Thursday, October 23, 2014
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Since the beginning of October the US dollar looked like it started as a great impulse but it started to fall apart rather quickly and now looks more like a triangle b wave has completed. I have always mentioned we could be in a 4th wave pattern and so far nothing has dispelled that. This also means any short play in gold should be cleaned up and a possible long position in gold would be warranted.
These types of moves even though they are very small in degree wise can wreak havoc on anybody that is playing the USD long on fundamental reasons. If the USD suffers a bear attack and creates another newer low then this could force the bears back into taking short positions. Of course that could also put the USD bears back into a bear trap situation. There is no rest for the wicked day traders once your stuck in a potential 4th wave. Not too many futures traders can handle drawdown swings like this. The Euro would also have to respond with a strong rally as Euro traders may be in a short term bull trap.
If I am wrong then the correction should be very limited as a running type triangle may have already been completed.
The world is awash with supply bordering on being a world oil glut, but that does not stop oil prices from going up but may do the exact opposite. Any lower oil prices the drillers would be shutting down and if Opec has any teeth left they will curtail production. Remember late 2008 we have more of a glut that we have now and what did oil do after that? In late 2008 crude oil crashed to $34 and during one of the worst gluts in oils history it added on $80 before it slowed down and created another long bearish phase.
The bearish phase may have come to an end on October, 16, 2014 after which it has now formed its first big higher low. Higher lows are all formed by "ABC" corrections and is the conventional description of a bull market. Contrarians that do not use the EWP look for the markets to create these patterns. All those super deflationist need crude oil and gold to keep crashing as the last thing they need is for oil to go on a super rally and break the $115 price level .
The pattern is already bigger than its corresponding wave 1-2 so it makes sense to start into my impulsive wave count. The markets will prove me wrong when I no longer can keep the impulse wave count alive as it will fall apart very quickly. This would start to happen at the $85.50 price level. The gold/oil ratio is about 15:1 which is a bit above normal.
I started my first wave, one degree lower than my entire count that I eventually will need and that would work even if crude oil goes back up to $160.
Some readers are searching, " is Elliott Wave Theory the holy grail" and I would have to say it is definitely not the holy grail. I can give many reasons why I think that and one main reason is that EWP is a complete description how markets behave and markets always behave contrary to the herd.
Modern EWP is also a promotion of one single wave degree which is GSC degree. Since the little blue book has been published EWI has never wavered from GSC degree wave counts and has been pushing a deflationary depression for decades. But it has never arrived and I doubt it will. Sure we may see serious recessions but by the time they figure a recession is here it will already be over and the next bullish phase would be well on its way.
Since 2000 the use of the EWP has exploded as the internet spread its use far and wide. But EWP works best as a contrarian tool as you would buy low and sell high with the wave structures.
There are not that many true contrarian investors out there as 2009 clearly confirmed. Where were all the Elliott Wave bulls in 2009? Sure some closed off their shorts but that was far to late as all the real contrarians (insiders) were already buying their own stocks back. The majority of wave counters should have been screaming, "buy stocks" but no, the majority were expecting another leg down.
The big problem with EWP is that we are all working a degree that is far too high by a large magnitude and therefore we miss bull markets that never should have been missed.
Calling for bull market when something has crashed also puts us into the crazy category, it's far worse calling for a crash when everybody is bullish. The secret to EWP is knowing your "ABCs" and a clear imprint in your mind about what an extended wave three is supposed to look like and how it is drawn out.
I am pushing my luck every time I post an intraday chart as these reversals can happen so fast, or they can be very small and keep right on going. Any correction should not plunge all that deep even with wide open gaps below. If the markets started going sideways for a long period of time in a very complex move then I would be looking for a triangle. Triangles are the warning patterns that there is one more "thrust" coming, and that a bigger degree change will also be terminating after the "thrust" has completed.
Another warning pattern would be if the markets started to produce inverted, "ABCs" where 3 wave structures start to overlap each other which are diagonal patterns. The SP500 still has the look and feel, and the power to break new record highs as we have retraced about 2/3s of all losses.
