An Investor's Introduction to Austrian Economics

I found this neat speech by Mrray Rothbard at www.mises.org.  It was recorded in Vienna, Austria; 25 May 1988, and is just over half an hour long.

Some of the key points discused in the speech are the following:

1) Austrian Economics focuses on the entrepreneur.
2) The entrepreneur knows more about his industry than economists.
3) All government intervention is counterproductive.
4) Increase in money supply will cause increase in prices, overinvestment in capital goods, and over malinvestments.
5) Any boom resulting from increase in money supply will result in bust.
6) Any attempt to avert the adjustment / bust phase following an artificial boom will prolong and increase the scope of the bust.
7) The psychological factor is wrongly left out of most economic forecasting.
8) The market does not efficiently discount everything.
9) Financial markets are important  and serve important functions.
10 Large increases in the creaation of new money (out of thin air) occur especially during war time when governments need the new money to finance the war operations.  

Again, you can find the speech at: www.mises.org/media/4569. 

Hayek vs. Keynes Rap

Hayek and the Austrian school win.

Gold -technical update 1/29/10

On 1/7/10, we looked at support levels in the Gold market.  Click here for that post.

The price action over the last two trading sessions has led to a break of near term support for gold.  Now a trend line is being tested.  If that trend line is broken with prices closing below, then the next support we will look towards is the key area of 1010 - 990 that was mentioned in the last post.

The breakdown below near term support left a near term price resistance level of 1163 (futures continuation contract) as seen in the blue line on the chart above.  If 1163 is broken to the upside any near or intermediate term bearish indications will be put aside until further reassessment.  These are clear parameters for any intermediate term bulls or bears to trade with.     

Both the S&P and Gold broke down together the last two weeks combined.  My latest S&P 500 post from 1/25/10 is found by clicking here.  Meanwhile the dollar gained ground against these markets as well as against the Euro.  Are people and businesses looking for liquidity and more debt reduction?  Is this going to push the dollar up further? Two weeks is a short period of time to make a clear statement off of, but one thing is for sure; new potential downtrends in equities and metals are emerging at the same time that a new potential uptrend in the dollar is also raising its head.  If we are simply following the price trends, it really does not matter what the reasons and causes are, but they are always fun to look at nonetheless.  Interesting.

Bernanke's Burn Notice -- Why Now? Research Reveals Insight Into Fed Chairman's Popularity

By Elliott Wave International

Like a spy who gets a burn notice, Federal Reserve Chairman Ben Bernanke has suddenly lost his support.

Bernanke has gone from being Time magazine's Man of the Year in 2009 to … what? A Fed chairman embroiled in a controversial reconfirmation process before U.S. Congress. Why the sudden turnaround in his fortunes?

Robert Prechter, president of the research firm Elliott Wave International, has written about the history of the Fed and its chairmen several times over the years, and his research shows that their popularity rises and falls with social mood, which is measured by the stock market. Here is a compilation of excerpts from Prechter's monthly market letter, The Elliott Wave Theorist, from 2005-2009 about the trouble he sees brewing at the Fed.

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you'll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.

(November 2005) The Coming Change at the Fed | Public figureheads have a way of representing eras. This is certainly true of entertainment icons and politicians. The history of Fed chairmanship implies a similar tendency for changes of the guard to coincide with changes in social mood and therefore stock prices and the economy. [The chart below] depicts our social-mood meter—the DJIA—since the Fed's creation in 1913, marked with the reigning chairmen according to a list on the Fed's website.

The first chairman, Hamlin, presided over a straight-up boom. As it ended, Harding took over and presided over an inflationary period that accompanied a bear market, exiting just as a new uptrend was developing. Crissinger took over at the onset of the Roaring Twenties, and Young presided over the boom, the peak and the rebound into 1930. Meyer took over just as confidence was collapsing and left the office in early 1933 at the exact bottom of the Great Depression. The next three chairmen struggled through the choppy years of the 1940s. Then Martin presided over virtually the entire advance from the early 1950s through 1969, exiting just before the recession of 1970. Burns and Miller presided over a bear market and exited as the new uptrend was developing. Volcker, after weathering an inflation crisis, presided over the explosive '80s. Greenspan has presided over the manic '90s and the topping process. [Ben Bernanke] will have his own era. Given the eras that have immediately preceded the coming change in leadership, the odds are that this new environment will be a bear market.

