Tuesday, 4 November 2014

When A Camel Pukes, Bulls May Appear

Warning: This article contains no fundamental analysis, no worthwhile technical analysis, no investment ideas and recommendations.

Gold slipped to new low levels $1,160 an ounce on last trading day of October, broke a significant support level $1,180. Huge numbers of 'intelligent' investors still need to know, whether gold will calm down around this levels or plunge to $1,000 as many speculators bet to be.

A CNBC trader, Brian Kelly, came with an intriguing and progressive gold chart last weekend. He believes that, all its ups and downs since beginning of 2014 looks like a puking camel, or Vomiting Camel in another saying. Technical analysts are always good at seeing deeply and betting on patterns, like Shoulder Head Shoulder, triangles, flags etc, but a puking camel is unknown for markets yet. Should this pattern scare the investors who are long in gold? Mr. Kelly thinks so. This pattern aims to new lows with complex calculations, as Mr. Kelly says on CNBC.

After a quick search, I've found a clear Vomiting Camel chart on Turkey's stock market, BIST. The chart seems pretty similar with today's gold chart. But before to talk about today's gold chart's similarity, a reminding may be helpful to know what happened those days. 2013 was a horrible year with high volatility and big uncertainty for all sized investors. Despite hitting new record levels by supports of credit rate hikes and massive capital flows, BIST fell sharply from record levels after Fed's announcement of wind down its bond buying program or Tapering on May 2013. Additionally, Turkey's own political tension rises with anti-government protests and government's alleged corruption cases put BIST through a bear market until the local election forecasts whispered, March 2014. When we look at the chart below, it is clear to see that 2013 was not a rosy year for Turkish lover investors.

To look at how the camel clearly puking, we need to shorten the period between August 2013 and February 2014. New low levels were tested, but the buyers were dedicated not to let fall another size of camel or stomach length, as Mr. Kelly says on CNBC. Apart from the fundamentals of the market, one last try to test new lows were a fantastic chance for a 'BUY'. Because the camel succeeded to get rid of what it has in the stomach, now feels free to run up as quickly as possible.

But this nonsensical think of way can not convince people by own. For many, only fundamentals matter. Thus the local election expectations in Turkey, cheap valuations and long-term stress caused a sharp rally after Mart 2014, in my view.

The charts looks very similar to each other, in spite of the fundamentals and expectations are completely different. However, technical analysis is no different than finding a similar pattern from past to implement on current one. And far from an investing idea or recommendation, gold's chart may converge to what happened in BIST, a sharp quick rally, after puking what the camel still holding in stomach.

I believe that this innovative technical pattern is more likely to have fun of it, instead of taking serious. But a historical example might help those think so bearish because of the last tumble in gold.