It isn't predictive as I stated in my previous post. Nothing is. The best thing that can be done is to assess what is being done behind the appearances portrayed by price. Money leads price because price has an emotional factor in it, but fundamentals determine whether money will persist. If it does, price will become correlated with money.
For the last two days total money flow into ABX has been negative, but the elasticity state persists, i.e., what heavy selling does to price, light buying repairs. This doesn't predict that tomorrow the total flow will turn positive and it doesn't predict that if the total were to turn positive that the current elasticity state would remain. If the total goes positive and elasticity inverts, you would get an advance which would be a mirror image of the decline. However, there is a high probability that elastic state will persist up to sizable price translation even under a macro total flow regime which is randomly distributed.
When there is no fundamental conviction total flow is randomly distributed and is seen as a saw tooth chart pattern without regular frequency. People call these price patterns bottom and top bases. This is true though only if money and price are correlated. Going back several months ABX has diverged in price from total flow. The difficult thing is that fundamental conviction is negative, on-balance total flow is positive, persistent elastic state is positive, and price is negative (downtrending). This is a unique occurrence. |
