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Introduction:
Someone once said, “gravity is not just a passive force controlling heavenly bodies, but also an interactive force that affects our mental perceptions”. Whether it is snowflakes falling, a child on a slide or a mountain hike along a steep gorge...a mental image is transformed into how it relates to our own perception of equilibrium and trend.
In the world of gold and silver investments, we are constantly aware of our position, the perceived trend and the desire for a place of equilibrium and safety. This is the “motion of emotion” that guides our choices and decisions. The goal is gravity center...an equilibrium point.
What is Gravity Center in the XAU?
In a past article, we suggested that in the pendulum swings of the market, such as the XAU, "Gravity Center" is the point around which prices fluctuate cyclically. This point is constantly changing and is a prime determinant of the overall trend. Prices do not stray too far from this gravity center and eventually return to it. Mathematicians might call this a "mean reversion". In effect, gravity center is a trend all by itself and a profitable low risk entry point.
Gravity Center is a simple formula that recognizes the intricate and delicate balance of recent highs and lows and then integrates them with today’s close in a pendulum format. Imagine a bowling ball careening down an alley and you will understand the principle.
The result, outside of the occasional sideways markets where this methodology does not work, uncovers emerging trends and clearly defined trend charts.
Two sequential examples:
During a 8/07 to 11/07 uptrend, the gravity center trend indicator did very well from beginning to end and as demonstrated below. Notice the uptrend was broken 11/07 and a down trend commenced as indicated by the blue Gravity Center line crossing the red MSM signal line
Two sequential examples from 2007
An example from 2006 below
Four additional sequential historical examples can be viewed here.
Our Pendulum indicators measure the swings in the market, their amplitude, force and energy while recording the motion of emotion across an equilibrium point or gravity center. The concept of gravity center is a central feature of Pendulum and is found throughout nature....that force of nature that compels both human behavior and physical objects to find their equilibrium point.
Strategy:
Studies have shown that 60% of a typical stock price change can be directly attributed to the movement of an overall market index. So it just makes common sense to be on the right side of a market trend and then consider individual gold, silver and resource issues.
Here at Market Pendulum our goal is to add to our premiere long term positions in any personal or model portfolio when low risk entry points occur as defined by our leading XAU indicators such as Gravity Center. It’s the sensible approach.
