As many know by now I like to take a longer term outlook on my investments. To that end I often prefer to look at the weekly charts and also multi year charts. Sometimes we get so caught up in the day to day happenings that we forget to step back and see what's actually going on. Today I'm posting a chart of the XAU but the principles are quite often the same for most stocks or indexes. Typically what happens is we see a strong rally followed by a correction or consolidation. The retail investor trading on emotion usually doesn't trust the move until it's about over and consequently often enters close to or at an intermediate top. If he does get in in the middle of the move he is often so nervous that he can't hold on to his position for more than a couple of points. He then either gets knocked out by the correction or worn out by the consolidation. Notice how each successive consolidation has been longer than the preceding one and each rally has been larger and now they are becoming steeper also. This latest rally is really breaking the mold for parabolic moves so far. I think the reason for this is the market realized that the Fed decided to sacrifice the dollar to try and save the economy by entering a rate cutting cycle. Now this is just my personal observation but it seems like everyone is expecting a rally in the dollar and that of course would mean a crash in gold. Several members of the Fast money crew have been talking down gold for the last $100 or so for that very reason. However taking a look at the size of the consolidation and the extreme hesitancy of investors I've got to wonder if we don't still have a ways to go yet. So far even though this move has been parabolic in nature it still hasn't even come close to matching the size of the other three uplegs.
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