Saturday, 25 August 2007

Goldrunner and his fractured fractals

This is another post about interesting posters on gold and the PM markets.

The American poster,Goldrunner, made his name as a PM poster by making several extensive contributions to the Gold Eagle Forum from 2003. He seemed to arrive shortly after Captain Hook when the latter left to sell his skills on his own site. From late 2005 Goldrunner also produced articles detailing his analysis, opinions and forecasts for gold and the HUI.

He is by profession a dentist although he could probably make a good living through technical analysis as he probably one of the leading exponents of this “art”.

Vronsky, the moderator of Gold Eagle valued Goldrunner so highly that gave this poster the epithet “venerable” when praising Goldrunner’s “wisdom and posts”. Goldrunner always praised Vronsky at the end of his articles and in particular, Vronksy’s Gold Eagle Forum for offering such an informative platform for goldbugs. As the moderator was given to blocking posters’ posting privileges for no apparent reason, or perhaps, for not being interesting enough, Goldrunner’s thankful comments sometimes seemed overly grateful and even obsequious. Although with such a control freak running Gold Eagle Goldrunner was probably trying to stay the on right side of him.

Goldrunner is very good at fundamental analysis; however he is known best for advocating fractal analysis as the fractals have similarities in charts that show identical movements over time. They have, as Goldrunner stated in his most recent article, “historical chart patterns”. The term, fractal, is also used to relate how clouds or images in art or wallpaper can have similar if not identical recurring patterns. Like Fibonaci numbers the patterns are regular and natural as they can be found in nature.

Goldrunner has argued for some time that Wave III of the Eliot wave in gold is due and that it will take gold and the HUI (the unhedged goldminers index) to new highs. He freely admits that he expected this wave some time ago and that the chart pattern seems to be playing out longer than he expected. Given that almost every goldbug, this one included, is mostly wrong, that does not invalidate Goldrunner’s fractal analysis. This is because he argues that sometimes fractals can only be fully seen in a retrospective manner. It is possibly also true as the central banks’ manipulation of the gold market on account of the weak Dollar, fragile stockmarkets and falling house-prices, unhelpfully elongated the timescale for the next upward move up in the bull market for gold and its associated PM stocks.

This poster obtained real kudos by calling the last move in gold and the HUI in late 2005. He nailed its high and he was also accurate on how far the HUI would retrace its move. The only problem is that this retracement did not just happen once, it happened twice. Still, this does not invalidate Goldrunner’s charts or figures. He seems to have coined the term “Verticalicious” as this is how he thinks the next move up in the HUI will appear.

Goldrunner's "Ride on a rail" charts from February this year.

Click on the charts for their full size.

The long correction in gold and the HUI has led to some sniping of Goldrunner by other posters at the Gold Eagle Forum. Posters who are careful not to give timescales for the next HUI advance and are cautious over the path of gold and silver have attacked Goldrunner over the last few months. Maddog, who is seemingly English, is one such poster. Half Monty is another. Ultimately, these posters disagree with Goldrunner’s ideas on fractal analysis. Given the length of the correction they have a point. Although that does not invalidate Goldrunner’s chart targets once Wave III actually begins. And he had the courage to commit himself to time-scales and figures when others would not do so.

Another poster, Stephen Swink, has successfully traded the trading ranges within the 18 month HUI correction. Goldrunner preferred to wait out the correction and only trade the wide range from its top to the bottom and not the swings between a narrowing trading range. This also led to friction between the two posters with each one suggesting that greater profits could accrue by either trading or not trading swings. Goldrunner disparagingly sees short term trading as “nickel flipping” because one could miss the real move in gold stocks. Again, the central banks’ manipulation of events has led to a longer period of swings between the trading ranges than perhaps even Swink expected. Still the move up, when it comes, will be a great money-maker and the buy and hold strategy at around HUI 320 should be a great bet!

Goldrunner may now be fed up with the barbs and seems to have lost his enthusiasm for posting; he may be waiting it out for the anticipated Wave III and will then resume posting when this gets underway. He would do better posting at Goldtent as there is much greater freedom there and his views would probably not attract envy or criticism. This, of course, would mean leaving Gold Eagle. But then perhaps such a move is way overdue. He is a clever poster whose take on events in the gold market is always worth reading. By now he has large following of readers who want to know his views. Talented and courageous Goldrunner has always been generous with his charts and ideas on the PM markets.

If you ever get to read this, how about it, Goldrunner?

Here’s an extract from his last article for Gold Eagle in May this year as this gives a taste of the quality of his posts. His charts can be seen in his articles using the link given near the beginning of this post.

“Back in early 05 I had put forth a "model" based on a historical chart pattern in the HUI that I thought would likely play out in the future. We saw that chart pattern play out into 2006 with an impulsive move to around 400. Since the following correction was expected to be a complicated affair with flat pattern emerging before another vertical period, my personal plan was to do some selling between HUI 385 to 393, then to re-buy in the 320 area for the next vertical leg of the HUI bull. At this juncture we know that my "time component" was off by about 3 months per year, but still this has been a longer correction than I would have expected strictly based on the earlier fractal sequence. That leaves questions. Why so? For how much longer? Will the fractal pattern still play out? Will the fractal pattern still potentially see the higher runs that I had expected? These are all questions that I ask myself since I invest based on the above fundamentals as I see them, along with my personal chart work.
My opinion at this time is that the fractal scenario will continue to play out. We will know by watching the movement of the HUI into late 2007 whether "time" will allow the potential targets into May of 08 to take the indext to the 1250ish level, or whether such a move will be extended into late 2008. Knowing that the last portion of the move will be fairly vertical, the potentials into May of 08 might still be on schedule. If not, it does not bother me much because the trend channel, if the timing is off into May of 08, will likely give us an even higher price potential the farther out we go.
Let's consider the psychology of market participants based on the perception of the fundamentals at this time. Sometimes markets can remain irrational longer than one would expect. I believe that this "irrational period" is about to suddenly end. Forget the smoke and mirrors that are creating the "market perspective." Forget the COT. The bottom line is that the market fundamentals will rule in the end. Market participants have been sold "low inflation" based on a horribly tainted CPI. They are being sold interesting "TIC data" showing Asian countries buying less of our debt with those losses being picked up out of the Cayman Islands. I can only imagine that Cayman Island debt buying being fueled one way or the other with newly printed dollars.......monetization of the debt either done directly by dollar printing, or indirectly done by a sweetheart deal combining dollar printing with credit being extended to some funds. IMO that is monetization of debt no matter how you look at it. Yet, the Bond participants seem to be caught in the same type of "perceptional maze" that Mr. Greenspan had noticed with "the strong dollar policy" hoax.”

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I teach Film, Media and English Lit.