Gold by Bill McLaren
Date: 5 September 2006

You can see the huge exhaustion move to end the uptrend. If you will look at the pattern that started that exhaustion move up in March. You'll see the market bounced up from an obvious previous low and moved up 3 days. The market then fell 6 days and was well above the low that started the 3-day rally. Then in one day it moved above the high that started the 6-day decline leaving a very powerful higher low.

Now let's move to the right side of the exhaustion high. There was a 20 trading day rally and the index is now 35 trading days from that 20 day rally high and well above the low that started the rally. The next rally was 7 trading days and the market is now at that low but it took 19 days to get there. The market is finding it more difficult to go down. Twice the amount of time is a good rule of thumb to indicate strong support. Unlike the March low there is no higher low but it was 3 days up and 4 days down to the same level. Now here's the caveat. This bounce is up from OBVIOUS support and as you all know, a bounce from the obvious can be a huge trap. Especially when a market is showing three lower highs as this doing.

So gold is now up three days and if a new low within two days the market will immediately go back to the 560 level. If it can move higher past 4 days of rally, the December contract should be able to hit 662 by next Monday. If that occurs next Monday will be very important in price and time and we'll discuss it next week.