Friday, July 31, 2015
This is going to be a quick update as my impulse wave was broken rather ruthlessly. The VIX still has two open gaps above so it can rally and rise from the dead when you least expect it to.
Right now if VIX made another lower low than that would not surprise me, but it would also be getting ready for another try at a bullish run. Any bullish run in the VIX is bearish for stocks and I would love to see the VIX eventually blast past that $20 price level.
I am going to show you three charts and the above chart is the Sept crude oil contract month and it shows that crude oil has broken well below record lows and I would have to count this as some type of a 4th wave. The problem is that this pattern is far bigger than any wave 1-2 I can match up with.
If I switch this same chart to a weekly type chart then this new low goes away and crude oil becomes more like the crude oil cash chart.
Stockcharts.com which is a very popular site shows us the cash crude oil charts or spot prices.
I never count waves in candlestick but this crude oil cash chart has "not" dropped to new record lows yet.
This is also the cash futures crude oil chart and it has clearly not dropped to new record lows this time as well. I can fit a wave 1 top heading down to a wave 2 bottom and everything would be great.
I even have several open gaps above which make crude oil very bullish. The gold/oil ratio is also still at record lows so that also supports longer range higher WTI oil prices.
It is always best to wait until the start of next month to see if the weekly and monthly charts update.
During the 2008 crash there was a huge spike that did show up on the charts but slowly disappeared over time. Add the fact that the crude oil crash was extremely steep we have the makings of an "ABC" crash for the 2008 time period. Technically speaking from my Elliott Wave Perspective this single "ABC" crash should get completely retraced.
From the 2011 peak the pattern that developed was a sideways pattern which also makes it part of another "ABC" crash. Technically this 2011 peak should also get completely retraced. This is not rocket science if the 2008 crash contained an "ABC" pattern.
On the intraday charts crude oil has lost much of its gains already but next week should tell us more, or even later on today.
The gold price was pushed down to about the maximum for a potential correction and then it reversed. Something spooked the bears as much of this rally will be short covering.
Lets hope not as I would like to see more upside to come. This would mean that the $1080 price level must hold, but any decline down to that level would not kill the wave count. Gold spiked about $22 in a very short time so we have to see if there is more to come. Many times if a new trend is established it can run at least a month or so before another reversal hits.
At the mid July bottom to now gold has established a higher low but we are very early in any potential longer bullish move.
Even with this will spike the gold/oil ratio is at about 22:1
This morning the pages read on this blog has spike dramatically, more than normal, in other words and entire days pages read has already been achieved well before 8 AM PST. (680 pages read)
If you have been reading my pages for a few months please show your support and donate some monies via the PayPal button on the right side of my blog. Billing Information - PayPal
If you were wondering what caused the spike in gold and oil then just look at the US dollar as it plunged overnight. I have been working a triangle with the "B" wave being the expanded wave but I don't think I can push that much longer.
Since the March the 16th the US dollars wave structure instant started to overlap on critical waves and therefore I still have to work it as a correction. I still have several patterns I can work with as the US dollar could be heading up on a diagonal 5th wave or it's heading down much further with the start of a 1-2, 1-2 count.
Any triangle pattern would have a bottom to it but we know how tricky that is to forecast. Most of the time trend lines mean nothing but they are good to highlight the area that I am working.
By the time we are well into August they we should know more as many wave counts never last more than a month. The only way they last longer is because we may be too lazy to change them as we have to constantly go back in time to review.
Thursday, July 30, 2015
I was surprised when I read about the HUI now being tracked with a futures contract. They are just starting so only the cash chart is usable at this time. Does it mean I can come up with a better fitting wave count, no as it takes a long time to try different combinations.
At this time the HUI bear market looks like it contains a 5 wave impulse decline, but this is not confirmed after the 2011 top as we have overlapping waves. What we do have, is a 3 wave looking pattern where the HUI drops to new record lows. These are diagonal related and I can even get the pattern into an ending diagonal.
Either way gold stocks can rally dramatically and still be in a bear market, and the only way to tell the difference is by looking at the wave structure as they rally. I have two major gaps open with my top gap being around 300.
By showing you an expanded top for the HUI, I am also saying that eventually the HUI will retrace its entire bear market and create a new record high.
When this will happen is a flip of the coin as all this could drag out all summer and frustrate all the forecasters. The 2000 low and then the 2008 low was far easier to see coming than the low this time around.
The XAU is different as it was the home of the hedged gold miners back then and so far it has made a complete retracement of its bull market. The HUI does not have to do this as it has fundamentally different component companies.