The new moon is today and these can be very bearish for stocks and also very bullish for the US dollar. My bet is that stocks are dominated more by stock mania and will ignore the new moon for now.
Wednesday, October 22, 2014
I think those Elliott Wave analysts that never look at the VIX are missing out on the visual representation of human emotions which make the Elliott Waves go up and down. With this violent drop we can see how fast these emotions can swing, destroying and bearish wave counts in the process. With the late 2008 peak of the VIX it ushered in a bullish phase that no wave counter clued and was about to happen. All the super stock bears still had very bearish wave counts in 2009 and they never gave up on these wave counts for well over 5 years. Meanwhile the VIX was telling us that all the stock declines were just corrections as the VIX dished out one inverted abc after another.
The question remains if the VIX has just stopped at a strong support base and that another chance to soar to newer highs will happen. This would leave three open gaps below, which will then get filled at a future date. This is a tough call to make as the VIX can just go sideways before resuming its downward path. Only time can answer that which may only take until the end of this week.
Sure the VIX crashed but it's not at the extremes where I would like to see it as it gives too much room to go either way.
When I posted this I realized that all wave counts were too high by one degree, but the wave count remains the same as there still is the possibility of a 4th wave just being completed and we still have to suffer through a 5th wave bullish phase. Of course things can get very violent in this process but the pattern so far fits best as a correction. With my wave counts this always means a 100% retracement from where the move original started from. Another example of this happened after the July 2013 peak as the USD declined in a very choppy fashion frustrating all wave counters along the way. That decline has stopped in May 2014 and now has been completely retraced.
I never had the confidence to say this about Elliott Wave ABC patterns until I realized it is an essential part of EWP forecasting capabilities which they do not talk about in the little blue book. (EWP)
Since I show a bigger "ABC" bullish phase, then this is already telling me that this entire rally in this daily chart will get retraced. In other words the USD should break the 79 support level in due time.
This USD bubble will come to an end but we may have to see one more upside move before this can happen.
Gold has been on the decline as stocks have made a huge rebound and this is stock mania at work but on a smaller scale. If there is one more bounce left in gold then I would be pushing my luck in saying so but wild moves do happen in reverse to the trend. Every dip that gold created on the way up would only supply short term support if gold is going to resume its 5th wave heading down.
It's the US dollar that is creating the headwinds for gold and other commodities but it also supplies good opportunities for the smart contrarian to build on their gold stock portfolios. They buy gold stocks in small increments with GTC orders already in place which always guarantees them to get the lowest gold stock prices. The majority jump on the bandwagon once they think it has left the station so they are always buying high. When they find out they were wrong they bail out in a panic and pass the low price of to the contrarians.
I am very confident that eventually we will see the end to this 3+ year bear market in gold and then every correction will be an "ABC" pattern of some type. It is all these "ABC" patterns that create the higher lows which is the conventional definition of a bull market.
When all those "ABCs" start to turn into inverted "ABCs" then this is a sign that the bull market will come to an end.
The drop in the DJIA intraday charts could have run its course and we should return to the bullish trend shortly. The VIX only made a short rally which looks like the VIX has much more downside to go. None of the tree open gaps in the VIX have been closed, but two new ones have opened up on the way down. This only suggests that the VIX can see new highs at a later date meaning we will see newer lows with the DJIA at a later date as well.
Tuesday, October 21, 2014
If you have to ask if you should buy into gold stocks then you are not going back far enough or you have only a short term horizon. Yes, there may be one more small leg down but contrarians will have their buy orders down there, while the emotional traders will be selling screaming, " downside breakout". It's not like it hasn't' happen before as it happened in late 2000, late 2008 and maybe it will happen again later this year. It would be sic to see the majority sell out again just before the markets turn and head north.
My wave counts may not be perfect with the HUI but if the entire pattern is an expanded flat then a 100% retracement in the HUI is very real some time in the future. The choppiness of the decline also helps with that assessment so it's not all about just the wave count. If we terminate at a potential 4th wave or a potential "A" wave even then we could see a 60 or 80% net retracement of the entire decline. The only time you should sell gold stocks when insiders are also selling. Buy when insiders are starting to buy which happen mostly during the June 2013 decline.
