We call this pattern various names — not all of them appropriate for a family investment news letter — flush and surge, 1-2-3, tight downwave, bull fake out, pump and head fake …
It basically consists of a wave high (as marked by the three days away rule), a down wave with a wavelet up, another wave down. A tight trendline may be drawn through the two wave highs. When this line is broken by a power bar buy buy buy. Well, we exaggerate a little. Buy a third of your line and wait for confirmation. So, just buy. Then, buy buy.
Whatever you want to call it these are buy signals in gold and the Dow. We call it a Valentine gift. A few days ago we were saying beware of Greeks (and Goldman) bearing Valentines.
At the same time readers should be aware of the fickle and false nature of these markets. Greeks one day, PIGS the next, and Goldyman and the three bears –what a zoo. We will cogitate for awhile and produce words of wisdom on this subject shortly. Meanwhile, is the downwave over? That’s the way to bet, but you never know till later, and in the meantime never leave home without a stop.