There is no holy grail for analyzing a market. But if King Arthur (or maybe King Midas?) was trading gold for exactly the last 36 years (62), he probably would have wanted to see the third price chart…
This article does not feature geometric shapes or curves in the fashion of my previous articles. Instead I will combine two standard concepts. The first from general geometry; the second from the great mind of W.D. Gann:
- Evenly divide a circle consisting of 360 degrees, with the emphasis on a right angle (90 degrees), it’s very important half of 45 degrees, and even its quarter of 22.5 degrees.
- Generating a fan of angles from $0 (literally, from nothing!), directly underneath a major low.
The twist here is that the former provides fodder for the latter by generating ratios. But before that step, here is a diagram showing a circle that is cut into quarters: the ‘cardinal cross’, as in N, S, E & W. 45 degrees and 22.5 degrees are thrown into the mix, which are 1/8, and 1/16 of the circle, respectively:
Upon first glance at a long-term gold monthly chart, the two major lows of $101.50 in Aug ’76 and $253 in Aug ’99 (exactly 23 years apart) naturally pop out as very important support points. I will focus on the first low (also the lower), as its occurrence in time selects a crucial vantage point to peruse 36 years of price action: August 1976 at $0.
Initially when I did this analysis, I thought it was worth noting that the second low was almost exactly ’90’ cents per month from this vantage point (near point D on the next chart). The rest came naturally:
‘Mathemagics’ Moment: Actually, the low of $253 is exactly $4.60 above the line: 23 years = 276 months x .90/M = $248.40. Interesting ‘coincidence’ that 4.60 is 23 doubled, and divided by 10, but more interesting is that 4.60 is exactly 1/5th of 23, which is the inverse of 5, the multiple of the other two angles.
Back to business: The ‘x5’ angle is $.90/M x 5, or $4.50/M (45 degrees /10). The x5^2 angle is $.90/M x 25, or $22.5/M, matching 22.5 degrees , and also is half of 45 degrees. Also, you can think of moving 90 degrees around a circle 5 times in a row, or 450 degrees ($4.50/M) which lands back on 90 degrees! Going around 25 times (5^2) winds up at 2,250 degrees ($22.50/M). Going in circles yet? That’s what the $.90/M angle did, many times over.
Moving on, since the basis of geometric charting is 45 degrees, or ‘1×1’ uniting price and time by perfectly cutting 90 degrees in half, let’s focus on the $4.50/M line as a central them; the lower $.90/M (considered now as $4.50/M /5) counterbalancing the above $22.5/M angle (considered now as $4.50/M x5):
Now the overall market dynamic is a little easier to see from this central perspective, as the $4.50/M angle acts as regression, with wide swings between resistance and support. No wonder the market corrected a year ago (E). It ‘came home’: Perfect balance, I must say!
But what about the smaller reversals along the way: are they ‘harmonic’ with this as well? More importantly, can we identify the more recent support area of the low-mid $1500’s as harmonic with the all-time high, as well as other lows, meaning that the correction ‘should’ be over? (This is a good time to quickly review the circle division image!)
Behold, the Holy Grey!?
How amazing and inspiring to see mass human decision-making follow such a simple but profound order: Combining natural fractions of 360 into dollars per month, from $0 underneath a major low.
Here is a close-up since the mid-90’s for a better inspection:
Procedural Note: At point G, I had to sneak in 3/7 and 4/7 of 360, which are $1.54/M and $2.06/M respectively (both rounded). Notice that the $1.80/M angle acts as regression for the correction from the high of ’06: Again, perfect balance.
The previous corrections of ’06 (G) and ’08 (H, I) are bound rather well by their respective S/R. The current correction seems to be following suit. Although, fractally speaking, this correction seems to be re-enacting the ’06 correction, by bottoming several times at support, as opposed to the ’08 corrections’ single jab. The final analysis shows:
If this is a true correlation, then we can expect gold to break resistance permanently upon reaching it, shortly after a brief pullback to support (N2, not time sensitive), just like in late ’07 (N1).
Where is it going? By continuing these angles procedurally, the following resistance lines are offered, listed as fifths:
Since the above angles are listed as their fifth relationships to $4.50/M, simply add 90 cents per month to arrive at their values: angle ‘1/5’ = $5.40/M, angle ‘2/5’ = $6.30/M etc… I also changed the $2.70/M angle name to ‘3/5’. This emphasizes the distance between the two major highs at D & E as ‘-2/5’ going down from the all-time high. Going up ‘+2/5’ from this high gives the above 2/5 angle.
I put a red cross target on this 2/5 angle at $2,840, which is a target resistance area from two independent (non-collinear) S/R structures. This gives the month of March 2014 on the angle. Viewed casually, the whole large uptrend from ’99 seems to be a parabolic swoop right to it.
So there is gold in all its glory: 360 degrees divisions converted into price per time, and an important point from 1976. Perfect together!
Wait, I almost forgot our friendly number 5, as in x5, x5^2 and 5^(ths) being used throughout. The following is an updated pentagon from my first article with some interesting internal harmonic 5 action:
