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May 13, 2009

History Repeats in Gold's Fractal Growth Pattern
by David Nichols

In my last public posting, I discussed how all of the name-brand financial bubbles in market history share a remarkable -- no, amazing -- similarity in the way they develop and grow.

The only logical conclusion from this observation is that market systems grow and proliferate like any other natural system, with well-defined -- and most importantly, predictable -- structure.

For the first time I have also decided to offer a free trial to the Fractal Gold Report, so you can see for yourself the amazing similarities between these famous bubble patterns -- from the Dow in the 1920s, the Nikkei in the 1980s, the Nasdaq 100 in the 1990s, and even the recent bubbles in crude oil and housing.

I think gold is now in the mid-stages of just such a bubble pattern, and those who come along for the ride from here -- both up, and then down -- will truly be in for the financial ride of their lives.

This free trial offer is still available, with gold getting closer each week to the next "hyper-growth" period where prices really take off to the upside. So the time to get ready for this next phase is right now.

I'd also like to share some rather interesting information about the similarities between the two lengthy consolidation periods that have so far occurred during this parabolic growth pattern in gold.

There have been two distinct "hyper-growth" phases, followed by two lengthy consolidation periods, during which gold essentially goes sideways and does not make any forward progress along the growth arc.

There are quite amazing similarities between the two consolidation patterns, and interestingly, if the prior template holds up now then a big move up in gold should be starting right around the end of June or the beginning of July.

Of course previous market analogs have a tendency to break down right when you need them to work the most, but in this case we're looking at the same actual fractal pattern in gold, so the odds of it being predictive in this way go way up over a comparison to a different market fractal pattern from some other market at some other point in history.

Below are two weekly charts where I've labeled the number of weeks during each consolidation, so you can see how similarly these consolidation patterns have been developing.

Clearly the second consolidation is much more energetic -- and much more volatile -- but this is in keeping with a parabolic growth pattern that is setting the stage for a multi-month blow-off run to the finish. It takes a lot of energy to propel a market up to such a degree, and this sort of violent consolidation period provides just such a foundation for a huge move.

The thing I find most interesting about this comparison is how the major turning points in the consolidation have occurred at nearly identical points, especially around weeks 30, 35, 42, 50, 56, and now around week 60.

In the first consolidation, an 8-week pattern started at week 60 which turned out to be the direct lead-in to the hyper-growth phase that started in week 69 and never looked back.

So an equivalent move now would see gold work its way up to the $990 zone in a similar sort of up-and-down pattern over the next 8 weeks, setting the stage for a huge and important breakout over the high from week 50 -- around $990 - at the of June, or the first week of July.

Of course we never want to put too much faith in these templates, but they are a very useful way of gauging whether a market is doing what you expect, especially now as we're anticipating gold to move into position for the next hyper-growth phase.

This continues to shape up to be a very exciting year for gold bulls. You literally have nothing to lose -- and possibly huge gains to make -- by signing up for the free trial offer to the Fractal Gold Report, which gives you immediate access to the recent Special Report on parabolic growth patterns, as well as a full month of daily updates on gold and equity markets.

David Nichols
email: editorial@fractalgoldreport.com
Fractal Gold Report

David Nichols publishes the Fractal Gold Report, a daily report covering the gold market using proprietary techniques that go beyond technical and fundamental analysis. The Fractal Gold Report is available by subscription here. Fractal Gold Report Disclosure.

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.

David is the editor of the Fractal Market Report and the Fractal Gold Report, daily subscription newsletters written in an easy-to-understand style that cover the markets using his proprietary techniques that go beyond technical and fundamental analysis.

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