ha ba dis donc .... la tronche du dow gold !!!
The Rocket Man…
The room is always darkest just before the light's switched on!..
Below is the Ratio between the Dow and the price of Ol’ Yella, graphique du ratio dow gold
Note that for the duration of this present Gold Bull cycle, the ratio has broken down through support levels on 4 separate occasions. On 2 such occasions, the ratio has then levitated back up to test the old support level. On the other 2 occasions following break downs in late 07 and the latter half of 08, the ratio retraced a reasonable proportion of it’s move, but it’s bounces still fell some way short of the old support levels! This is just one way Bully Boy ensures he keeps as many off his back as possible!
The most recent break down through support occurred in August this year, where 2 year support around 7.5-8.0 was lost and the ratio plunged to circa 5.5. It has since been retracing this move and we are now brushing back up against the old support level of 7.50.
History would therefore strongly suggest that any further rise in the ratio from here is both unlikely and also short lived! I therefore expect it to head lower again in the near future.
To note: This is a monthly chart, so these are monthly moves. My expectations that the ratio will roll back over from here, do not necessarily reflect the next day or next week, but certainly within the next 6-12 weeks. However that said the ratio really has moved back up close against serious resistance in the 7.5-8.0 region and so any further upside (regardless of when it might roll over) should be limited from here!
One more chart to peruse, en chandelier : le dow golden courbe : le cours du dow jones
Note, I’ve included the price of Gold against the ratio chart. I’ve marked the 3 previous occasions when the ratio had reached the peak of it’s retracement bounce before rolling over. As can be clearly seen, each occasion co-incided with a very suitable buy opportunity for the metal itself with significant upside in the post-ceding months ahead. And as importantly virtually no further downside!
If we are at or close to the bounce retracement peak in the ratio now, then we should expect only ‘Blue Sky’ for the precious sector here on in!
Rich (Live from 'The Bridge of the Silver Rocket Ship') www.lemetropolecafe.com