Commodity Trade Mantra

Gold, Silver, Equities: Secular Megaphone Chart Patterns

Gold, Silver, Equities: Secular Megaphone Chart Patterns

Gold, Silver, Equities: Secular Megaphone Chart Patterns

Examine the 20 year log scale chart of monthly gold. I have drawn lines connecting highs and lows. The result is an expanding channel or megaphone pattern. The increasing prices are exponential (log scale chart) because of exponential increases in debt, money supply, and Keynesian craziness, although I have no graph to prove the latter.


Examine log scale charts for silver, crude oil, the Dow Transports, and the S&P 500 Index. You can see similar exponential increases and megaphone patterns of much higher highs and deeper lows.





I have circled important chart lows and highs, and related lows and highs in the MACD and TDI at the bottom of the charts. I have also added dashed lines indicating my estimate of the future direction of prices.

WHEN? Ask the high frequency traders and central bankers, since they exert substantial influences on prices, but market forces cannot be repressed forever.


  1. Prices for gold, silver, crude oil, other commodities, and equities are exponentially increasing in the long term.
  2. Debt and money supply have increased exponentially and have driven prices much higher. Equities benefit for years and then commodity prices benefit for years.
  3. Equities have enjoyed a very long bull market. It may have topped.
  4. Bonds have been in a 30+ year bull market. When some European yields go negative past five years duration, it is time to anticipate the death of the bond bull.
  5. Central banks want to levitate bonds, levitate equities, and repress commodity prices. Clearly they have temporarily succeeded. Their ability to manipulate prices may survive a while longer, but commodity prices will eventually follow the increasing debt and money supply. Debt and money supply will increase, so in the long term commodity prices will also increase, unless there is a violent reset.
  6. Higher gold, silver, and crude oil prices are coming. Lower prices for bonds and equities are coming.

Take the Low Risk Road

The S&P 500 Index has hit numerous new highs in the past three years.  Note the log-scale graph below and the broken support lines from 2000 and 2007.  The current support line, depending on where it is drawn, is on the verge of breaking.


Further, Paul Mylcheerst says the modified monthly MACD has given a sell signal on the S&P.  The same indicator gave sell signals close to the peaks in 2000 and 2007.

There is significant risk in the S&P 500 Index in spite of the fact that central banks and governments have successfully levitated the stock and bond markets.

By contrast, the XAU, an index of gold stocks, has fallen to a 13 year low, and the monthly MACD indicator that gave the sell signal on the S&P has tentatively indicated a buy signal on the XAU.


What about the ratios?

Consider the ratio of the XAU to the S&P 500 Index.  The ratio is at the low end of the 20 year range and at a 14 year low because the XAU stocks have been crushed and the S&P has been levitated.

The S&P up and XAU down trends appear ready to reverse.  The charts show extremes in prices and in the ratio.

The low risk trade is to sell S&P related stocks and to buy gold, silver, and gold and silver stocks.  Sell high and buy low!



  • The S&P 500 Index hit an all-time high in May 2015.
  • The XAU index of gold stocks hit a 13 year low this month – July.
  • The XAU to S&P ratio shows that gold stocks have been weak for several years and appear ready to reverse higher.
  • Gold prices have been crushed since August 2011 while paper bonds and stocks have been “strongly encouraged” by global central banks.
  • The MACD (modified by Paul Mylcheerst) has given a monthly sell signal on the S&P 500 Index (don’t discount this), a buy signal on the XAU, and is close to a monthly buy signal on gold.

Take the low risk road.  At this time the S&P looks like a high risk path while gold, silver and the XAU look like a low risk road.



Courtesy: Gary Christenson – The Deviant Investor

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