The Big Flush

We have had a very good washout of stale longs which is healthy and had some traders, including myself, thinking that the worst of open interest drop off was over, but today’s action flushed another wad of them out. China and India will be pleased.

Dan's sharp observation about open interest was important. C-wave advances, while slightly different in terms of structure when starting, come in waves of three/two since 2001. That is, three up thrust and two down thrusts of open interest during the advance.

The 2005-2006 and 2009-2010 C-waves, illustrated below, started from an extremely negative net long position, in excess of -50%, by the commercial traders. Thus, these waves are studied for comparison.

Gold London P.M. Fixed and the Commercial Traders COT Futures and Options Net Long As A % of Open Interest:


Clearly, the cycle of three up and two down is revealed. The big flush comes after the second up thrust in open interest during the advance. The "big flush" came in February 2006. The weak hands were flushed hard. Gold fell more than 4% from $568.75 to $545.80 under guise of some economic end-game MOPE.

Gold London P.M. Fixed and the COT Futures and Options Open Interest Stochastic Weighted Average:


Similar to 2006, the "big flush" has once again taken out the weak hands under the guise that the budget crises within the Euro Zone are more troublesome than those within the US Union. To that end-game spin, I say believe what you want.

The upward revaluation of gold in all fiat currencies is the mechanism for defeating the debt implosion that comes at the end of an economic cycle.

One up, one down, two up, two down. After that is three up.

Source: jsmineset.com