William Kurtz

The VIX Index is a barometer of investors' complacency or fear. A high reading equates to fear; a low reading equates to complacency. Recently, the VIX has been at approximately the same low levels which prevailed just prior to the Flash Crash of May 6, 2010. Now the VIX is rising, which is an indication that investors may becoming a little less certain that the stock market will continue to rise.

Upon looking more closely now, we find that there was indeed a Candlestick Reversal Pattern which formed in late July in Gold prices, that could have served as our clue to the remarkable increase in the price of Gold which has ensued.

The price of Cotton has been increasing rapidly over the past several weeks. However, a Candlestick "Bearish Engulfing" pattern which arose last week, together with confirmations which are provided by our Indicators, tell us that the price of Cotton should promptly decline and should retrace all of the ground which has been gained since late July.

The Crash of 1987 was foretold by a unique Candlestick trend reversal pattern. Following the emergence of that pattern, traders could have exited the market at any time during the nine trading days before "Black Monday." Clearly, it did not "come out of the blue," as it is still remembered today. Similarly, the Flash Crash of 2010 was foretold by a powerful Candlestick trend reversal pattern in April. The Flash Crash occurred seven days later, so it did not "come out of the blue," either.

A "Bearish Engulfing" reversal pattern in the Weekly chart of the British Pound has been reinforced by a six-Star "Sendai Racer" reversal pattern in the Daily chart. Since formation of these patterns, prices have in fact declined. Based upon previous predictive of these two reversal patterns elsewhere, it is very likely that the current decline will continue.

After a long period in the doldrums, during which the Dollar was held in great disfavor, it has come to life again and promises a long and successful run to the upside. It will disappoint many who have, and will in the future, bet against it.

A Candlestick Bullish Engulfing Pattern has emerged in the Weekly chart of the Dollar Index. It foretells a substantial rise in the Dollar, compared to other major currencies.

It's always satisfying to spot one of the "old standby" Candlestick trend reversal patterns. They appear frequently enough to maintain our interest. It's even more of a thrill to discover a pattern which is obviously a variation of an old standby, and then to watch it grow and to see whether, in fact, it has any of the same predictive capability of its parent - and if it does, to give it a name of its own.

The runup in Gold prices to the all-time High in June 2010 has all the earmarks of a genuine mania, like the Tulip Bulb Craze, the South Seas Bubble, and the stock market Highs of 2000 and 2007. We were, and continue to be, bombarded with propaganda which touts the inevitability of much higher prices for Gold. However, the reality is that external reasons do not drive the price of Gold - human emotion does. The Candlesticks predicted a decline in Gold, which has now come to pass.

The tall black Candlestick price bar in Gold on July 1, 2010 reflected a price drop of $44 per ounce in a single day, and probably signaled the end of the Gold Rush and a long stretch of declining Gold prices. This is contrary to "fundamental" expectations, which aver that there are many reasons why the price of Gold must rise. However, fundamentals are negated by social mood, which is changing, and which argues that Gold's price will likely decline.