I talked about the gold/HUI ratio with a friend and today we were at about a 10:1 ratio. This would be to the cheaper side of things when using gold as money. When calculating ratios I use gold as the money otherwise we would not get meaningful consistent numbers. The gold price will always move and adjust itself to the velocity of money.
Right now stock mania still in affect has decimated gold stocks. Some may find this as a conspiracy theory but I assure you stock manias will always happen and stocks will always provide direct competition.
We have had many years when gold stocks traveled with the general stock market like in 2009 to 2011.
It has been 7 days ago since gold made its last record low and hopefully this will hold as gold seems to be making a correction. In other words gold could be getting ready for another move up as a "C" wave decline should come to an end.
If any rally turns into a sharp move and it starts to slow down at my top trend line then this would turn gold into a potential zigzag and another down cycle would have to happen.
Wednesday, July 29, 2015
One thing I can say and that is that the pattern we are staring at is not an impulse by any stretch of our Elliott Wave thinking minds. Every critical wave overlaps at the wrong time, so there is only one choice and that is I have to assume the decline so far is part of the bull market still correcting or we are heading into a potential leading wave structure. Either way the entire June/July bearish phase will eventually all get retraced, even if the DJIA dropped like 1000 points tomorrow.
The knowledge that, "ABC" bounces are actually telling us, very few indicators out today can give you a clue that a 100% retracement is coming. Of course this is all specific to the largest degree we are working in.
There is a good chance that an impulse wave is in progress but only a small correction would happen.
At this stage of the game we have to keep an open mind as stocks can change directions very quickly.
Crude oil pipelines are being blown up and Obama has been ignoring all the terrorist attacks on US soil. All this adds to the pessimism and increases the risk going forward and stocks will have no choice but to go lower.
It is now a popular pastime to see the mass media come up with lower and lower gold price forecasts.
How do they know? They sure could not or did not forecast these low prices back in early 2011. Most of the experts never even saw the gold bear market coming and now we are supposed to believe them that they know where the real bottom is going to be. Some forecasts have mentioned $800 and no a recent forecast has mentioned $350.
One thing was clear back in early 2011 and that was that they would not have dared make that same call back then.
Another point that needs mentioning is when and if these low targets get hit, will that be the end of the gold bear market, and will they have the confidence to forecast $2000 gold? I am sure we will get the normal $10,000 to $25,000 gold price forecasts. Chances are good they will say that gold will "never" go above $800 again.
Where do you think gold stock indices are going to end up, with gold still to fall to $700 or $350?
Where will the crude oil price be if gold hits just $700? Apply the recent gold/oil ratio say 23:1 and we are looking at close to a $30 crude oil price. Crude oil would only have to fall about $16 and we would have the same ratio as today.
Forecasting a gold price without considering the gold/oil ratio is just an exercise in futility. Of course through this entire time that gold is still going to crash over $350, the US dollar must rally!
Below I have applied a few big trend lines with support lines drawn in where others are saying that gold is still going to fall down to.
Gold is already so bearish that it is laughable and smart people will buy gold at these low prices. If we were to call the gold bull market complete in 2011 then we have to look at the potential that wave three in Cycle degree has completed. The gold contrarians will be screaming as they know that gold is already a record low sentiment.
What they don't understand is that we could get a huge bounce sending gold right back up 50-60% before it comes crashing down again. I am showing a potential small impulse (down) bear market but that is very debatable.
Since the 2011 peak and gold contains any part of an "ABC" decline then I am very confident that this "ABC" will be completely retraced of the next few years. This would take an extremely long time to play out.
Right now to many diagonal type patterns are being played out so something should happen to surprise us. The stock market and the US dollar bull market may look like it is going to keep going in the same direction but things can turn very quickly in todays world.
My cycle degree wave three top is not confirmed by any means as I would expect gold to show bigger with faster drops a long time ago. Are all the banks still going to hold gold when and if it hits $700?
Gold just repealed up from the $1090 price level still keeping my "ABC" wave count alive.
If the 2011 gold peak is still an Intermediate wave three top then the entire gold bull market becomes very distorted. In other words if gold still lands at say $1050 then we would have to add another $1660 dollars to the gold price and we would end up with a $2700 gold price. Many times 5th waves get extended but we already have wave three extended. Thats not a problem but two of the three motive waves end up being even.
Tuesday, July 28, 2015
The VIX has blasted upward but I think we are in a potential 4th wave as the VIX dips down to close a recent gap. The VIX still has two open gaps above to fill and we have to wait and see if these get filled.
