The gold market chips are on the table and the US Dollar chips are on the table, now lets roll…
The gold price has now touched the top portion of the symmetrical triangle 3 times and the bottom portion 3 times. One way or the other we will get a resolution. Time wise I have calculated that the gold price cannot really extend much farther then end of September to make a decision because there is simply no room left inside the triangle.
The thoughts that go through my head when I look at the gold price triangle are something like, “Can this market really get an upside breakout?”, “What if the gold price extends too far into the apex?”, “This chart better start resolving itself SOON”.
The chart above is the seasonal US Dollar chart between the years 1985 and 1999 courtesy the Moore Research Center. What is interesting about this seasonal chart is that we can see that the US Dollar tends to have a lousy second half of the year statistically between years 1985 and 1999. And if we look carefully at the chart we can see that the most devastating statistical downside for the US dollar starts at MID AUGUST (we are in mid August 2009 right now) and then continues almost relentlessly until mid October.
This is quite fascinating to me because it is telling me that the big dollar bounce that the heavy hitters of technical analysis are calling for is going to have to occur during this time frame that seasonally is the worst for the US Dollar.
Technically I can see the reasons for a big US Dollar bounce, but I would say that so far this bounce looks lousy. The upside action is lazy and labored so far in the current bounce and is just not indicative to me of a huge upside sustainable rally.
But. I could be wrong. Perhaps the US Dollar rally will be delayed a month or two. But at least so far the bounce has been meager. And the statistical chart above has me thinking the US Dollar is going to have to turn into superman in order to get the supersize rally going.
The strange and unusual thing about persistent bearishness and persistent bullishness is that it can continue far longer than most expect. Certainly it becomes more probable for a direction change when sentiment levels reach extremes. But sometimes persistent bearishness or bullishness leads to capitulation blow off spike moves.
So the jury is still out on both the gold price and the us dollar in my opinion. But not for that much longer. A decisive move in either market is going to happen soon.
My bias is still for and upside break in the gold price, but I will change my opinion in a New York minute if necessary.