One of the few reasons why contrarian buying makes no sense is because of the short term pain that may be involved especially if you have jumped on the bandwagon recently. The majority chase a bull market, they don't let the bear market come to them. Contrarians will have many GTC orders open below present HUI prices so they are guaranteed to buy low and will never get caught buying high!
The True Contrarian is an expert at this and he has the cash reserves which allows him to do this.
You can scroll down to his holdings and you can see he is heavy into the metal gold stocks and other commodities so you don't want to be bearish when he is loaded up for the bull market when it comes.
If you are selling in a panic you are selling to the contrarians that understand to buy low and sell high is the name of the game.
The time to sell is when he unloads all his commodity assets and starts to turn bearish on gold stocks.
Those that follow him via his newsletter, know that buy orders have been triggered in the last few weeks or so. My friend Andy.B does the same thing as he manages other peoples cash accounts as well.
This is a Canadian stock which works more like a fund as they payout dividends on a monthly basis. At this time it shows a return of over 16% on a yearly basis. PME may also make another bear market low but if your getting dividends the pain is mitigated.
Gold stocks are already in oversold territory and I am sure some more downside may come but this always happens to shake out the investors that should not be there in the first place. You can figure this out when you calculate your net cash to asset ratio. There is a big difference in fear when you bet 10% of your money or you are betting 80% of your cash money. Contrarians always make sure they have lots of cash in reserves so when a new low comes along their GTC orders can get triggered.
By doing it this way it takes very little for the markets to rebound before they are in the green. By the time the majority jump on the bandwagon contrarians are mostly in the green already.
The SP500 surged upward triggering all the protective buy stops along the way. Of course at the same time all the sell stops moved back up loading up sell orders below present prices. One miscue and the sell orders will get triggered sending the markets back down where they came form. I have a wave count of 7 waves at this time so another two waves would have to form if this rally has higher aspirations. I am giving this a potential wave 2 wave count, so if the impending correction starts to fall short then I have to quickly adjust.
So far the SP500 has retraced a bit more than 60% of its net decline which is about average for a wave 2. All wave counts are on the table as even this rally could be a "B" wave top. The pros know how to trigger stops that the majority use and you can be assured that the majority of protective sell orders are moved up tight. Any downward move can cause a cascade of sell orders to get hit and it would be pretty hard to stop until we get into another oversold condition.
At 1910 would be the first price level that may see support so we will have to watch this when the SP500 gets close.
Right now in the DJIA intraday charts I have a wave count of 7 with a little open gap below. A run of 7 means it's a correction so in order for the run to keep going we have to have a correction. This correction may take us down to the 16,300 price level, and any further then that would force a bigger degree review. Like a wave 2 just completed? This was a very violent move suggesting that many buy stops got triggered. The SP500 made more of a violent move as the VIX also crashed leaving two open gaps it its wake.
Most of the wave counts coming from any wave analyst are always wrong, the difference is in how fast they are in catching their errors and what type of plan they have in place to fixing these problem.
In any Cycle degree pattern I like to make sure I eventually catch all Minor degree turnings, but with crude oil we are down to 4 degrees below Minor degree. Something is bound to go wrong at these small degree levels.
I would love to see this oil decline already completed but I will keep my options open just in case we are not. Crude oil may end up making one more bear market low before it finds a solid bottom. The US dollar is still heading up but it seems to be struggling as it travels along its way.
I have to review my USD wave count as it is not in a zigzag anymore? Every time any Minor degree wave count does not come in close enough then it's time for a review.
Monday, October 20, 2014
The fact that gold still can be in a bearish rally is how gold crossed to a new low in early Oct. There was nothing clean about that crossing so I will keep working gold as a bearish rally until it tells me otherwise. $1255-$1260 would start to push the maximum I can have, with $1280 being the maximum. The USD has one more rally left to go from which it could top out at a wave 4 top, but gold will have to suffer some more down side while the US dollar plays that scenario out.