As the VIX rallied the SP500 and other indices imploded. Maybe they were sympathetic to the nose dive the Shanghai index took or some other strange reason like any country and it's financial problems. With all the problems countries face we would come up with a very big list as all dictatorships and socialist countries all have taken on too much debt and they don't want to pay it back. Any democratic country will also implode if its debts are too large.
Countries that own US debt can also bring the US to it's knees (China) but many Republicans already see this in this 2016 election cycle. It may sound silly to talk about US elections but I strongly suggest that you stay informed as the 2016 elections are going to be a big deal for America and the next generation to come.
Going back to the 1990 peak the Nikkei topped out a bit over 38,000. Now at 20,000 the Nikkei has retraced well over 50%, but is its bear market finished? The starting pattern after the 2009 bottom does not make a high quality impulse at all so I would have to count the Nikkei like it was still in a big bear market rally. A potential "D" wave.
This is what deflation can look like in stocks but this would not happen if Japan opened the doors for immigration. Chances are slim that this is going to happen. Japan also has a huge aging population and until the younger group dominates Japan may not climb out of its problems. They are inflating which is destroying the older generation who no longer have savings left.
Every country in the world is on this inflation kick which incase you have not noticed destroys all the savers in the world. Inflation is a tax by any definition and only the very rich can play that game and benefit from it. I think Janet Yellen is misguided if she is going to raise rates as I am sure she will have to lower them shortly after or she will toss the whole idea.
The Nikkei would have to crash and make new record lows below the 2008 lows if this were to be a false rally.
Gold has been taken a beating from the bears up to the bottom of the 23d. After that gold has started to rally and I am sure it will bring back some "hope" that gold will rally much further. After all there is so much chaos in world today it would be logic thinking that gold should rally.
Well, markets do not move on logical thinking, they move because they are already going down or are already going up. Emotional bandwagon jumping is the main sport and if gold continues to rally all the bears will turn into instant buyers as they could be in a bear trap. Physical bear traps or financial bear traps they both hurt, but they hurt in different ways.
At this time there is no way of knowing if an impulse wave has started to form as 4th waves can act containing zigzags which uses impulse waves as part of its pattern. If this gold pattern drops like a rock and we end up testing it's lows then I would have to throw in the white towel again.
We are getting closer to the end of the month from which we can have major reversals, so all is not lost just yet.
It may sound irrational but the ramping up of the election contenders will start to shape the future until early 2017. It is when inauguration starts in the spring of 2017 is when all hell can break lose in the markets as this is when the new party in power actually takes control and it usually screws things up. Personally I hope the Democrats get kicked out as Obama is worse than Jimmy Carter was back in the late 70's.
Since the 21st of July the US dollar is still heading down, but I already have an extra wave that does not fit a great impulse wave. This may have to be changed to a diagonal wave if the US dollar starts to deviate from a high quality impulse wave. Remember, that impulse waves can go up or down and when they go down they are part of a bigger corrective wave structure.
Three wave structures in a row roughly the same physical size is also a clue something may be amiss.
Also if a 7th wave forms this also would be a corrective move and a 100% retracement would also have to happen. At this point it's a lot of speculation but they are steps I go through when I start counting after any turn.
Any further moves down in the US dollar should help boast gold and gold stocks as physical gold buying will not do it.
Monday, July 27, 2015
In the last few days I have spent hours in looking over my large degree wave counts trying all sorts of different combinations. I can do more scenarios and do them faster by hand than I can when I do them in an editor.
Did I come up with a better fitting wave count? No nothing that I can sink my teeth into. The big problem is that I am not satisfied with any potential big gold wave count even though we are seeing record bearish mood lows in gold and in gold stock indices like the XAU and other ETFs.
The one wave count I can come up with is a potential "A" wave decline but at a much higher degree. In other words Cycle degree wave 3 has completed at the 2011 peak and I would need a Primary degree correction in gold.
Every start to a new run and I see a potential impulse forming I track it one section at a time so that later on when the wave structures do get bigger I know what I had. Right now it seems that a good impulse has started to form but it is so small that I started with Miniscule and Submicro wave degrees.
I show a "B" wave bottom in Intermediate degree but that is part of a potential expanded triangle in Minor degree. If we are going to get a stronger run then my top trend line will not hold. With a potential "C" wave in action gold should only go up from these price levels leaving very little room to wiggle down. Coming up to the end of the month also has the potential for gold to make a turning.
The Shanghai index imploded again which is no surprise. It is also affecting US stocks as they continued their slumps early this morning.
I am working the SHCOMP as a potential 5 waves down in Minor degree and I need much more evidence to keep this wave count alive. This impulse has a long way to go and I will toss it as soon as the impulse pattern starts to act differently then what an impulse pattern should.