(June 2006) Economists are convinced that the Fed can "fight" inflation or deflation by manipulating interest rates. But for the most part, all the Fed does is to follow price trends. When the markets fall and the economy weakens, the price of money falls with them, so interest rates go down. When the markets rise and the economy strengthens, the price of money rises with them, so interest rates go up. The Fed's rates fell along with markets and the economy from 2001 to 2003. They have risen along with markets and the economy since then. Regardless of the Fed's promise to keep raising rates, you can bet that the price of money will fall right along with the markets and the economy. Pundits will say that the Fed is "fighting" deflation, but it will simply be lowering its prices in line with the others.

It is highly likely that the next eight years or so will test the nearly universally accepted theory—among bulls and bears alike—that the Fed can control anything at all. The Great Depression made it look like a gang of fools, as will the coming deflationary collapse. We have predicted unequivocally that the new Fed chairman will go down as Hoover did: the butt of all the blame, and if you are reading the newspapers you can see that it's already started. "When Bernanke Speaks, the Markets Freak" (San Jose Mercury News, June 10, 2006); "Bernanke is being blamed for spooking Wall Street" (USA Today, June 7, 2006); "Bernanke to blame for volatility" (Globe and Mail, Canada, Jun 13, 2006). The new chairman had a brief honeymoon (which we also predicted), but it's already over.

By the way, I heard his commencement speech at MIT last week, and in it he spoke eloquently of the value of technology and free markets. But he also opined that economists have successfully applied technology to macroeconomics. We believe that the collective unconscious herding impulse cannot be tamed, directed or managed. In our socionomic view, the Fed cannot control the mood behind the markets, but rather, the mood behind the markets controls how people judge the Fed. We'll ultimately find out who's right.

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you'll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.

(December 2009) Bernanke's greatest achievement was not the measly $1.25t. of debt that he arranged to have the Fed monetize; it was convincing the government to shift the burden of debt default from the speculators and creditors to taxpayers.
(September 2009) Thanks to the Fed Chairman and two Treasury Secretaries, profligate bankers have been cashing checks off the Fed's and the Treasury's accounts, and the poor savers and taxpayers who fund these institutions are unaware that their personal bank accounts are being tapped by counterfeiters and thieves.

That lack of awareness may soon change. Declining social mood is fueling the drive to expose the Fed's secrets. [Ed. note: Bloomberg News has sued the Fed under the Freedom of Information Act; Congressmen Ron Paul, R-Texas, and Barney Frank, D-Mass., are leading a charge to audit the Fed.] Exposing the Fed's secret deals could lead to scandal and the collapse of major money-center banks. But most important to our monetary outlook, it will serve to curb the Fed's reflation efforts. As I have written many times, deflation will win. Social mood is impulsive and cannot be stopped. The downtrend will claim its victims by whatever measures it must take to do so.

(August 2009) On July 26, in a speech in Kansas City, MO, Fed Chairman Ben Bernanke declared, "I was not going to be the Federal Reserve chairman who presided over the second Great Depression." (WSJ, 7/27) We think this implication of a fait accompli is premature. Clearly, the Fed Chairman and the majority of economists are of the opinion that the worst of the financial crisis is past and that the Fed's unprecedented lending has averted deflation and depression. But wave 3 down in the stock market will dispel these illusions. Years ago, we suggested that Chairman Greenspan quit if he wanted to keep his lofty reputation. He didn't do it. Now Chairman Bernanke should consider this option.

So will Bernanke serve a second term as Fed chairman? The January 2010 Elliott Wave Financial Forecast says, "Social mood is still too elevated to deny Bernanke reappointment as head of the Fed. ... But rising political tension confirms that his next term will be far more stressful than his first."

Can the Fed Stop Deflation? Robert Prechter answers this all-important question in his Free Deflation Survival Guide. The guide gives you a 60-page ebook that will help you understand deflation and its effects on society; you'll even learn how to survive and prosper in such an environment. Download Your Free 60-Page Deflation eBook Here.