This is also when most gold investors will get very depressed as it could also kick in bank selling, or stories of banks selling gold. Of course companies that control the GLD will be selling gold but they will be buying it all back once the gold market bottoms. We could see a $100 or more drop in the price of gold during this time but I believe it will terminate at a 4th wave bottom in Intermediate degree.
If this all becomes true then gold will start to behave radically different as it will keep making "ABC" corrections and not stop. Gold should pass all old highs and maybe even approach $2000 or more. I would be pushing my luck if I said gold can still hit $2225. Sure I am looking ahead into the future but that is what Elliott Wave is all about as anything above $2300 gold would be approaching the long term top trend line again.
Even when gold approaches to a potential wave three in Cycle degree most contrarians will be selling as the subsequent gold crash will be much deeper than what we are going to get in the next few weeks. Gold can surpass old highs but old bullish readings may not, so we should be prepared for that when it happens.
Gold $5000 is a number picked out of thin air because crude oil would have to keep up to gold and if we have an average gold/oil ratio of 14 then $5000 gold would produce a $357 per barrel crude oil price. When gold was approaching that extreme top 90-95% did not see a bear market coming as the majority were all bullish on gold. The same thing happens at bottoms when the majority are bearish on gold like they were in 1999 and just recently. Mind you 4th wave bottoms in gold do not have to match the bearishness as what happened in 1999 as that was one degree different then what we are facing now.
By the end of this week we are going to approach the new moon date, which can be very bullish for the USD. It hasn't traveled down far enough to fit a zigzag so in the short term we should still see some US dollar weakness. Then we should see a USD bull attack which should push the USD towards the $89 price level, maybe reaching for the $92 price level.
This will all be bad news for gold in the short term but the good news is that I believe the USD would be terminating at an Intermediate degree 4th wave top from which the USD should decline in a 5 wave pattern creating a new record low in the process. You will be hard pressed to find the fundamental reasons for this decline now, and the old lame excuse of the printing presses running full blast will not do. This 5 wave decline will send gold soaring just when everybody has given up on gold and banks start to sell their gold holdings.
Saturday, October 18, 2014
As we get closer to the end of any month then we can also expect a potential big turning. It does not happen like clockwork but it happens enough times that we can't ignore it.
Below I have reworked the degrees with my wave counts because I think I am still too early to have crossed into Cycle degree with the 2008 bottom. This all makes my present degrees several degrees lower but my targets still ending up doing the same thing.
Always remember that when looking at my US dollar wave counts that I flip the Elliott Wave Principle upside down. This makes "all" upward bull markets always a 3 wave affair and only small degree 5 wave sequences can form, specific to my largest degree.
At the 2008 bottom, Cycle degree was too big and Primary degree makes less sense so for the time being I will work the pattern that started with the 2008 bottom as an Intermediate degree wave 3.
The largest degree 5 wave sequence I can have until the entire corrective wave is completed, is a 5 wave run in Minute degree. Making sure that my degrees are relative to each other is a mathematical sequential process that I take very seriously as that stops wave counts from drifting into a degree that we should not be in. The best part of understanding Elliott Wave is if you understand the concept of all the "ABCs" eventually getting completely retraced. This is very degree specific and in the case of the US dollar it has to be below Intermediate degree.
Since 2008 all the patterns have been choppy and erratic which makes the entire pattern very prone to complete retracement. Eventually the US dollar will create an all time new record low. To do this it has to make an Intermediate degree run heading south. You will never find the reason why by looking for fundamental news to support that forecast, because fundamentals are the result of price changes not the cause of them.
By the time they do figure out a reason and regurgitate that reason a few times, that very reason becomes irrelevant.
The majority always forecasts for a trend to continue but I always expect the markets to eventually do the exact opposite of the crowd, This has always the best chance of happening after a major run, and after a major spike has formed in daily and weekly charts.