Sunday, July 26, 2015
By the time Friday was finished the VIX popped up very nicely which could be a wave three top. If I were to count out an extended wave three then I would turn my wave three into a wave one but one degree lower.
Most of the indices also ended up with a spike to the downside on Friday so this may be an indicator a surprise rally may happen in the first 2-3 days next week. There is very little chance that I can catch any of the small counter rallies as that would be the job of someone that constantly wants to feed you mindless trade setups. We don't need the EWP to setup trades as there are countless indicators in every basic tool kit to do that. Besides most people do not buy low as they only like to buy high and the best EWP setups are completely ignored by the majority.
Silver has always been a real challenge in trying to find good fitting wave counts. The only way to find a better fit is to constantly review the past and start with a different wave count. An older one may start to fit better again so regurgitating a triangle is always and option.
I only use 5 core waves in all my counting and with corrective waves I always have a choice of 3 different types specific to the degree I am working in. If my 1980 peak was a wave 3 in Primary degree then all my other degrees must all be one degree or more lower.
I could never fit the 1990s rally into the start of an impulse wave even though a 13 year silver bear market ended in 1993. After that date I had higher lows which turned into a wild bull market with extreme silver bullish readings of 96% bulls.
For now I am going to run a triangle since the 1980 top with a potential "E" running "E" wave for the 2001 bottom. Five waves up would complete a diagonal 5th wave and 2011 would now be a Cycle degree wave 3 top. There is nothing to stop silver from a major bear market rally as a "B" wave but I don't think we would get another triangle. Another zigzag or even an expanded flat could happen.
If we were to get an expanded pattern then silver would clear the 2011 peak one more time.
Silver has retraced a lot further than gold has but I think a big rally still needs to be played out. Since I am showing a running part of a triangle any cycle degree 4th wave bottom does not need to go very low.
I am only going to run this wave three in Cycle degree until it does not fit anymore and until we have a clear rally in progress. If any rally in progress becomes choppy quickly then a "B" wave rally would be the first on my list.
At the top in 2011 everybody was extremely bullish on silver but many contrarians new that silver was going to implode as they have seen this all happen before.
At the extremes fundamentals or funny-mentals will always tell you the wrong things and silver in 2011 was no exception.
Saturday, July 25, 2015
Even when gold finished its 2011 peak the mainstream experts were still extremely bullish on gold. Wild $10,000 forecasts for gold were not uncommon and by the time the sentiment reports came out we were breaking records that have not been matched in decades. The amount of bulls present at that time were well into the mid 90s% Silver peaked at 96% bulls.
Back in 1980 the crazy forecasters were calling for $2000 gold. 30 years later this still has not been achieved.
In 1999 the opposite was true as the experts all hated gold with a passion. They hated gold so much that only 14% bulls were present at that time. Banks and countries could not auction their gold off fast enough as the media covered every gold bullion sold. Everybody was selling gold short and they had no clue they were in a gold bear trap.
The biggest reason I like to mention these extremes as it is nothing new but the majority will always have the tendency to forget it as they refuse to believe that it can happen again.
$10,000 gold would translate to about a $1000 oil price. Do you think the world is going to run smoothly when that happens or are they all going to protest on the streets and tear the White House down?
Over 4 years later everybody hates gold again but at a much different gold price and is still perceived to be falling. Late Friday it looks like gold started into an impulse type pattern so I will start a new impulse wave count until it to falls apart. Like many other gold bear market in history, they all ended up losing out to stocks as stocks will always compete with gold on a long term basis.
I call this stock mania, and one of the last biggest mania stock moves was in the late mid 1990s to about 2000. Of course gold was crushed in price at that time and everybody blamed the gold price decline on manipulation. They must be good manipulators as they have to create Elliott Waves during that entire time.
My wave three in intermediate degree is still not confirmed by any means but I will keep working it as a triangle for now. Hopefully we will get a smaller "D" wave rally that at a minimum would retrace all of the 2013 peaks.
Right now I can get the present decline into a three wave pattern which indicates a potential diagonal was in progress. I have talked about the $1050 gold price before but this is now irrelevant as we are so close already.
Friday, July 24, 2015
The rally in SHCOMP index sure seems like it is completing a potential zigzag. Length wise it can add a bit more but if a zigzag is real then it should break to the downside soon.
There is very little room to move to maintain the zigzag as if the Shanghai traveled much higher then a bigger impulse would be forming.