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Robert Prechter, Chartered Market Technician, is the founder and CEO of Elliott Wave International, author of Wall Street best-sellers Conquer the Crash and Elliott Wave Principle and editor of The Elliott Wave Theorist monthly market letter since 1979.

S&P 500 Update 1/25/2010

On Dec 29th, we tightened the stop on the long S&P 500 position we have been holding for several months. Click here for that post.  The stop was tightened to 1093.87.  This stop has been hit.  We are out of our long positions.  This was also a trigger level for more aggressive traders and investors to begin initiating bearish positions.  We are beginning to get our feet wet on the short side.  More on that later in the post.

The stop was not tightened arbitrarily.  We used a consolidation and reversal low which had become a technical support level.  The stops were tightened because our outlook for the market is bearish over the secular or long-term.  We will get into a little of that later in the post.  What is important right now is to confirm that the stop was indeed hit.  Our long positions have been liquidated. 

Now, stops for short sale positions are at the previous high, which is now resistance.  That level is 1150.45 (cash market).  Any move above that level would be a signal to close out any short sales, bearish mutual funds, or inverse / bearish ETFs.  We cut losses short, we do not hang on to them if our trend is violated.  If such a breakout were to occur, the more assertive traders and investors might want to go back to a long position with stops at the reversal low.  Others, might want to just stay in cash positions for a while.  Should the stop against our bearish stance not be hit, then we will just enjoy a profitable ride to the downside. 

I'll take this little moment to mention that in my trading I typically will not risk more than 2% - 5%of overall trading / risk capital on any position.  This is measured not as the amount the positions cost to acquire.  The measure is calculated against the stop.  A position size regardless of costs that equals a loss of 2% - 5% of capital at the stop is utilized.  So, I am taking the amount of loss between entry and stop and multiplying that by number of contracts or shares it takes to achieve the risk profile of 2% - 5% of overall trading / risk capital.  I do not bet the house on trading ideas, just as any other business is ill advised to putt all their eggs in one basket or one deal.  My goal is to create repeatable processes and good business practices.  I should note, that 5% is considered very high risk in most professional trading circles; and for good reason.

Depending on the set up, I will sometimes add units of trade as the stop is moved in favor of the entry due to price trend action.  When I do this, I simply add the number of contracts / shares it takes to achieve the 2% - 5% risk threshold against the new stop.  The benefit of this is that if the trend is strong and persistent, then the profit potential is increased through this pyramiding.  The downside of this type of procedure is that it is possible to turn an original position that would have been profitable into a position that gets stopped out for a loss.  Again, unless I am using a systematic algorithm, I base this decision on the technical set up of the market.  We will address that if the new downtrend does emerge and persists, but it is good to think ahead in terms of procedure.  


As old readers know, I tend to blend trend following and Elliott Wave analysis.  The chart below shows my current Top and ALT-1 Elliott counts.  In this case, they both point in the same direction.  That does not mean that we know they are the correct counts, but it does mean that the same stop we mentioned above is also the negation point for these two counts.

Both the Top and ALT-1 counts indicate that Primary wave [2] is most likely complete.  This is a very bearish indication.  Any move above 1150.45 negates both counts as they stand, and would tell us the hard way that wave [2] was not complete.  

The top count is called a zig zag, with its final wave 5 of (C) as a rare expanding diagonal.  The ALT-1 count is a triple zig zag.  

I always like get into two questions fairly quickly: 1) Where is my stop going to be?  2) What are the problems with the Elliott Count?  We have identified the stop already.  Now for the problems with the counts.  The top count relies on a rare pattern.  Rare increases the chances of it being the wrong count.  The ALT-1 count is not really as proportional as I would like to see.  In other words,  the waves of the same degree in terms of labeling do not visually appear to be of the same size and scope.  

What would strengthen the bearish outlook suggested by both counts.  A firm break below the trend lines you see above with prices also closing and holding below them would be strengthen the case.  A price move below 1029.38, the level labeled as Top -[iv] / ALT-1 -2nd (X), would increase the probability of the intermediate term bearish case.  Confirmation is a different story.  We will not have confirmation until new lows are achieved -below 667.  Life is measured in probabilities.  There are very few certainties that are known before hand. 

To learn more about Elliott Wave, read this page and click the links on it. 


