This weekend, I learned the meaning of the word “alethiometer” from a precocious ten-year old boy. Turns out, it’s the official name for the “Golden Compass,” of the 2007 sci-fi movie starring Nicole Kidman.
As for its magical power, the device answers any question thought by its user. The catch is -- you have to ask from the right place. Otherwise, you will be led not closer, but further and further away from the actual truth.
The concept is quite familiar to the world of finance, where the mainstream experts seek answers to the marketplace from an alleged "golden" source of wisdom: i.e. outside news events. Yet, time and again, followers of "market fundamentals" end up lost and confused.
Take, for example, the recent news stories regarding the Gold market. According to the in-crowd, three main coordinates will always point gold prices due NORTH: Economic uncertainty/political unrest, a falling equity market, and a rising oil market.
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It’s safe to say, the last few months of human existence have provided all three of these details in spades, as this brief rundown of current events makes plain:
- Economic uncertainty/political unrest: In the US, the worst credit contraction in recent history continues to spread across the nation’s top tier financial centers (see: Earnings crisis at Bank of America, Barclays, Citigroup, AIG, MBIA, and on), while the most severe housing downturn since the Great Depression just saw a 112% leap in foreclosures and the sharpest drop in home prices ever.
Not to mention a string of catastrophic earthquakes, tornadoes, oil strikes, pipeline explosions, ongoing tensions with Iran, China, Russia, and a violent outbreak of fighting in Lebanon.
- Lower Stocks; Higher Oil: From its May 1 high, the Dow Jones Industrial Average has dropped to a three-week low -- AND -- From mid-March, crude oil has enjoyed an uninterrupted winning streak past $100-,$105-, $115-, and $125-per barrel.
Despite ALL arrows pointing up, however, GOLD prices turned SOUTH with a vengeance: From its March 17 peak, the yellow metal has plunged 17% to a four-month low.
Now, consider what our March 14 Short Term Update said just days ahead of the market’s high: “Gold hit the psychological motherlode when it pushed to $1000. We may have to wait until closer to the end of next week before prices make a turn lower, but any decline beneath $960 should be a clear early warning that a declining phase is starting.”
Directly off the metal’s peak, the March 17 Short Term Update follow-up was certain: “This reversal looks like the real deal.”
Bottom line: Mainstream wisdom “asks” for answers to a market’s price action from the wrong place; namely, outside the market itself. Our analysts search inside the market, where clear and calculable Elliott wave patterns reveal the next likely turn BEFORE it occurs.
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