V.2:1 (20-23): GOLD SWINGS REVISITED by Jesse H. Thompson

V.2:1 (20-23): GOLD SWINGS REVISITED by Jesse H. Thompson
Item# \V02\C01\GOLD.PDF
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In the March 83 issue of TA, in an article entitled "Gold: Bull or Bear Market?", a simple yet very effective trend tool, the swing chart, was used to analyze the greater trend of gold. The monthly swing chart for June Comex Gold was in the position indicated (right). In the article it was noted that the "failure of the June contract to break the previous swing high (527) is indicative of weakness." Essentially, the turning down from the second or double-top at 528 established a distribution area at the 527-528 level. From this chart it was also concluded that "If the last swing low at 413 is broken by $10, then we will have emphatic confirmation of a greater bear trend. (Ref. A)

Confirming Price Activity

In the first week of June '83, the June Comex Gold contract confirmed a greater bear market by breaking to 396.20, under 413 by $16.80. The Dec 83 contract did likewise by breaking to 414 which was $19 below the 433 monthly swing bottom. Both contracts thus confirmed a greater bear trend and lower prices. (Ref. B, C)

Importance of the Monthly Bottom

More carefully scrutinizing the 433 Dec bottom (and the June 413 bottom), we see the critical importance of the 433 price level. Reviewing the weekly swing chart for the Dec 83 Gold contract, we see that previously the major bottoms in the 430's acted as support levels. Once these levels were broken, the price action indicated a weakening of demand or increase in supply, which should have concomitant bearish implications. (Ref. D)

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