       

Ron Paul hits a home run on CNBC discussing the Fed and Bernanke

The Fed destroys our money as well as helping to facilitate bubbles and the extreme swings in the business cycle.  Dr. Paul has for a long time done an excellent job in exposing the masses to this part of Austrian Economics.

Corporatism 101

Recent S&P 500 post

On days when the markets are active, particularly to the downside, I get e-mails asking about my view.  Here is a link to my last S&P 500 post. 

Ron Paul laying down some Austrian Economics in his State of the Republic Address

New Year: New Economic Boom? Why 2010 Should Be One to Remember

By Nico Isaac

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 Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.

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By Nico Isaac

In the realm of market psychology, there's a big difference between optimism and extreme optimism. The first is seeing the glass half full. The second is seeing the glass half full deep in the heart of a bone-dry desert. In finance, it's what we call "Buying the Dip" mentality -- when all outcomes, even losses, are cause for celebration.

We are there now.

To wit: With a new year upon us, the mainstream has already come up with a fresh tagline to define the next 360-or so days. It even rhymes: The Bull Runs Again In 2010. This projection is in no way "in spite of" the fact that the U.S. stock market just finished its first decade of negative returns since the Great Depression; it's because of that fact.

See, according to the mainstream experts, this "Lost Decade" of abysmal stock performance (in which the Dow ended 9% in the red, the S&P 500 - 24%, and the NASDAQ Composite - 44%) is the very foundation on which a new bull market will apparently be born. One economic scholar recently coined the phenomenon the "Slingshot Effect" -- the more severe the downturn, the faster the recovery. (Associated Press)

Adding to the upbeat chorus are these recent news items:

"The horrible decade has wiped out all the excesses of the previous two decades and put us back on track for more normal returns." (USA Today) -- AND -- "It may be the best of all possible worlds." (Business News)

Back in the late 1990s, when the "unstoppable" NASDAQ began to experience regular days of double-digit drops, it was "Buy-the-Dip." Now, it's "buy the entire lost decade." And, as the Dec.31, 2009 Elliott Wave Financial Forecast Short Term Update reveals -- current sentiment readings "continue to show that stock market bears have packed up and moved to Florida for the winter." 

The Dec. 31 Short Term Update also reveals two mind-blowing charts of the S&P 500 versus Investor Intelligence Advisors Survey Percentage of Bears -- AND, the S&P 500 versus the percentage of "Fully Committed" bullish advisors since 2000. The current reading is the lowest bearish percentage in 22 years.

 

Take one look at the evidence, and you'll see that a defining pattern emerges: Low levels of bearishness have consistently coincided with one kind of market move. Combine this picture with the other measures of investor sentiment like momentum, volume and Elliott wave structure, and the evidence tilts overwhelmingly in favor of an unforgettable year.

Elliott Wave International's latest free report puts 2010 into perspective like no other. The Most Important Investment Report You'll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.

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Nico Isaac writes for Elliott Wave International, a market forecasting and technical analysis firm.

Free Download: Get the Most Important Investment Report You'll Read in 2010

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Free 13-page Report: Robert Prechter's firm Elliott Wave International has just released its annual "Most Important Report of 2010." Inside, Prechter delivers hard facts, eye-opening charts and straightforward commentary to help you take advantage of the opportunities – and avoid the dangerous pitfalls – that you will face in 2010. You'll get analysis and forecasts you can act on, and you'll learn what the government's unprecedented involvement in the financial markets will mean for your portfolio in 2010 and beyond. Learn more and download your free report now..

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Dear Investor,

Please recall with me the prevailing investor sentiment from this time last year …

U.S. stocks had been in strong decline for more than a year. Some of the most celebrated bulls had turned into bears, and the few bears that did exist before the downturn had become even more bearish. The Daily Sentiment Index for the S&P registered an astonishing 3 percent bulls -- virtually no one was betting on the upside -- and the bleakest of forecasts for 2009 called for nothing short of financial apocalypse.

But well-known contrarian analyst Robert Prechter took the opposite side of the trade. Prechter, a long-time bear, emerged as a solitary bullish voice among overwhelming bearishness. After closing out a record short recommendation that gained 800 downside points in the S&P, he issued the following bullish warning to bears:

"The market is compressed, and when it finds a bottom and rallies, it will be sharp and scary for anyone who is short."

