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.
I can only post weekly charts or larger with the cash crude oil charts. Between the August and even Dec contracts I will get completely different wave counts. Then when I switch to line mode, all new wave counts appear again. On the cash chart I have several open gaps as crude oil crashed. Even now we can see another huge gap that formed in the last week or so.
These are all very bullish indicators as we could be coming to a wave two bottom. The August contract still supports a potential wave two bottom but the December contract most certainly does not!
Many are still calling for $10-$20 oil but these are all numbers based on fundamental analysis. The problem with fundamentals is that they change like the wind and when they are the most intense they have the least amount of meaning, as everybody already knows about them. Fundamentals at the extremes will always give you the wrong information as not to many people saw a $15-$20 crude oil rally coming in the middle of a world oil glut!
In early 2008 the forecasters were calling for $200 crude oil as they figured out that we were running out of oil! Eight months later we were in a world oil glut which the fundamental analysts did not see coming.
Now some are even saying that crude oil will never go above $100 again, but the pattern that has formed since the 2008 crash bottom suggests otherwise. It may take some time before it will happen but that 2008 crash was not an impulse so technically it should still get completely retraced.
The gold/oil ratio is sitting well above 22:1 so this has not budged for sometime, which is not a big deal as I see it. If we get to 12:1 or even 10:1 then it will be a big deal as oil would be ready to make a huge correction or another big crash.
Friday, July 17, 2015
For sometime I have mentioned that it was a good chance that the US dollar still had to breakout past my last "ABC" decline. In the last day it has done so with what looks like a near perfect 5 wave pattern. It contained a mixture of many other patterns as well with expanded flats and diagonal wave patterns. These are rare wave patterns as most of the time the grade or quality of these 5 wave structures are far worse. One reason for that is chances are good they are diagonal waves.
We can still see a bit of upside baring no more extensions to the end of the month but I am looking to a correction in the US dollar, if not an outright reversal of trend. If we end up with another potential declining "ABC" then chances are good we could be completing a potential triangle in the US dollar.
Since we are also completing a potential bigger inverted "ABC" then this entire move should eventually get retraced by 100% to the downside.
I think I would be dreaming if the US dollar is roaring up to a potential wave 2 as that would still leave to many overlapping waves unexplainable.
If any impending correction starts to go sideways with many overlapping waves then the 95.400 price level may supply support as a new 5 wave leg could then form. This is the least likely scenario I would want to run into.
This US dollar rally, combined with a stock rally and golds price implosion fits in very well with the stock mania I have talked about. General stock markets will always offer serious competition to gold and gold stocks, but the trick is to catch it early when it's about to happen. So far I can pinpoint the stock mania start to 2011. This has all happened many times before, throughout history and it will happen many more times.
Thursday, July 16, 2015
Most gold stocks broke to new bear market lows and this XAU and the GDX below were no exceptions. The HUI moved lower much further than these two. Since late 2014 gold stocks have been going sideways for a long time which at anytime we could squeeze into a 4th wave pattern.
There is a problem with that as the XAU crossed to new lows looking more like a zigzag than any impulse wave. If the gold market gave us a 3 wave bounce then this would fit well into a potential ending diagonal. The XAU only has to travel to abut $40 and then it would match 2001 lows creating a complete 100% bull market retracement. In other words the Gold stock bull market when looking at the XAU was a complete fake!
This was all telegraphed before had as waves started to overlap right from the start. Not too many wave counters would dare make such a forecast as we would all be certified! Yet it happened and it will happen again any time we have the same inverted "ABC" patterns.
Of course most wave counters stayed away from counting out the XAU exactly for that reason. They all switched to the HUI as it filled the impulse waves much better.
I may even have drawn out a complete retracement in the XAU but I would have to search for it. When a rally in any asset class starts to travel with waves over lapping in a dramatic fashion then it is wise to treat that asset class as something that could crash when you least expect it to.
The GDX also crossed to a new bear market low as a 3 wave pattern, so any rally can also be a fake. It would be nice to see a small fake three wave and another 3 wave run down as that would give us a potential ending diagonal. At the $16 price level GDX has matched the 2008 lows with only a couple of dimes to spare. Yet nobody is buying as the majority seem to hate gold stocks at this time. They were all bullish in early 2011 as insiders were all selling.
If we are lucky we may get a 5 wave bounce but then we may be in another expanded 4th wave type of a move.