This may not interest too many people but it sure is important for anyone that is an Elliott Wave analyst. How we see the waves has huge implications and I think the problem comes from the futures charts with crude oil being one of the worst. I have circled the specific area I am talking about which recently has become the most obvious problem.
Below is the Sept crude oil a few days ago and what they call a weekly chart.
Below is the Sept crude oil a few days ago and what they call a weekly chart.
We can see that crude oil on this chart has clearly not traveled to new lows but is still far away from doing so. In other words it can still be counted out as a potential wave 1-2.
If I take the same chart but use the cash chart it will be the same so the cash chart confirms this Sept weekly chart
I pulled this chart from stockcharts.com which they call the spot oil price or the EOD price. Many wave counters use this site and this cash or spot crude oil price confirms my weekly chart, but it sure does not confirm my daily charts.
With a simple click of the mouse I can change to a daily chart, but when I do that my entire wave structure gets changed as well. Here the Sept daily contract has created a downside breakout already, which is confirmed by the Dec daily chart as well.
In short it is pretty hard to come up with great wave counts with such distortions between two sets of time frames. It will be interesting to see if the cash patterns catch up to the Sept and Dec patterns!
Here is a recent August crude oil daily contract where it clearly shows crude oil has traveled to new bear market record lows. Very few analysts talk about this as they are working from the cash crude oil charts.
Our gold/oil ratio is about 22.45:1 so that is not distorted by any means.
Those analysts that use the cash charts for crude oil do not see these new record lows, which obviously distorts any crude oil wave counts.
I always get a bit excited when I think I am going to get an impulse wave structure. They are so rare and usually turn out to be false alarms. Trying to catch them early before they fall apart is the trick. In this case the VIX has two big gaps above present prices as one big gap just got filled.
The VIX is one giant diagonal with waves constantly overlapping each other and it is rare when they don't overlap. My top may not be an expanded pattern as that would already suggest a fake run for the VIX, but an "E" wave top would work.
If the bigger stock bearish mood is in play then I would expect the VIX to clear all price levels we see on this intraday chart, which would be above $20.
I have stated my count as an impulse but they can get destroyed very quickly. Destroy one wave count and it forces you to look for a better fitting one. If the US dollar makes a very sharp decline and stops around the 96 price level then we would be in a position to add on one more complete set of impulse waves. This would be devastating for gold and gold stocks, but it is the least likely scenario it would entertain.
We need the US dollar to decline and establish a few short term record lows to that 92-93 price level. The US dollar could also have finished a wave two top so this would help gold and gold stocks rally from their depressed state.
So far stocks are still heading south so the US dollar can head south right along with them.
This is the inverse to the stock mania that I have been talking about.
These types of patterns can always fool us, but it looks pretty if a potential 4th wave was to develop. Gold can't go past $1165 for a 4th wave peak but if this were another "ABC" decline then $1230 or higher would be my target.
This last little decline also looks like an ending diagonal so that would fit well with any "ABC" decline. Whenever I expect a rally and this rally turns out to be very sluggish with overlapping waves then we are looking at another bearish rally. It's not always that easy to tell at any beginning because zigzags distort this.
Thursday, July 23, 2015
Apples stock price has been hitting hard up against that $135 price level which I do admit is a perfect setup for and upside breakout. At about the $120 price level Apple hit a long term bullish trend line. Investors are stuck between a rock and a hard place as analysts say this is a buying moment. Oh really? They will never tell you what the right price is as they have no idea themselves.
They also think that Apple will still go to the moon as the rest of the stock market crashes! This has happened many times before and Apple will not act like a safe haven stock. They tried that trick with Nortel back in 2000.
It is no secret that the mainstream analysts give out buy recommendations just before the stock implodes as I have documented this many times on my pre 2013 posts.
I looked and in the last 6 months no insider purchase of Apple stock has been made but only sales have been initiated, about 1.5 million shares have been sold by insiders.
If insiders can't even buy their own stock why should you? Al Gore is the 5th largest share holder and he has not announced any purchases of Apple stock.
Since the July 2013 bottom at $55, Apples chart has been filled with gaps and I count about 4 major gaps that all will get closed over time. Buying on the dips works great in a bull market but dips in a bull market have a notorious habit of turning into bear markets.
There is no doubt in my mind that our solar cycles have a huge impact on all investments on earth, with the commodities section being one of those being impacted. I am using gold as an example, as at times it gets repelled at the solar cycle peaks alternating with being attracted to solar cycle peaks.
Gold crashed briefly into the 2008-2009 solar cycle bottom but then roared back up to the 2011 peak, which is the first peak in solar cycle #24. At the 1980 peak, gold was repealed to the downside.
