Source: Free Stock Charts
 

 

I’ve been seeing some chatter about the Death Cross for Gold.

We’ve addressed the Death Cross previously — its a rather meaningless signal. And the Golden Cross isn’t much better.

What have these crosses told us about Gold? Well, not very much.

Consider:  Since April 2012 we have witnessed the 50 day moving average crossing above or below the 200 day moving average on three separate occasions.

1. The Death Cross flashed for GLD on April 26, 2012. Over the prior 50 trading days, GLD had lost ~3.5%. After the cross, it lost another 7.7% over 13 sessions. (Chalk one up for the Death Cross)

2. A Golden Cross for GLD flashed September 20, 2012. Over the prior 50 trading days, GLD had rallied 12%. 29 days after the Golden Cross signal, down 5.3% — 62 days later, it was down 7.6% (Very bad signal for Golden Cross)

3. There will be another Death Cross imminently. GLD prices 50 days ago (12/7/2012), were appreciably higher  ($165.16), and is now down 7% from 50 days ago. (Jury is out).

4. It took only 100 days for the Golden Cross to cascade into the Death Cross. This hardly provides much confidence as to the acumen of these signals.

As we have shown previously, death crosses are not all that predictive of much of anything; Golden crosses are not any better. These mostly tell us where we came from, and not where we are going.

 

 

 

Previously:

Worry About Important Things — Not The Death Cross (August 16th, 2011)

How Bullish is the Golden Cross? (January 30th, 2012)

Category: Gold & Precious Metals, Technical Analysis

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “Cross of Gold”

  1. nofoulsontheplayground says:

    The XAU weekly has had a nice “mirror” pattern going back to early 2012 (draw a vertical line at the June 2011 low and work out left and right on the candlestick chart).

    That pattern formed a H&S top in the summer of 2012, with an implied target of a test of the 2008 lows.

    The next major support for the XAU is the 33 area, with minor support near 36. From the 33 zone it could either bounce to back-test the 39 area, or accelerate down in a waterfall towards the 2008 lows. Typically H&S patterns will back-test the neckline area, or the 39 zone on the XAU, so this seems a pretty good bet.

    This all appears to spell continued doom for Gold and Silver in the near and intermediate term.

    Mirror patterns are a favorite of mine. I can’t say I invented them (I don’t know if I did or not), but I sure have used them profitably over the past decade plus. BTW, H&S tops constitute less than 5% of the “Mirror” patterns I typically see.

    Oh, when you get 3-red candles in a row on a chart, it nearly always leads to a lower low.

  2. [...] Why gold is going lower.  (Money Game, Buttonwood’s notebook, MarketBeat, Big Picture) [...]

  3. Angryman1 says:

    The money supply is shrinking globally.

  4. Frilton Miedman says:

    Cause/effect
    MA and MA derivatives are the effect IMO.

    Fundamentals & macro-fundamentals of supply/demand are the cause of that effect.

  5. carleric says:

    re “death crosses are not all that predictive of much of anything; Golden crosses are not any better. These mostly tell us where we came from, and not where we are going.”

    Not to demonize the TA devotees but isnt this true of all charts?

  6. Sean says:

    Gold Death Cross stats back to 1991

    “Death Cross” +300 Days +600 Days
    (P)Breakeven 50% 56%
    (P)Gain >10% 27% 39%
    (P)Lose >10% 20% 25%
    Max Loss -27% -30%
    Max Gain 59% 106% <– After mid 2008 death cross

  7. Robert M says:

    In terms of technical chart reading the gaps away from support and resistance are of more importance.

  8. The death cross lacks responsiveness. The Dow Theory is much more responsive. Thus, two months ago, on December 20, 2012 ( http://www.dowtheoryinvestment.com/2012/12/dow-theory-update-for-dec-20-gold-and.html ), it flashed a primary bear market signal for gold and silver.

    On the other hand, GLD “puked” 20.77 tonnes today (1.57% of inventory). Contrary to conventional wisdom, such drains are bullish, as they denote great avidity for physical gold, which forces GLD to disgorge its gold in order to put out fires elsewhere. Past “pukes” resulted in significant price gains in the weeks ahead.

  9. ben22 says:

    “Not to demonize the TA devotees but isnt this true of all charts?”

    most technicians do NOT claim that TA predicts anything…in fact, the people making most of the “predictions” are fundamentalists…when they extrapolate fundamental factors from the past into the future to then forecast the stock price (two steps, the first removed from the market itself)

    TA is a risk mgmt tool, most trained technicians will tell you nothing more. To imply that TA devotees believe they predict the future is entirely misinformed.

  10. [...] course, Barry Ritholtz rightly points out that the death cross charts are not 100% predictive. (The Big [...]

  11. [...] Gold also breached several key technical levels at US$1,600/oz. It entered a so-called death cross in February, where the 50-day moving average price crossed the 200-day moving average. Pity the death cross has no predictive value whatsoever, as pointed out by asset manager and blogger, Barry Ritholtz! [...]