In the following days, the mainstream media reported that "perma-bear" Robert Prechter had turned bullish -- the reports were only half true. Prechter had, in fact, turned intermediate-term bullish, but he stopped short of recommending average investors to jump back in. Why?

Prechter saw something on the horizon that the shortsighted mainstream market watchers did not, which brings me to the untold portion of this story …

In Prechter's eyes, the bear market is far from over, and what he expects to happen after the current rally ends is significantly important to how you position your portfolio now.

Prechter's firm, Elliott Wave International, is now offering for a limited time The Most Important Investment Report You'll Read in 2010. Inside, Prechter reveals his big-picture outlook for U.S. stocks and the U.S. economy. The eye-opening 13-page report, originally published for paying subscribers to his Elliott Wave Theorist, examines the government's unprecedented involvement in the financial markets and private enterprise. It reveals what's already taken place in candid detail then focuses you on what the government's measures will actually do for the U.S. financial markets and economy.

Be assured, this report delivers analysis you will not find on the front page of The New York Times or Wall Street Journal. It delivers independent insights from the man who saw the bear market -- and today's bear market rally -- coming when virtually no one else did.

But hurry! This free 13-page report is available for a limited-time only due to its timely content.

Please learn more about and download the free 13-page Most Important Report for 2010 now.

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About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

Keynesian Econ vs. Austrian Econ

This video should help some of those wondering about the difference between Keynesian (current mainstream) Economics and Austrian Economics.

Austrians: wealth and capital comes from savings

Keynesians: wealth and capital come from debt and printing more money out of thin air

BTW, Peter Schiff is running for Senate: www.schiffforsenate.com 

The #1 resource for Austrian Economics (real free-market economics) is: www.mises.org 
 

Why You Should Care About DJIA Priced in Gold

By Vadim Pokhlebkin

The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.

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Of the many forward looking market indicators we at EWI employ, one of the most interesting tools (and least discussed in the financial media) is the DJIA priced in gold -- "the real money," as EWI's president Robert Prechter calls it.

We've been tracking the Dow/Gold ratio for many years and it has serves our subscribers well. It's not a short-term timing tool, yet in the longer term, as our January 6 Short Term Update put it, "the nominal Dow eventually plays catch up to what is transpiring in the Dow/Gold ratio."

Here's a good example. Remember when the nominal DJIA hit its all-time high? October 2007, just above 14,000. At that time, most investors expected new highs still to come. But our Elliott Wave Financial Forecast warned five months prior, in May 2007:

One key reason [for a coming top in the DJIA] is the undeniable bear market status of the Dow Jones Industrial Average in terms of gold, the Real Dow...

Notice, by contrast, the relative strength of the Real Dow versus the nominal Dow, the index in terms of dollars, from 1980 to 1982. By August 1982 when the Dow denominated in dollars bottomed, the Real Dow was rising strongly from its 1980 low... The nominal Dow soon played catch-up, and they both rallied more or less in sync until 1999.

Now, instead of soaring the Real Dow is crashing relative to the nominal Dow. In fact, it’s barely off its low of May 2006. This dichotomy reveals the weakness that underlies the financial markets’ push higher. When mood turns and credit inflation reverses, the ensuing drop in the nominal value of the market should be dramatic.

"Dramatic drop" did indeed follow: Between October 2007 and March 2009, the DJIA lost 53%, high to low.

For more information, download Robert Prechter’s free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.

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Vadim Pokhlebkin joined Robert Prechter's Elliott Wave International in 1998. A Moscow, Russia, native, Vadim has a Bachelor's in Business from Bryan College, where he got his first introduction to the ideas of free market and investors' irrational collective behavior. Vadim's articles focus on the application of the Wave Principle in real-time market trading, as well as on dispersing investment myths through understanding of what really drives people's collective investment decisions.

Valuable Investment eBook Free Until Jan 12

Our friends over at Elliott Wave International have informed us that their brand-new Market Myths Exposed eBook will still be available free until January 12.  The 33-page eBook takes the 10 most dangerous investment myths head on and exposes the truth about each in a way every investor can understand.

You will uncover important myths about diversifying your portfolio, the safety of your bank deposits, earnings reports, investment bubbles, inflation and deflation, small stocks, speculation, and more!

