Thursday, October 30, 2014
Since the beginning of Oct 2014 the Euro has been in a rally but has run out of steam many times. This has produced a very choppy sideways pattern that could have completed early this morning. If a short "C" wave bullish phase is going to happen then the Euro should retrace and clear all Oct 2014 price peaks.
Wednesday, October 29, 2014
Once this gold chart crashed and I saw the angle, then this gold decline could have finished or nearly finished today. There may be a very small 4th wave still to finish but that $1208-$1204 range has some serious past support levels. If the trend is truly much more bearish, then those levels will never hold. The last thing I would want to miss is a 5 wave run or be caught in a gold bear trap.
This will not take long to confirm as I have very little room to move and therefore it would not take long to trash this wave count. I have already started a wave count like this, so it's just a matter of tweaking when we think we are close. Imagine if we were to take off in a "C" wave bullish phase, and that this bullish phase should have 5 waves up in Minuette degree.
The correction in gold has been about 8 days long so far, but on corrections I would rather see odd Fibonacci numbers like 4 days or 6 days. If the bottom is in then I can explain the entire 5 wave sequence in what I think may happen. It would be the exact same thing for any 5 wave sequence in any degree, in any future.
When I post a chart review you can bet I have changed the wave count and even if it fails this time, the exact same logic would get applied to any other 5 wave sequence we may face. The thing is there are always 5 potential patterns from any turning point. As I mentioned, this should not take long to confirm especially once gold starts to roll out from under the grip of the bear. Since this may be the potential for a wave 2 bottom and they are usually the shortest waves, then we know we have wave three as the longest length and even then a potential 5th wave extension.
Before we know it gold is sitting at $1375-$1400 and we are all trying to figure out what happened? As soon as they get it figured out, I am sure gold will reverse and come tumbling down to earth once more. Once we see gold rally further than expected, then any correction must be from the family of "ABCs".
Updated Oct, 30, 2014
Gold ended up crashing much deeper than I thought it would which just about puts this wave count into the trash bin of financial history. I will keep it going for a little while longer as we should get a counter rally as well. Any counter rally could take us back up to the sideways correction at about $1230 as the decline contained an extension. Before we would get back to that price level $1215 would also be a price target for another turning. This morning gold bottomed again but at the $1195 price level which leaves us about $16 or so away from producing another record gold bear market low.
Gold is determined to trick us as it sure supplied no treat for the gold bulls. Short term we are torn between two major wave counts in gold and we are coming up to the end of the month which can have very volatile consequences.
At this time I am keeping my 4th wave top in play, until the gold decline tells me otherwise. If I get a counter rally that is very big and travels up much further than I anticipate then I will have to review most of my daily charts. I have managed to short gold several times with my real money account but have closed off these shorts every time I thought I was in a short term bearish trap. If I thought the short term trap is going to turn into a short term bull trap I would close my short position.
In Forex the gold chart already hit a low of $1208 from which it seems to be in rally mode. If the 4th wave top is to hold then no new highs should happen until the 5th wave is fully played out. This still may take until the end of November as there have been major turnings in this month in the past.
The USD exploded this afternoon so you can blame gold's demise on the US dollar. Some analysts always blame market manipulations for the reason of any gold drop but this is a sad excuse for something that happens all the time and will happen again and again. Bear markets come when the majority least expect them to and the reverse is true for the ending of any bear market.
In 2011 a full 95% of all experts never saw the gold bear coming so I am sure they will not see any future gold bull market coming as well.
Gold's bear market will come to an end and then gold will start behaving completely different then what we have seen since 2011. The problem is we don't know the exact price that gold will bottom at as many times it picks up downward speed just before any end can happen.
Eventually gold should create a downside breakout at the $1180 price level as these triple bottoms rarely ever hold. Some experts have mentioned $1050 as a low but they have no clue where gold is going after this price is achieved.
The higher the US dollar goes the sooner its bubble will burst as all bubbles eventually do.