We may have another leg up to go with the USD but then we should see a return to a bearish decline that nobody is expecting or talking about right now. Any bearish decline with the US dollar will be good for gold as you can't pry them apart no matter how much they try.
All the SC and GSC degree wave counters must keep forecasting that the USD heads north as that is what deflation is supposed to do. The deflation that we recently have had, since 2011 has crushed the gold price and even the oil price, which has happened many times before. Gold is the most sensitive metal to inflation/deflation but it is useless as an inflation hedge if we buy it too late.
Friday, October 17, 2014
Markets rebounded in dramatic fashion today. Creating a wave count without ever looking at the VIX is like beating your head up against the wall. The VIX visually displays inversely, the emotions that investors go through every time the markets go up or down. The idea that the markets are "safe" when the VIX is low has been proven wrong time and time again, yet experts keep regurgitating that theme. One reason they do this is because investors hate volatility and they only get in when volatility is at a minimum. Most all gains have already played out once the VIX is at an extreme low price.
As the VIX crashed today it opened up a big gap which strongly suggests another new high in the VIX can be created in the next week or so, considering we are within a day of the 1987 crash anniversary date. Back then it was called a Black Friday, maybe we will get a Black Tuesday?
The degree of the 5 waves that I had been working was one degree too high as the SP500 stopped at the 1820 price level. This matched another gully low back in April 2014. No retracement calculations were required as I rarely ever use them. When you travel back down the bull market, every bottom can be a turning point so why spend all that useless time with Fibonacci retracement levels. Fibonacci retracement levels do not tell you when a bull market is supposed to start or end and we can use the bottom of 2009 as an example.
Pattern recognition is far more important than any Fibonacci price level, but any pattern is strictly degree related. All the SC degree wave counters may be saying how much worse it's going to get as the markets are supposed to plunge back to the 1970s price levels. Dow 1000 has been a favourite battle cry for the GSC degree wave counters, so where do you think the SP500 is going to end up at if it were to keep up to the DOW? The SP500 would have to plunge well below 200 and that is a very conservative number as it would have to be closer to SP500 100!
All those forecasts are based on wave counts that have never been confirmed by anyone in the last 14 years. Hell they haven't even found a complete set of 5 waves in Cycle degree yet, and I bet they never will. They will never find all the Cycle degree wave counts because it's too much like work. Cosmetic wave counting is much easier as you don't have to go back 300 years to double check your work.
As long as the majority are using the WXY wave system, they are hiding the true waves in a smoke and mirror like game as sequential wave counting is thrown out the window.
Elliott Wave 5.0 "Reboot" is all about finding those 5 wave sequences in Cycle degree but that can't be done without a detailed blueprint for five waves in Cycle degree, and wave three must be the longest wave.
The SP500 may have one more leg down, where it could halt closer to the 1740 price level and this would match the level that a potential expanded wave 4 started from. If this were to come true then we could see a fast monster rally that may even take the markets to record new highs by years end.
The small sideways pattern in the USD sure seems to fit better as a small 4th wave which means there is more downside to come. 5th waves in commodities can extend dramatically but that may only be the tip of the iceberg. Even if the US dollar hits the 83.800 price gap it would not be long enough to complete a great looking zigzag. I have applied an impulsive wave count but most all my wave counts that I use are wave counts that have to be eliminated. Elliott Wave from my perspective is the process of elimination, not mindless cosmetic wave counting which we all have practiced at one time or other. A further decline in the US dollar will give us the kick that gold deserves to get, as golds bear market has been dragging on for far too long.
This market is going to move fast in both directions as this looks like it can be a bearish rally which means more downside yet to come. The VIX opened a huge down gap so the VIX can push much higher again. Even the SP500 opened a small gap on the way up, plus I have a very vertical move which dictates a correction to come or the resumption of the bigger trend.
Eventually I would like to see a complex pattern like a triangle as that would indicate a bigger degree change is coming or that we are in a 4th wave.
If there was a time for gold to do something special it should do it soon. Gold may not go to the moon but another leg up can sure happen. I did not start my blog to produce mindless trade setups but rather bigger turnings that will impact all the players who are playing in one direction.