It is impossible to use any type of Gold/GDX ratio as GDX was inversely spilt which will skew all the numbers. Recently the Gold/GDX ratio works out to about 71.50:1 which sounds cheap but it may be better to use the XAU to do the same thing as the XAU has not been inversely spilt that I know of.
It was pretty clear to many of us that the trend in our Canadian dollar was down. Ou Fed drops the rate some more sending our Canadian dollar into the toilet. Any smart observer knows that this was not needed as now our real estate and debt bubble is going to get much worse. Dropping rates motivates people to buy or build a home as now the money is cheaper. They think they can handle the debt. What they don't realize is that our fed is making the same mistake as every country in the world has done before. (1929 rings a bell)
When I heard this news I could not believe it as even many of the banks also shook their heads. Just because our GDP has slowed a bit does not make it the end of the world.
Meanwhile back in the USA Janet Yellen is yapping about raising rates, and as soon as see does that he markets will implode and she will end up lowering rates during the elections!
Right now our CAD is a a very big double bottom but there is no guarantee this will hold as a small 4th wave can still play out or a bigger expanded pattern could also develop. The expanded pattern would have to be a set of 5 waves up and break my present 4th wave peak.
Since the 2008 peak our CAD is in a big corrective pattern which the majority take as a big bear market. We better hop that the CAD does not fall back to 2002 price levels as that would mean much lower gold and oil prices.
The more ridicules over sold commodities become the longer and higher the subsequent bullish cycle will last. If Our present decline from 2011 is an "ABC" then the entire bear market since 2011 should get retraced. Mind you it will not do it this year or not even 2016.
In general our Canadian dollar will run with the oil bulls and we already know that oil when compared to gold is very cheap.
Without looking at the VIX and know that the general idea is that when the VIX is pointing down that this is actually bearish for stocks as the participants display no fear! At record highs and all the turmoil in the world stock holders are right bucket being very complacent! They are as good as pointing the middle finger at all the fear at this time.
It got so bad that huge gaps opened in the VIX as it was dropping like a rock. Most of it I would guess were the protective stops getting hit. The VIX has 2-3 major gaps above so as violently as the VIX went down it can go up just as fast again closing all the open gaps.
The violent VIX down move was just as violent as the SP500 move up as it also created several open gaps on the way up. If the SP500 stays as a 3 wave rally then I may have to switch to an ending diagonal wave count later on. At this time the SP500 could still break out and create a new record high. The DJIA has a long way to go before it can breakout to new highs. All the gaps that were opened to the upside will all get closed to the downside, and I don't think it will take all that long.
Last week the Mini Nasdaq rally performed as it has three major open gaps on its trip north. Apple has also left an open gap on its upward blast last week. Over all it is a toss up which has more gaps, the Nasdaq or Apple! The Nasdaq broke into record territory but Apple did not. If the Nasdaq still has a small 4th wave to play out then this may happen in early next week.
Some say Apple's stock is a good time to buy at any time but Apple's stock chart looks more like a piece of Swiss Cheese as it is full of gaps all the way down to the $55 price level.
All the crazy stock moves is nothing new if you understand some of the stock mania stuff I have been talking about, the trick is to spot it before it arrives so you can sell all the gold stocks before they crash. The roar in stocks, and the continued rally with the US dollar clearly shows that stock mania is still alive. Again, I would like to stress that this is nothing new and it has happened many times before. One big move happen from about 1995 to 2000.
Sunday, July 12, 2015
It looks like my computer system problems were started from my USB hubs or one of my printers from a USB hub. The problem acted just like a HD failure but it was my OS files that ended up being corrupted. Apple no longer supports my computers due to its age but Simply Computers does. Either way the System OS had to be remounted and my main HD files that contain all my apps was also brought back.
All my data that I have created over the years are stored on two external 500 gig Firewire drives and the Time Machine Back up is stored on a single 1T external drive as well.
As long as I keep my offending Scanner/Printer/Fax machine offline my system reboots just fine. Even though I have two printers constantly turned on with my system, as soon as I added the third printer my system would not reboot. I have had many more printers hooked up before with no problems, so when I have problem with three printers I was surprised. One way to fix the problem was to shut everything down and unplug all external equipment and add it all back one at a time.
It takes a long time to sort out what piece of equipment/hubs or cables may be the problem but after each try you have to shut down the computer and start up again.