I can still fit the crude oil charts into a 4th wave pattern with a bit more upside to go. In this case $84-$85 would be my target range. Any wild price moves well above these limits will force a review with the daily charts. In the end we may see $75 before we ever see $115 oil again. Many are talking about the world oil glut and it may take a few more to recognize that same fact. As soon as more people recognize that the glut is hear then the glut will be over and crude oil prices should start to rise again.
Crude oil is a prime example where we don't need major suppressed low prices just to reflect a world oil glut. One major oil glut happened at the $10 price level, then the next one happened at the $34 price level and this time crude oil may still hit $75 for the third world oil glut since 1999. I am sure there will be more oil gluts in the future.
The world crude oil distribution system can get shocks from any direction, so don't let the glut fool you into thinking there is never going to be another crude oil bull market again. Markets will always act the opposite way than what fundamentals suggest as the bigger the glut the bigger the bull market we will get following the glut.
As much as I would like for this crazy rally to end, I think we still have a bigger correction to work through. There may even be an expanded pattern in progress but the limits of this decline may only get us to the 1930 price level. This could send the VIX into a bullish spike were it would resume its decline for one more major bottom.
We would also be at a potential H&S pattern which we know that they cannot be trusted. Sometimes we just get the right shoulder, before it turns and produces another great upside breakout.
Tuesday, October 28, 2014
The US dollar is still in a correction and I believe that eventually it has to make a new record high. Of course gold is also acting erratic and as long as the US dollar can still turn up then there would still be downward pressure on gold.
I always have several or more alternate counts available at any degree turn as this potential smaller 4th wave could go vertical and never look back. Diagonals can make wild and powerful moves that can surprise many of us, especially in the last 5th wave.
There is nothing we can do once a sideways patterns start to play out as they can take a long time to finish. Since early Oct 2014 all this sideways patterns should get completely retraced and the US dollar breaking that 86.700 price level will help to confirm it.
Same thing would apply to the Euro as it would crash if the US dollar were to continue with a rally.
The Russell 2000 can fit best into a potential triangle but there would also be a lot ground that it still needs to cover. In other words the Russell 2000 can only correct in the next few weeks and then should also push to new record highs. Triple top looking patterns can fool us into believing a bear market has started as we do have at least one lower high already developed. But 4th waves or triangles can blow the conventional bear market indicator into confusion as they will not work for wave 4 corrections.
Any smaller correction is already long overdue, which could happen anytime before the end of the month. The Nasdaq is getting the closest to breaking out and creating another new record high. At this rate maybe the Nasdaq will hit 5000. Of course that is wishful thinking, but a much bigger decline is still ahead of us. We can't ignore all the open gaps we have in all indices and these gaps will all get closed in due time.
Any correction can take us back to the 3940 price level before it cranks up again and then breaks out to a new record high.
Monday, October 27, 2014
In the short term gold has been declining again which stands to reason as stocks have been pushed to their bullish highs again. This pattern seems like we are in an expanded flat as the decline also has been making very choppy 5 wave patterns. Gold has little room to decline in before my small expanded pattern gets thrown out for lack of confirming moves. I am also keeping my bigger expanded pattern wave count alive, which could have completed closer to the Oct 21 date which was a day or so before a new moon date on Oct 23.
If my original Minuette degree 4th wave has completed then we know that there should be no new highs but gold could then plunge back to the $1180 price level in which we have a triple bottom. The last thing I want is a triple bottom in anything especially gold, as they hardly ever hold and besides they are indecisive patterns. At this rate we could see gold $1050 before we ever see gold $1800 which was the last triple top. At that time the trend was still down so that triple top worked as resistance as gold pushed down from there with gusto.
Which trend is still alive, the one that pushed gold south from the $1800 triple top or a bullish trend that has pushed gold north from its last major triple bottom of $1180? Hopefully we don't have long to wait as this triple bottom will have to get resolved sooner or later.
In the future I will not be posting on Mondays or I will minimize my postings as most of the time Mondays are very slow as well.