During the depression gold prices were distorted as golds price was fixed as the government of the day desperately wanted (needed) inflation. Silver had no such restrictions and was in a huge 13 year bear market that did not end until 1932. (1919-1932) Silver also had another 13 year bear market from 1980 to 1993.
The reason I mention this is because we are being told that gold will protect you from deflation. This is total bullshit as no other commodity confirmed this as they all smashed bottoms in 1932. If gold is going to implode it will act just like any other deflationary times and we have already seen several examples of this. The 1996-2000 gold decline was a prime example when gold did not protect you from deflation. 2011-2015 is another recent example.
John Hampson at solarcycles.net does great work and covers solar cycles in much more detail than I do.
Gold stocks keep falling even thought some indices are approaching 2000 lows. The XAU is only about 8 points away from doing a complete bull market retracement. GDXJ is a relatively young ETF but has already been inversely split so I don't expect that to happen again.
At this time the GDXJ has crossed to new lows with a 3 wave pattern and there is the possibility for a rally to my top trend line before it head south one more time. Any wedge like pattern is very bullish as the asset class is being compressed. Usually a violent reaction happens, but not before this is completely played out. It would be nice to see an ending diagonal to form with the 4th and 5th waves still to come.
Where I have my wave 1-2 can also support an "ABC" correction part of the "E" wave decline.
There are a minimum of three sets of open gaps above present prices, near the $55 and $135 price levels. One just opened at the $21 price level.
When I read about how much Google jumped in price, I had to take a look!
Low and behold I see one of the biggest gaps going up. This entire gap will get closed and the only question is how long will it take to close it. There is another open gap lower still so we have at least two open gaps creating a pull to the downside.
I am showing you a 1-2 wave count which still can work as a potential zigzag decline. It makes a big difference when any asset class crosses to new lows in a 5 wave sequence or a three wave sequence. Many wave analysts don't care but from my perspective this is a very important point I stress.
If a 4th wave rally happens then it will run into resistance somewhere close to my top trend line, otherwise gold could rally and retrace all of May 2015. We need the general stock market and the US dollar to decline, then traders or participants will perceive gold as a safe haven and run to it. The problem with that is that fear moves rarely last or they become fakes rather quickly.
For those that thought gold could never decline the way it did, has happened many times before. It is nothing new, the only thing new about it, is that we may not clue into it before it happens. This latest stock mania started on Oct, 3, 2011. The best time to look for the end of a stock mania is when stocks and the US dollar are pointing up and gold with gold stocks pointing down. This happen last about late 2000.
This Mini Russell 2000 cash chart had its last peak in late June and so far has made one small lower low. Sure, I would love to tell you that it's all over but the crying, but I will let others tell you that.
I know how fast these moves can turn on us but I will be looking for 5 wave sequences to build or compound on top of each other. If any wave three is going to be extended then I will be looking for a 1-2, 1-2, 1-2 punch wave count, or a minimum of three sets.
Back in 2014 we had a big sideways pattern that fits well into a triangle, and triangles mean that a degree change must be initiated by a minimum one degree higher. Most of the time it's two degrees and in this case it would be a switch to Intermediate degree.
If we are heading down another big zigzag type pattern then any "A" wave decline can contain 5 waves, and we really don't know where they may stop. Either way the 2011 bottom may be a bigger support level.
At this time if I am out by one degree, then my entire Russell 2000 wave count has to be recounted. I would rather error on the side of too small of a degree than be in a bigger degree that has never been confirmed. Long term the Russell 2000 also has a very nice flat base which the DJIA and the SP500 don't have.
Wednesday, July 22, 2015
The Nasdaq is one index that has blasted to the moon leaving 4 gaps in its wake, which I numbered 1-4 going down. All these gaps will get filled, but before the ink has dried another gap has opened as the Nasdaq crashed. This is a bullish indicator.
As long as that gap remains open the Nasdaq can come back with a vengeance and close this gap before closing all the others down lower. If we are at a 4th wave then this downward spiral should hold and create yet another record high.
My bottom wave 1-2 may be part of a triangle so this could skew and new record top leaving this top gap open. Wouldn't that be joke if this gap remained open as the Nasdaq crashes back to 2011 price levels. One gap left open up high is nothing as I think we will get many more open gaps on the way down by the time any stock bear market is completed.
Many gold analysts that are calling for $16,000 gold or $25,000 gold are basing their forecasts on how gold moved in percentage terms in the 10 years from 1970 to 1980. The inflation that happened at that time was completely different, than the inflation we may think we have had since the 2000 bottom.
