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The Antidote to a Meltdown

By David Nichols      Printer Friendly Version
Oct 7 2008 4:05PM

In my last post on September 23rd, I discussed a strong new bullish pattern emerging in gold, and how one final hard test down to the $850 energy level should be the "final boarding call" for gold prior to the move back up to the all-time highs.

Sure enough, the hard test down to $850 came right on schedule, which is a great confirmation that the controlling fractal pattern is developing according to plan.

If gold can now continue to build on this test-and-rebound, it should quickly soar up to the all-time high at $1,033.

This coming rally in gold is actually a great chance for a "do-over" if you got caught up in the financial panic that has sent so many markets into meltdown. A $200+ move up in gold is the perfect antidote.

Not all market fractal patterns are created equally, and the next rally phase in precious metals is one of the most predictable and profitable types of market fractal patterns. It's essential to take advantage of this particular set-up, as we may not get another opportunity like this for quite some time.

If you missed the entry down around $850, there are always opportunities to get on board along the way, with as little risk as possible.  There's no reason to think it's "too late" for this trade.

The one caveat to this set-up is a slight risk that gold may need to dip down further during this correction, heading down to $792 before the big upside reversal.

This is not an immediate concern, although we need to be aware of the possibility. The persistent relative weakness in silver is the main cause for concern on this, as a breakdown to new lows in silver could derail the immediate bullish potential in gold.

It's generally better to see silver in the lead on an emerging pattern in precious metals, as that is a tell-tale sign that strong speculative demand is driving the pattern. But as long as silver stays above the critical $11.00 - $11.20 zone, then the rally in gold should remain on track.

As for silver, there is also a very good set-up developing in this market, with even more profit potential than gold. If you're a more aggressive trader, silver should be the best way to take advantage of this coming rally phase in precious metals. 

As always, I will provide daily updates on gold in the Fractal Gold Report, and subscribers on the annual plan also receive the Fractal Silver Report.

David Nichols



David Nichols is a graduate of Yale University and a leader in the emerging field of fractal market analysis. This pioneering analytical approach studies the markets as chaotic, non-linear systems, addressing the predictability in financial markets. Fractal market analysis discovers the order hidden within the seemingly random chaos of the markets.