I would like to update a few of the ratio charts we’ve been following that are still showing an important low or bear market low is in place for gold. There are so many things we read where this analysis says this and that analysis says that but the more one reads the more confused they become. There is no Holy Grail when it comes to trading the markets although everyone is looking for one. Every trading discipline has its own unique characteristics that if one has the discipline to study it long enough they may eventually get pretty good at interpreting what it’s saying. Find something that matches your own personality and through trial and error you maybe surprised at what you may discover.

Keep in mind we’re playing the hardest game on the planet to win. There are investors from all over the world that want your money and they wont’ be satisfied until they get every last penny. There are computer programs, hedge funds, you name it and they want to win just as badly as you if not more so. It’s a dog eat dog business we’re in and to the victor goes the spoils.

This first chart is the ratio / combo chart which has the TLT:GLD ratio chart on top and GLD on the bottom. The TLT:GLD ratio chart has served me well through the years. Lets start on the left hand side of the chart which shows the bottom for GLD during the 2008 crash low. As you can see GLD formed a beautiful and very symmetrical H&S consolidation pattern while the ratio chart on top formed a H&S top. It wasn’t until GLD broke above the neckline in 2009 that the bottom was confirmed from a Chartology perspective. Even though the breakout didn’t occur until October of 2009 there were still alot of clues that GLD was forming a very large H&S consolidation pattern. Waiting for the breakout would have cost you some good low risk entry points in many of the PM stocks that had crashed.

Study the breakout and backtesting sequence on GLD when it broke out above the neckline, red circle. Put yourself back in 2009 at the breakout point keeping in mind this is a weekly chart and each bar represents one weeks worth of trading. You can see right after the initial breakout GLD backtested the neckline about four weeks later and the neckline held support which told us the neckline was hot. GLD then rallied for about eight weeks which looked like the impulse move up was starting only to see a second backtest the neckline. That second backtest took about 12 weeks or so to complete but knowing the neckline was hot gave us something positive to look for and not let our emotions get in the way of what was going to be a near parabolic rise in gold to its bull market peak in September of 2011 at 1920. The reason I’m showing you the breakout and backtesting sequence in such detail is because our current breakout of the seven point bearish rising wedge is only in its third week. Patience is one of the hardest things to learn when it comes to trading the big trend. I will post the ratio chart here and look at it again for the bull market peak in 2011.