The economy was booming so hard that price controls were common. They were throwing money at workers just to keep the boom cycle going and by 1974 my wages doubled to a whopping $4.98 per hour! Workers got wage increases with little fighting and this translated into the economy with higher commodity prices.
Very little of that has happened since the 2000 bottom, as any inflation slipped in by other means like higher fees and higher taxes.
If all minimum wages in North America were set at $15 tomorrow than this would basically have the same inflationary effect as it did back in the 1970s. In BC there is a big battle going on to get the minimum wage raised to $15, and make no mistake as any business will just raise prices to compensate, or go out of business. I argued with a group that was petitioning for a $15 minimum wage and they say that the extra money will be spent in the economy. If they don't save any money then it is just a matter of time and they will be no further ahead than they would be at a $10.50 minimum wage.
It frustrates me when I see forecasts made about gold based on a completely different generation. These perma gold bulls forget that gold needs for the US dollar to head down in order to support higher gold prices, without stock mania being present.
Do you think that gold at a $16,000 price level will leave the crude oil price behind? If we have a 10:1 gold/oil ratio at that price level we are looking at a $1,600 per barrel oil price. At that price the world would be at a standstill, or screaming from the streets for lower gasoline prices.
Those high oil prices will never happen as there are many technologies out already where we can create oil like products from coal and from the CO2 in our atmosphere. I just don't think man is that stupid that he will just will rollover and die before they invent (adapt) some other fuel source.
Even though the herd is very bearish on gold, gold has not shown to make any pattern that would fit into a normal "ABC" pattern. I have problems fitting gold into a triangle pattern as well. Sure we have gone rather long in this bear market but price wise not nearly as deep as what I think should have happened.
In the past gold bull markets have been chopped by 50% or more, which should put gold at about the $800-$950 price level. I still have the 2011 peak as a wave three but do you know what should happen if it were? In an impulse two waves usually get extended and they have a tendency to be even in length. In other words about another $1640 move would have to happen for wave 5 in Intermediate degree once wave 4 has completed. If wave 4 were to complete at $1088 and we add $1640 to this bottom, then we should expect a gold price of about $2728. With that we would have two even legs in a great impulse 5 waves up in Intermediate degree.
Right now gold has crossed to a new low with a 3 wave pattern which usually indicates that a diagonal wave or a small triangle is in progress.
The 2000 bottom never went anywhere near a previous 4th wave bottom therefore we need to keep an open mind about taking that previous 4th wave guideline as a rule. It most certainly is not a rule but a shaky guideline at best.
The US dollar has achieved the price target I was hoping for in what looks like an inverted zigzag. Gold, and other commodity price implosions all have their links back to what the US dollar has done when compared to a basket of other world currencies.
It's not about India celebrating weddings or China buying physical gold, but it all boils down to the US dollars largest trend or when it changes its largest degree of trend. The US dollar is just 1/3 of the equation of what I call stock mania, which has happened many times before. Is stock mania going to continue if the US dollar decides to implode? I doubt it, as then investors would run into gold as a safe haven.
If the US dollar is going to make another leg up then it could compound another wave two bottom and a wave 3-4-5 bullish cycle. This would be a horror show for gold and silver and is my least likely possible event. What else is new as we are in a gold horror show already.
Either way the US looks like it made one normal "ABC" decline which if correct would have to get retraced at some future date. In the mean time the US dollar could plunge for any reason with no short term bottom in sight, so this would offer gold a big lift.
Tuesday, July 21, 2015
Any chart has the ability to fool us and this can be checked by switching from a bar mode to line mode. The above chart is in bar mode showing that gold crashed to $1088. In line mode it never reached that number but the second number was the low point. This creates dramatically different wave counts between bar mode and line/area mode.
Most all commodities come from futures charts so I think the problem is everywhere. As soon as gold rallied from the $1088 price level it produced a 3 wave structure so this added to the fact that gold was heading lower. I will use the secondary low to see if an Impulse is about to form. Only an Impulse can compound into another Impulse giving the potential for any asset class to move much higher. Of course it is all specific to the degree we think we are working in. Gold has just dipped below the $1100 price level again.
In this case the $1095 price level would have to hold. Gold stocks crossed to new lows in a 3 wave fashion and so did gold at this time. This all indicates a potential diagonal is in progress.
No expert ever saw that the 2011 peak and subsequent bear market could go as ow as it has. Of course conspiracy theories abound every time gold stocks go down. When we look back to the mid 1970s we can see this action has happened many times before.
The only difference is the rally from 2000 to early 2008 was much bigger and very choppy. The only index that was out of place was the HUI which all the wave counters loved. Back in 2000 everybody hate the XAU and ABX as they were so choppy they had no clue in what to do with it.
