In a Box

I've been looking so long at these pictures of you That I almost believe that they're real Been living so long with these pictures of you That I almost believe that the pictures are all that I feel
--The Cure

The technical concept that I like to call 'box theory' was made 'famous' by stock market speculator Nicolas Darvas (1960). It proposes that, in a bull market, prices advance in cells or boxes that can be readily tracked.

We can apply box theory to the bullish gold move over the past 3-4 years. Four boxes have defined gold's move off the long base in 2005. Each box has ranged about $150.


Moreover, it appears that there have been two different types of boxes. An advancement box has been characterized by a rapid price rise thru the entire price range up into the next box higher. That advancement continues into a consolidation box, where prices spike up to the top of the box range, pull back, and then endure a period of consolidation before heading higher into the next advancement box.

Currently, we're in a consolidation box ranging from about $850 to $1000. In the previous consolidation box, we spent more than a year, well, consolidating. Will we need to do the same thing this time before (if) gold moves higher?

Let's see what happens.

position in gold

References

Darvas, N. (1960). How I made $2,000,000 in the stock market. New York: Carol Publishing Group.