Review Of The Week - Plus A Look At The BGMI

At the Dow Jones’ current all-time high, that would take the Dow Jones down to 26,442. I think that would signal that the bulls in the FOMC are having problems keeping the stock market’s valuation inflated.

But this week that wasn’t so, as the various major market indexes I follow began seeing BEV Zeros in increasing numbers until Friday (table below). With sixteen of them closing the week within 5% of their last all-time high price, they remain in scoring position for making additional BEV Zeros in the weeks to come.

Another indication the financial market would be having problems would be a surging price of gold. At the close of this week, we really couldn’t say the price of gold was surging, but it’s not collapsing either.

Let’s take a look at gold’s BEV chart below, and see how gold has behaved since its December 2015 bottom. I’ve placed various stars and circles in the chart. The December 2015 bottom is marked by a circle, as are two corrections in the price of gold I’ve labeled #1&2. The two red stars are also price corrections.

The thing that jumps out to me is how since December 2015 price corrections in the gold market have decreased in intensity. Though truth be told, correction #2 was larger than #1. But not by much, and correction #2 happened above the BEV -27.5% line ($1,360), a level gold hasn’t traded at since 2013.

Just take a moment to study these post December 2015 corrections in the gold market and then look at what gold has done since the first of this year; for the past six weeks gold hasn’t been advancing, but it hasn’t been correcting either.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 638\Chart #5   Gold BEV 2015-20.gif

But if you’d look at open interest in the COMEX gold market (chart below) how it surged to historic levels from late November to late January, and then seeing OI collapse 154,000 contracts in the past three weeks, maybe the price of gold should have corrected – but it hasn’t, not yet anyway.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 638\Chart #6   Gold's OI & Price.gif

Decades ago there was an old rule-of-thumb concerning the market and investing that was popular; that about the time you understand the rules in the market, someone goes and changes them on you, and they don’t ring a bell when they do. Like the current and very popular rule that the stock market always goes up, we can be sure that someday, this someone is going to change that rule, and as always this someone, whoever that is, isn’t going to ring a bell when they do.  

But the reason I’m bringing this up is because as I’m looking at the chart above, plotting gold and its COMEX open interest, it appears that someone has changed the rules at the COMEX. I’d like to follow these trends in open interest and the price of gold for another month, possibly two before I can speak with certainty, but at week’s close it appears that the bulls are going to win this battle at the COMEX.

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