August 3, 2012 Page 3
short contracts outstanding. There are four general rules about the interpretation of open interest. They areas follows:1.
Rising prices with rising volume and rising open interest is a strong bull market.2.
Rising prices with falling volume and declining open interest is a weak up market.3.
Declining prices with rising volume and rising open interest is a strong bear market.4.
Declining prices with falling volume and falling open interest is a weak bear market.Since the high in September 2011 the market has seen declining prices with falling volume and fallingopen interest. This suggests that the mini bear seen over the past 11 months has been a bull marketcorrection only and that when it is completed one should see the number 1 rule above take hold. Theserules generally apply best to the futures markets but can also be applied to the stock market. The onlydifference is that the stock market does not have open interest but the volume interpretations do hold true.The volume/open interest interpretation fits with Fields Elliot Wave theory as well. TC has beenpredicting that once gold breaks out over $1,700 that objectives could be up to $2,100 and even $2,500. If that holds correct that would be in Fields interpretation wave 1 up of major wave three or as he calls it thethird of a third. What would then follow could be a shallow correction of 8 to 12% if the theory holdstrue. If the market is truly on its way to $4,500 the next move could prove to be quite exciting for goldbulls. Mr. Fields track record has been quite good over the past decade so he should be paid attention to.
copyright 2012 All Rights Reserved David Chapman