Protect your financial future and change the way you view your investments forever!

Download Your Free Market Myths Exposed eBook.

Gold: important support levels

Up to this point, most of my technical analysis posts have about the S&P 500.  There are reasons for this.  Right now, I  like to trade and test the S&P market.  I've followed it for a while, and have a feel for it, although I got really out of sync in the period between 2004 and 2007 (this happens sometimes in trading).  The S&P 500 also has wide appeal.  Many folks are invested financially and psychologically in the stock market.  Because of this, the stock market tends to be a leading indicator of other economic data.

I am planning to slowly add other markets to my posts.  Today I am going to talk about the price action (technical analysis) in Gold.  Gold has been a hot topic lately.  Let's see what's going on with the price action.  

By the way, philosophically I like gold or other commodity backed and market determined monetary standards (sound money) rather than the fiat monopoly money we have now.  However, that is not the topic of technical analysis.  Technical analysis is the study of the market itself -price action, price trend, momentum, volume, etc.....  Technical analysis is concerned with the how and the what rather than the presumed why.  What direction is the price trend?  How will we know when this trend ends and a new one begins?  How much risk do we take in trying to harness the trend or probable trend for profit?  These are the questions technical analysis attempts to answer.      

There is no denying the uptrend in gold.  The weekly chart above shows only part of it.  Resuming in late 2008, the price action has been persistently upward.  This is identified by higher lows and higher highs in the price action.  I have also drawn a simple trend line across some of these lows that mark the most prevalent overall trend of this period.  If we were to look at a longer term chart, we would see that the price of gold has been in an uptrend since 1999 or so, with the downside action of 2008 being the most significant pause in this very long term trend.   

One of the major uses for technical analysis in trading and investing is the placement of stop orders -exit orders for existing positions.  These stops serve to limit losses that result when trends begin to go against your position.  There are many methods for placing stops.  If you are a little bit sophisticated with your operations, you could have trailing ATR stops.  A basic approach would be to place stops above and below resistance levels found at areas of price trend consolidation.  Alternatively, you could use a pattern methodology like Elliott Wave to place stops at areas of pattern failure.  

Gold has a key area of support on the long-term gold chart at the highs of the large consolidation and correction of the early 2008 to early 2009 period.  I've placed dashed red lines in this zone, which is roughly between the 1010 and 990 area.  If price breaks below this zone, the long-term up trend in gold will be damaged.  Such a breakdown would indicate that selling pressure had overwhelmed buying pressure.  Were this to occur, it could mean different things to different traders and investors.  Some who are building stores of gold could use it to wait out the downtrend until signs of its weakening or ending emerged, at which point they could again resume accumulation at better prices.  Others, who are primarily intermediate or shorter term traders would need to either be out of this market or be in short positions.  I know this concept of short selling gold sounds strange to some of you.  I hate unbacked money too.  However, we are talking about trading and investing in price trends, not the sound monetary policy of which I too am an advocate.      

Finding a zone around the 1000 level is no big surprise.  Market participants, especially the retail public, tend to place a lot of psychological significance on round numbers.  This factor is increased when the number of digits itself changes with them!  Price discovery in markets is subjective based on the many micro factors of the participants.  Auction markets have a certain feedback loop -continued price action- that intensifies the decision process for participants.  This post did not start out looking for a zone around 1000.  I found and marked the zone to only then look back to see what price level it was at so I could put it in print.  We are looking at a line in the sand that has previously been drawn by buyers and sellers competing in the price discovery process.     


Lets zoom in a little closer to look at the intermediate term. 

Looking at the daily chart above, it is very important that I point out the key intermediate term support level, which is identified with a thick red line and writing.  This level is 1086.6 on the continuation futures data.  If this level is broken from here, it will have left an Elliott Wave corrective pattern to the upside in its wake.  This would be bearish for gold in the intermediate term.  Such a pattern, if it were to occur would lead to measured targets towards the previously mentioned zone of longer term support.  After 1086, the next line of defense is the upwards trendline, which  would have to be breached for prices to make to the 1000 zone.   As more price action develops, I will try to cover it here.  If 1086.60 holds, then price should either consolidate sideways or move further upwards.