Sunday, October 26, 2014
Pretty scary looking chart if your bullish on commodities, as the majority see the exact same crash. Sooner or later all those bears playing this index to decline much further will get into a trap. I don't need a fancy wave count to tell you that. I have always looked at pattern first, and if we go back to that infamous 2011 peak we have a declining pattern that has many overlapping wave structures.
In other words you couldn't count out a great looking impulse if you tried except for the recent decline. This decline fits very well into a part of a "C" wave decline or the tale end of a triangle and its decline will eventually come to an end. What we see here in one direction , also happens in the other direction. When it is inverted I would call it a "C" wave bull market. There may even be a very high probability that we could get exactly that again, as another "C" wave bull market may happen.
When the bear market started in 2011 it instantly formed 7 waves all about the same size. 7 waves are corrections or in this case part of a bigger correction. It does not matter if this index still crashes but what is important from my perspective is that this entire decline from the 2011 peak still needs to get completely retraced, eventually exceeding that 760 price level. I am counting this out as one big diagonal 5th wave where any wave 4 bottom can enter price territory of wave 1.
Here is a great example of a pattern showing us basic "deflation" in commodities , which also confirms the US dollars bull market that we have had since 2011. If some crazy wave counter were to forecast a potential new bull market in the GSCI by the end of this year then we are effectively forecasting a fundamental economic "inflationary" attack. This should all get confirmed by the end of the US dollar bull market as without the US dollar all this deflation, inflation action cannot happen in the first place.
Once this inflationary attack starts to get serious, you can also bet that gold and crude oil will soar in price.
Back in 2012 the Apple stock price pattern suggested that an expanded pattern had taken place, which always means that the peak of that expanded pattern will eventually get retraced. Mind you it took until 2014 to completely retrace it. For all the smart wave counters out and who saw that expanded peak, already new that when Apple was at $55 in the 2013 slump that a $45 gain was in the cards. This is the power of the forecasting abilities of the "ABC" patterns in the EWP, yet very little of this is explained in the little blue book.
Since the 2013 bottom we now have what looks like an impulse wave, but it is rather choppy so a diagonal 5th wave would fit this pattern the best at this time. How Apples stock price jumped to new highs sure looks like another expanded pattern which means AAPL can slump again back down to the $95 price level. At $100 AAPL opened a big gap which just adds to the other big gaps still open far below present prices. If AAPL slumps in the next few weeks which could be a small degree 4th wave bottom, then Apple will have another real chance to create a new record high, exceeding its latest high again.
This would all eventually terminate at a Cycle degree wave three peak from which we should get a crushing correction that would retrace Apples entire 2013 and 2014 bullish phase. This would eventually bring Apples stock price to the $55 price level closing all existing gaps in the process.
You will never find those price level forecasts in the fundamentals of the company as fundamentals are a lagging indicator not a leading indicators.
Saturday, October 25, 2014
Before I get into the VIX rant, I had a look how the commercial traders were situated regarding their net long or net short VIX contract positions. To my pleasant surprise they are virtually net neutral which I have not seen in a long time. Stocks are pointing up while the VIX has crashed down with the USD all being up. What this means is that I can't use the COT reports to give me any special insight. In the end I would like to see them start turning net short on the VIX.
There is a real chance that the VIX is getting ready to crank up again and even create a new record high since this VIX bull market has started back in July 2014. The target price would be well above 34 and even 40 can't be ruled out. If stocks have one more leg down to go to newer bear market lows then there is no reason why the VIX will not follow in lockstep. I have two open gaps above present VIX prices and I think these gaps are going to get filled sooner than we think.
If all the bottom gaps were left open then this would be just great as these bottom gaps will be the Aces up our sleeves in a future wave count, like a potential wave 3-4 in Minor degree.
