We are getting a strong confirmation based on an intermediate- and long-term supply and demand basis (mean reversion) that the gold and silver markets are about to break out to the upside with the possibility of challenging the September highs by the end of 2017.
The VC PMI Automated Algorithm
We use the proprietary Variable Changing Price Momentum Indicator (VC PMI) to analyze the precious metals markets. The primary driver of the VC PMI is the principle of reversion to the mean, which is combined with a range of analytical tools including fundamental logic, wave counts, Fibonacci ratios, Gann principles, supply and demand levels, pivot points, moving averages, and momentum indicators. The science of Vedic Mathematics is used to combine these elements into a comprehensive, accurate and highly predictive trading system.
Mean-reversion trading seeks to capitalize on extreme changes in the price of a particular security or commodity, based on the assumption that it will revert to its previous state. This theory can be applied to both buying and selling, as it allows a trader to profit on unexpected upswings and buy low when an abnormal low occurs. By identifying the average price (the mean) or price equilibrium based on yesterday’s supply and demand factors, we can extrapolate the extreme above this average price and the extreme below it. When prices trade at these extreme levels it is between 90% and 95% probable that prices will revert back to the mean by the end of the trading session. I used this system to analyze the gold and silver markets.
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