Gold has been shooting straight up recently, but will it keep going? I reckon it’s time to dust off the old Fractal Dimension Index (FDI); don’t you agree? Here is a weekly GLD chart (click to enlarge):
The FDI is in the red line in the lower panel. When it drops down to the purple line, that means that prices have been moving in a straight line, which our allegedly fractal markets are not supposed to do. And sure enough, low FDI readings have corresponded to peaks on the GLD chart. (Points 1, 2, 3, 5, 6). And, as you can see at point X, the FDI is very low right now.
However, that does not mean that gold will take a plunge. It might, or it might just pull back a bit and gun higher as it did at points 1, 2, and 5. A low FDI reading only tells you that the trend is long in the tooth. It doesn’t tell you what will happen next.
Now look at points 4 and 7. A high FDI reading means that prices have been consolidating and that a breakout may be imminent. Not bad, huh?
Note: I will write more about the FDI as soon as I’m done coding it. I just have to add the alarms now.