At this time the BGMI is only 200 points away from a complete 100% retracement. The XAU is only 10 points away as for ABX it has already made a complete 100% retracement. I am sure many of the little gold stocks have also made a complete 100% retracement.
Can the BGMI make a truncated "E" wave, or a running triangle "E" wave? Sure it can but we have to wait and see if it actually does this.
Headlines keep saying that there is no reason to buy gold but the BGMI is just about approaching 30 year lows! Back in 2000 they also hated gold stocks with a passion as hedge funds were selling out at that time.
Right now I can work gold stocks as a triangle but we could get a fake "B" wave rally in Minor degree.
The VIX imploded with style leaving 3 "large"gaps in its wake. These gaps will get filled as the VIX is grovelling around record lows already. In the long run there is only one way the VIX can go and that is up! In the early July top the VIX may have created an expanded pattern, and if that is the case then the VIX will clear those wave structures before another downward correction will happen. The drop in the VIX corresponds perfectly with the rally in the SP500 and of course Apples stock price.
There is always a chance that the VIX can head down to the $10 extreme level and only time will answer that question.
This SP500 futures cash contract (SPY00) came within a few points of breaking another record creating a triple top like pattern in the process. Don't you just hate that as now we have to try many peaks to see which peak belongs still belongs to the bullish side and which peak is already to the bearish side. There was no doubt with the Nasdaq and so far no doubt in the DJIA. What corresponds well with and stock downturn is a Fibonacci date of July 21!
The US dollar also turned down with stocks but gold was indifferent to this action.
It was in late 2000 that gold stocks took off in a major bullish phase. All the experts that were very bearish back then jumped on the bandwagon and by early 2008 had turn very bullish again. Even after the 2008 crash it did not take long for all the bulls to jump back on the bullish bandwagon. Of course 2011 changed all that! All of 2011 went sideways with many overlapping waves, so this may already indicate part of an "ABC" pattern.
The XAU only has less than 10 points to crash before a complete retracement is made. Mind you right now we have a funny move down as the XAU has crossed to a new low with a three wave pattern. Gaps have also formed in this XAU and the HUI so they are bullish indicators because they will get filled on the upside swing. The problem is the three wave action to new lows, so another small fake could happen if an ending diagonal is still to play out.
ABX has also made a complete bull market retracement and all I can say is that this was all written in stone if we would have had a better understanding of overlapping waves in a bull market. Do you think anyone in 2011 would have listened? I doubt it very much as we would be considered crazy to call it.
Even though complete retracement with inverted "ABC" works on a bigger scale, we can see it happen at the smaller scale on a regular basis.
Anyone that wants to see some of my old GSC and SC degree wave counts, then if you search in the years 2010 to 2013 is where you will find the majority of them.
Sunday, July 19, 2015
This Sunday gold bottomed at about $1088, will this hold or are we going to get another 4th wave type pattern. Either way gold has come up to the bottom of my trend line which we could get a bounce from. The sideways pattern for parts of May and parts of June sure work well as part of a triangle pattern. Triangle patterns always forecast that a degree change is coming, and it is usually a least one degree higher than what I have been working.
Any rally that does happen should have a different acting pattern even if we were to travel up in a very big "B" bullish wave. All my low price targets I mentioned that should still get exceeded happened as $1145, $1170, $1132 were just a few.
All the bullish hype has been proven wrong as gold refused to play their tune. With all the inverted "ABC" waves any overlapping waves all these peaks should be retraced and exceeded, with a target of $1230 being an important one. Next the $1260 price level would give us an upside breakout from the top trend line which would help to confirm a higher degree.
It is clear to me that the stock mania is still in progress as the US dollar keeps pushing higher with stocks still joining in. It takes three asset classes to help confirm stock mania, Stocks,US dollar and gold, with two of them traveling together and gold going the opposite way.
One other main reason why gold has not performed is that the velocity of money has crashed, in other words there is lots of money around to chase gold but most of it is being hoarded.
Since 1980 the speed that money gets flipped in the economy has crashed.
This chart helps to confirm what I have mentioned many times and that is they can print all the money in the world but if it just sits there, it will have no effect on the price of gold.
This represents the cash that is in the US system. If we use the 1.4 trillion level and multiply out the amount of gold ounces the US is supposed to have, we would come up with a gold price of around $5000 per ounce. That would only happen if every cash dollar chased gold in a very short period of time.
In reality that will never happen as many would borrow and when you borrow you are also cancelling out the gold price.