to buy gold and that joe public will buy the poor mans gold. hasnt silver benn money for 1000s of years even before gold and much more than gold. do you believe the non-federal private federal reserve bankers want to bless people with real goods, check out inflation since we went off the silver standard and the whole dow is a loss .i think toby should read more historical facks and just a few less charts the banks make the markets
Thanks. I must be prudent, and so your experienced advice and insight is appreciated. Your style is simple enough yet eloquent enough to demonstrate expertise, and as a new boy myself, I see you have been calling them right.
Re; Market manipulation, duh, obvious to me.
Bravo! T. Garden, MSc.
Is it the hand of God that causes the price of gold to conform to the patterns you track? Is it the actions of governments intervening to paint the picture the patterns expect to see? I am not challenging whether your predictions are accurate or not. I haven't done that research. As a potential customer of your service though it turns me off for you to so strongly dismiss evidence discovered by others as reasons for the market to behave the way it behaves if you can't tell me the forces that cause the patterns of gold price. With so much volatility in the markets as a whole right now, and the evidence and admission that indeed central banks / governments do intervene in the market (It's their job after all as managers of the fiat currency) it's not easy to grasp WHY your patterns work. Is the collective market (ignoring all the chaos going on around us) tuning in to some cosmic wavelength and causing a top -then selloff? Would like to hear some thoughts on why price patterns work (other than.....they just do). Does the government intervention just serve to increase the velocity in the direction that the pattern indicated prices would go? Thanks for putting your info out here for us to think about.
With all due respect, Hal...Isn't that the difference between a person arguing facts, vs. a chartist? I have wondered the same thing about Toby, frankly. But what recently I have seen from him, he has done pretty well !! And, I like your mention of the "non-interference" idea of the gov't and the fiaters. Frankly, there is some pretty good evidence of that, on this website--(24h gold.)
with the knowledge of the existence of the Plunge Protection Team, how can Toby say there is no manipulation of markets. From watching stocks for 25 years, you can surely seek a difference in the patterns of the way they behave. You can actually tell when the manipulators get in there, without any great deal of intelligence.
yes, I have wondered the same thing! (the why's of the markets vs. tech considerations.)
--david l.
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Mr connor; I am not trying to be a smart Ass, I always say the stupid Question is the one not asked. I see you say, we have no intervention. and you are a chart guy. why is it that every morning at 10 A.M. New york time, the gold market drops? like this  Read more
sparrow - 10/3/2011 at 3:31 PM GMT
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