Eoin Treacy's view At The Chart Seminar, we spend a considerable amount of time identifying the consistency characteristics of various trends. Having an appreciation of consistency characteristics helps one to get to know the market, it gives us an idea of how supply and demand are interacting and allows us to script what an eventual ending might look like. In articulating what the factual chart reader sees in a trend, one should be able to describe what is happening in a simple, common sense manner, so that even a blind person could develop a mental picture of the price action. For the purposes of identification, assume that I am a blind person asking the following questions in this example focusing on gold:

P&f, monthly, log scale, 10-yr weekly, 5-yr weekly and daily.

Blind Questioner:"Is it trending or ranging?"

Factual Interpreter: "Prices ranged from 1982 to 2003 in a long bear market, but the chart action has been broadly bullish since 2000 and gold has been trending powerfully since 2003."

Blind Questioner: "Is it consistent or inconsistent?"

Factual Interpreter: "Consistent but there are some inconsistencies."

Blind Questioner: "What are the consistency characteristics?"

Factual Interpreter: "There is a progression of higher major reaction lows, at $330, $410, $545 and $700.

"There is a progression of higher rally highs near $400, $730, $1000 and $1200.

"An 8-year step sequence uptrend is evident."

Blind Questioner: "Tell be more about the step sequence, are the steps one above another or do they dip into one another?"

Factual Interpreter: "Gold rallied to more than $400 by early 2004 and ranged mostly above that level until Q3 2005. It then accelerated out of the range and rallied to approximately $730 by May 2006.

"The subsequent reaction found support above the previous range in June 2006 and gold moved into another lengthy range. It broke upwards again in September 2007 and rallied to just over $1000 by March 2008.

"The following reaction found support in the region of the previous high near $730 but did dip below that level briefly. It then rallied quickly back to test the high and eventually broke upwards in September 2009 and rallied to its recent peak just above $1200."

Blind Questioner: "What can you say about the size and duration of the steps?"

Factual Interpreter: "There have been three relatively well defined ranging consolidations in the course of the bull advance. The size of the reactions has differed. The first was approximately $85 from top to bottom, the second was $188 and the third was $350.

"The length of time they have spent ranging has been broadly similar. The ranges have been 19-months, 18-months and 19-months in duration.
Upward breaks from these major consolidations occurred in September 2005, 2007 and 2009.

"Important peaks were hit in April 2004, May 2006 and March 2008."

Blind Questioner: "Can you tell me anything about the advances?

Factual Interpreter: "Each ranging consolidation has been completed by an emphatic upward break and has been followed by an acceleration higher. The late 2005 and early 2006 breakout was of approximately $275. The late 2007 and early 2008 breakout was of approximately $320. The advance from September 2009 has so far been approximately $200.

"Both of the first two breakouts were punctuated by somewhat larger reactions near the midpoint of the advance."

Blind Questioner: "What about the commonality of gold with the other precious metals?"

Factual Interpreter: "On each of gold's important peaks, silver has also posted an accelerated peak."

Blind Questioner: "Let me summarise what gold's consistency characteristics are:

"A progression of higher major reaction lows.
A progression of higher highs
A series of approximately 18-month consolidations
The large trading ranges have been completed with emphatic upward breaks of between $200 and $300.
Important upward breaks tend to occur in September.
Major peaks have been reached late in the 1st or in the 2nd quarter.
The major advances have been punctuated by the somewhat larger reactions about midway through the advances.

"The largest inconsistency is the size of the 18-month consolidations.

"Does anything in these lists of consistencies and inconsistencies imply that the relationship between supply and demand has changed?"

Factual Interpreter: "No."

Blind Questioner: "If nothing has occurred to change the multi-year dominance of demand over supply we can reasonably expect the current pattern of acceleration followed by 18-month consolidations to continue.

"Since we now know the shape of the interaction between supply and demand, any substantial change to the major consistency characteristics would be indicative of a change to this relationship and would be cause for reassessment of the secular bull hypothesis. Nothing has yet happened question the bullish view."