With gold rising so quickly over the last few weeks, let’s take a look at two perspectives on this rise – a look at the different “angles of ascent” and the “parabolic arc” that have formed in daily prices.
First, the “Parabolic Arc” formation:
Starting with the April 2009 lows, we see that a clear rising arc has formed underneath each price low as gold has continued its upward trajectory.
Often, when price “goes parabolic,” it is a sign that price has gotten ahead of itself, and the continued arc to the upside has become so steep as to become impossible to maintain. Price often breaks the parabola (or arc) and either consolidates or reverses to let price “catch up” with the momentum.
Think of an arc as an “adjusting trendline.” It has the same implications of any trendline – a break downwards from a rising trendline is a ’sell’ or ‘take profits’ signal – so it is with an arc break.
This is not to say that gold will stop rising – it’s just saying that momentum might have increased the price rise to a temporarily unsustainable angle.
Speaking of angles, let’s look at three different confirmed trendlines and note the angles each trendline represents… it’s another way to look at the arc.
Gold’s “Angles of Ascent”
Using TradeStation, we see three trendlines that I’ve drawn and I’ve recorded the “angles” or steepness (in degrees) of each trendline.
We started out stable at a 28.5 degree angle and then price began to accelerate into a 37.8 degree angle. Most steady and stable uptrends adhere close to the 45 degree angle mark, so that’s perfectly fine and expected.
It’s the most recent trendline rise that is concerning – in that we see a 62 degree angle off the August to September swing lows. This trendline currently exists at the $1,020 level and will continue to rise as long as price is above it.
The point is not to cause you to rush out and sell gold – but to think about sustainability of the current uptrend without some sort of pause to let the market catch its breath. This is simply stripping away all the indicators and looking at the pure “structure” of price itself.
Watch the arc and angles as drawn here closely into the next week.
These charts come from this weeks’ 22-page “Intermarket Report” for subscribers.
Corey Rosenbloom, CMT