I should be starting to update again this weekend.
Saturday, July 11, 2015
It's not rocket science to figure out that stocks have rolled over. That is what the majority may be thinking and the participants will be betting on it to continue going down. They may all be right but this 2015 topping process can also be an expanded pattern of a "B" wave.
Every expanded pattern that is mentioned in the little blue book is just a correction in a bullish phase. After any expanded pattern has completed its crash, it then roars back and completely retraces all previous losses and then heads to newer record highs.
We will never know if this is going to turn into an expanded pattern and I we will never know until I run it as such. The Nasdaq futures cash chart has so many gaps in it, that it's a wonder it hasn't imploded any sooner. Of course Apple has just as many huge gaps in its wave structure.
All this may take all of July to become more clear and breaking down past all the potential support levels would help to make the bearish case. Since 2000 this has been the longest topping process I have noticed so this makes me suspicious as it could still be a correction.
Look how deep the markets dropped in Oct 2014 before they roared back and broke new record highs. My arrows all point towards open gaps and I may even have missed a few. Last weeks end also produced a gap up so I am sure markets have to turn and close that gap sooner or later.
There is not a single wave count I run that is in SC or GSC degree as I have done that for years already. I even had a blog with only SC degree wave counts which I closed down as soon as I realized it did not fit as well.
In any degree there is a specific amount of 5 wave runs that we must have for each of the three corrections, and if these 5 waves do not come in, then chances are good our degrees are out of sequence.
Friday, July 10, 2015
First I would really like to stress the point that for the last year or more I no longer look at crude oil from any Elliott Wave Degree higher than Primary degree. As many wave counters may disagree with me, I have come to the conclusion that any wave count in SC and GSC degree is a myth and a figment of our wave counting imaginations.
For any degree we are in we have to have a very specific requirement of impulse waves inside their corrections, and if these impulse waves never happen or can never be confirmed then we are not in the degree we think we are in.
The majority of the time we call a wave count completed far too early which pushes us forward in time but many never go back in time to review and fix the problem. 99.99% of the time all it takes is dropping our wave counts down by one degree or more and then it must also be recalculated to check it.
Those that want these crazy wave counts in SC or even GSC degree, I will be happy to create one for you but it will cost you two ounces of silver, or a minimum of a $50 donation for one chart. :)
I have dropped my Cycle degree wave counts well over a year ago and all my wave counts in commodities and stocks are done with the highest degree being Primary degree.
No corrective wave in a Primary degree world can be larger than an Intermediate degree letter, so when I see a Primary degree letter I know it's a SC degree wave count at minimum.
The crude oil chart below is the cash chart which I can only show the weekly or monthly version.
In 1980 crude oil peaked out just below $40 and then it made another double top in 1990, before it plunged back down to about $10 in 1999. This ended up being a 19 year bear market with several world oil gluts during that time period.
In about 8 years crude oil turned from a glut into a world wide shortage as claimed by all the experts at that time. You could not find anybody that was not forecasting oil to go to $200 or more. Many contrarians knew different as crude oil was set to crash and we knew it was going to crash deep. My $50 bottom also ended up being very optimistic as crude oil finally settled around $34. (perfect Fibonacci number)
This 2008 crash is an "ABC" crash as impulse waves are rarely that steep. The 2008 bottom in oil could be a 4th wave bottom but it will have to be a diagonal type.
The rally from 2008 to 2011 contained what could be counted out as an Impulse wave. From the $115 peak crude oil started to go sideways to down in a real choppy pattern that also can contain a triangle "B" wave top.
Then we have our famous crash from about June 2014, which many say is still ongoing or there is much more downside to come. The world glut took a recess but now it is supposed to come back. All this may come true but we just hit a gold/oil ratio of about 22:1. In 1999 this worked out to a ratio of about 25:1, and look what happened after that ratio got hit. At its worst the crude oil ratio hit 29:1 which eventually must respond with some ratio that is an extreme to the opposite side. 12:1 or 10:1 would do it.
Many analysts are forecasting using supply or future supply numbers to justify lower oil prices but fundamentals change like the wind blowing from the NW or SW.
The drop in oil on the cash chart is not even anywhere near what the August or December futures charts show as this chart shows a huge gap that opened up. Gaps are very bullish as sooner or later gaps will have to get filled.
On the weekly chart I have gaps at the $55,$65 and $80 price levels so those are all bullish signs longer term.