Turnings that force the majority to completely get out of one direction and which forces them to jump onto the trend in the other direction. The emotional traders cannot handle these turnings as they don't have the trading liquidity to handle huge draw downs.
Even this counter rally will force all the XAU/USD players to jump onto the bullish bandwagon as missing out in a bullish trend is not an option. After all the trend is our friend right? Well, the bearish players sure got stabbed in the back by the gold bulls last month, and they may not be finished yet.
Let's say that gold hit a big rock bottom in early Oct as a potential 4th wave, then we should see some sort of 5 wave patterns build by compounding themselves and only producing "ABC" corrections. This would be the classic higher lows which indicates a bullish phase is in progress. Drawing trend lines too early is also too subjective and many times all trend lines do is highlight the area in discussion.
With crude oil potentially hitting a major bottom, it would fit well if gold also has hit a very strong bottom a few weeks apart.
Gold stock insiders are not selling, but I am sure they are all buying whenever they see their stocks hit new lows. They are the smart contrarians as they never buy gold stocks on an emotional basis. Yes, Mr. Andy B, you are on my smart contrarian short list. :) Gold can make bearish moves during this entire time masking the big bull market in gold yet to come. If the trend in stocks is down, traders will jump on anything that seems to be going up, as these day traders are truly the emotional bunch.
It's been about 27 years to within a day that the 1987 crash produced a Black Monday. The markets snapped back very quickly in the last few days and I have a problem with that as a mini vertical move is in the process of developing. The VIX dropped in response leaving a huge gap in its wake.
I think all bets are off as we could already be in a much bigger sell off condition. I had trouble starting to count clean waves so this move sure looks like it is a corrective move. If I am correct this market is going to move fast in both directions and it's going to be touch and go as I figure out where in an impulse pattern we are.
Thursday, October 16, 2014
Once I saw this last spike pointing straight down it sure looks like the bottom may be here already. Crude oil reached $79.20 after which it started to bounce. We will know more once the rally goes further than I expected. Once we go back to the 2011 peak and review what type of patterns we developed, we have 5 "ABC" patterns that all fit into a triangle. Since 2011 the pattern has been corrective and therefore we should get a complete retracement of this running triangle, which means crude oil has to break that $115 peak.
The $115 price would only clear a Minor degree peak, as we still have the 2008 Intermediate degree peak to retrace as well. The triangle is a warning that we have one more "thrust" to look forward to and that a major degree change will be coming once this "thrust" is finished. That peak would be a wave 3 in Cycle degree and it does not have to hit $200. Even the smallest price level past the 2008 peak of $147 would do.
The best Elliott Wave 5.0 Peak Oil price that I can come up with would be closer to $160. That may take until late summer 2015 to play out. If we use the average gold/oil ratio and a $160 crude oil price we would come up with a $2240 gold price. With those numbers I just don't see the ratio staying average as it would be below average at best. Today the gold/oil ratio hit about 15.45:1.
This wave count is progressing along quite nicely as a vertical move seems to have terminated. If I'm correct then the last 5th wave in this run should play out in the next few weeks or so. In the final days it could slow down dramatically especially if diagonal wave structures start to materialize.
This spike also dropped the gold/oil ratio down but it's still a bit above normal. I don't expect the ratio to radical unless it happens closer to the end. I would love to see crude oil to hit the $75 price target but a bit more will not hurt this wave count at this time.
I don't have enough time or the will power to update the T-Bonds but I do check them from time to time.
This time when I checked it I saw a massive spike that just completed and technically these T-Bonds should drop and create a new record low in the next few weeks or so. Any decline would send real interest rates up which could spook the markets at a later date. Eventually we should see T-Bonds at new record highs as it is obvious that investors still use T-Bonds as a safe haven retreat. Of course they will get screwed as any fast fear induced move never lasts.
Some readers have been searching, "When to use WXY waves". The short version is that I never use any part of the WXYXZ wave system as they have little to no forecasting value and the "W" wave can be anything it wants. Sure I can fill my charts with, WXY waves but they would be irrelevant if the degrees are off as well. It is more important to keep the degrees in sequence before using any WXY waves.
