John: This morning I’m presenting a very interesting comparative chart of Gold (continuous contract) and the CDNX Index to show important relationships and repetitive patterns. Consider the attached 30-month weekly chart showing Gold as a single black line and the CDNX as a red line:
The first item of importance is that both Gold and the CDNX are trending upwards in parallel upsloping channels as noted on the chart. The main focus of this analysis are the “A” and “B” recurring patterns within the 2 large mauve circles.
Consider pattern “A” first. In 2010, the CDNX started a down move at the beginning of April and reversed 3 months later at the beginning of July. The CDNX (red line) crossed down over the Gold (black line) in May.
Now look at pattern “B”. We see that the CDNX started its decline near the end of February and 3 months later it’s very close to its support trendline. Note the gradients of both patterns are parallel.
The similarity of pattern “B” to “A” is additional evidence that now is the time to be bullish regarding the CDNX, not bearish. We see great opportunity over the last half of the year as the Index likely climbs gradually until it reaches the top of its channel. Another point to note is that pattern “B” is approximately the same length as pattern “A” but has occurred 1 month earlier. The indicators shown, RSI, Slow Stochastics and ADX are for Gold and are bullish. This chart should be kept as a reference.
Conclusion: The relationship and repetitive patterns between Gold and the CDNX that we have gleaned from this chart give us valuable insight into what to expect for both Gold and the CDNX through the remainder of the year.