One aspect of the WXY waves is that they are all 3 wave structures and mostly zigzags. This all sounds like ABCDE waves to me? I also only use 5 wave patterns as my core group, and WXY waves would make that 6 patterns.
I also follow the idealized Cycle degree sequence which I use as a script or as a blueprint for all other bigger or smaller 5 wave sequences. I have never used any WXY waves in any of these blueprints. Without the blueprints, how do we know what and when we are supposed to be looking for pattern changes?
When I see any WXY wave in Primary degree with this DJIA chart, then I know they are working in GSC degree already. Who has confirmed anything regarding GSC degree? Nobody has and nobody will if the entire 300+ years of GSC and SC degree wave counts have never been reviewed?
Recently I dropped my Cycle degree peak again, as this bull market has traveled over 5 years and much higher than I would like. It was that 2010-2011 correction that screwed up any triangle bull market, this forces me to look at a diagonal again. This morning the markets are rolling upward and hopefully there will be more staying power behind it in the weeks to come.
Another panic attack could happen if the VIX developed an "ABC" decline but the bullish mood would have to return sooner than we think as well.
There are three sets of patterns that are almost identical and sometimes can be interchangeable on a short term basis.
These three sets are, WXYXZ, (triangle), ABCDE, (triangle) and ABC1, ABC2, ABC3, ABC4, ABC5 (diagonal). The key is knowing "where" these patterns do occur most frequently. Any "Y" wave has no passion to it as it produces no confidence calling for a 100% retracement.
Gold has gone sideways in its pattern so that instantly calls for another update. At this time it's all looking like a triangle with one more little leg up left to go. $1280 would be my extreme maximum for me to be able to keep this wave count alive. Once a wave count is broken then the entire daily chart has to be reviewed, as we could then be in an "C" wave bull market in gold. Ideally I want gold to head down as I would eventually be looking for choppy wave going down as well.
Over a trillion dollars have been put back into consumer hands via the crashing crude oil prices. Where is this money going to go? It takes time for this effect to be felt by consumers and maybe they will go shopping sending the cash back into the economy, of course if there is too much of it then the gold price would rise.
Crude oil rallied a bit this morning as well, but the ratio remains somewhat above normal at 15.3:1
The US dollar did make a very sharp bottom but it is the sideways movement that could produce one more leg down, completing a potential zigzag. If this were to happen then that would certainly be bullish for gold. Even that would have it's limits as it would have to keep creating downward impulse waves. Instead of an "ABC" I would use "1-2" as my count. I have that gap down at the 83.800 price level so that would be a great place for any move like this to terminate at.
Wednesday, October 15, 2014
The Euro sure seems to be in a great looking impulse decline with wave 4 just recently completing.
We have a very short wave 1 ending in June and now we have wave 4 ending in October. Since wave three is the longest we could expect wave 5 to be shorter but could extend as well.
I would like to see a clean 5th wave but at the end diagonals should start to form. The big question will be if the Euro is going to create an all new bear market low which started in 2008. If this feat were to come true then the Euro could be at a terminal 4th wave bottom in Cycle degree. Until this impending 5th wave plays out no big Euro bullish trend can happen. Once it does then we could see a massive Euro bullish run that is impossible to imagine at this time. Because it is impossible to imagine at this time, chances are very good that it will do exactly that. Markets will always do what the majority never expect because if they did, it would be too easy to forecast and trade.
We do have a small gap up in the month of September and that should provide a turning point in the future.
I don't have to fill in many wave counts with this chart as when one section does not come in the entire weekly charts have to be recounted. This run with the US dollar is looking more like an impulse and a 4th wave has completed this morning. Many may find it hard to understand that we may get a stock mania attack in which the US dollar can resume its bullish run north. If this all plays out, then after any 5 waves in any direction must present us with another correction or the termination of a larger pattern.
I am sure the Euro would have to resume its trend south as well.