I have so many potential wave 4's in progress in many different assets and that is all a good thing as these are telling me the markets are getting better synchronized. I also have different degree levels of 4th waves in progress, such as the US dollar, and the Euro, even oil may still rally completing a 4th wave. The violent move down in the VIX could be a "B" wave bottom which means that in the future the entire VIX bull market will get retraced as well.
Under any present SP500 prices we have many protective sell stops being formed or moved to the last correction, so we could see a cascade of sell orders get triggered. The real smart traders may even have two sell stops active in which case they would get stopped out, and be on the bandwagon heading south in one easy move.
This could also be very bullish for gold in the short term.
Friday, October 24, 2014
The news that oil is in a glut situation has finally caught up with the charts as many are realizing the same thing. When this happens its usually a sign that the glut will end but we can still have a small counter rally and one more new low.
In Forex the same basic chart is equal to the West Texas Oil unit with the difference of a few points.
I have a virtual Forex account where I am long in oil already and the next few days will tell if there is more upside potential. If I am wrong I just get out as one can always try again. Lets say a rally is due but in reality it is a fake rally.
If this were the case then $85 oil would be about my limit that any fake rally can run to. My entire decline is a 5 wave decline in Subminuette degree with a very long 5th wave extension which may not be perfectly completed just yet.
It is pretty hard to imagine that eventually I will turn very bullish on oil in the midst of a world oil glut, but the markets will do the exact opposite of fundamentals just like they did in the midst of the oil glut in 1999 and in 2008. Even gold was in a glut in 1999 and look what happen to the gold price after that. Of course analyst will never tell you that gold was in a glut in 1999, but all participants flooded the market, as banks, countries and traders were unloading gold as fast as they could.
Only 14% bulls were present at that time so the majority of experts never saw the gold bull market coming.
Right now the gold/oil ratio stands at about 15:1 which is a bit above average.
During a bull market virtually any external bearish news will have little effect on the markets but once the markets have already turned to the bearish side by even the smallest wave pattern then that news will reinforce the bearish trend.
Ebola the little virus that can bring down the stock market has happen before, but with the Spanish flue in 1918. Doctor tests positive for Ebola in NYC - CBS News
This Ebola scare is far from over and the numbers I watch are the new confirmed cases, once that number slows or stops then they may have the problem licked.
Fear is fear and it does not matter much from which area it comes from. If an asteroid was discovered on Sunday heading directly to earth do you think there would be fear or no fear? I am sure the selling would start immediately on Monday.
This rally has exploded dramatically and I have to come up with some alternate thinking as this move could also be a "B" wave top, or at best a wave 1 top. I have three open gaps below in the SP500 with three open gaps above in the VIX. That is a powerful inverse combination that I can't ignore.
We are also facing a H&S pattern so the time is ripe for either a correction or a fast resumption of the bearish trend. Since the decline fits well into a diagonal pattern, then the "C" wave decline may show very clean subdivisions. The Russell 2000 sure did not keep up to this torrid pace so there is a disconnect as the Russell 2000 has been working as a leading indicator for sometime.
I have tried many different degree levels for the 2008 bottom, but none of them held for very long.
A little while ago I tried the wave 3 in Intermediate degree and so far have not been forced to adjust it. Most of the time we tend to call something completed to early and this is especially true when it comes to the degree levels. One thing I always like to remind my readers is that I invert the EWP when applying it to the USD. I didn't do that just to be different, but I did it because I figured it out that the USD was inverse to the stock market.
This also makes every bull market with the USD a 3 wave pattern or multiple 3 wave patterns like a potential triangle. Once a wave three bottom has been identified then we have to look back at the monthly charts to see if it still fits as where I used to have wave 3-4 in Intermediate degree also needed adjustment.
At this time wave three in Intermediate degree for the 2008 bottom is holding, making any part of the counter rallies strictly 3 wave affairs with any 5 wave runs being very small degree runs. The biggest 5 wave run I can have in any direction can only be 5 waves in Minor degree. In this case that would be 5 waves down in Minor degree, once this US dollar bubble starts to burst.
All patterns since 2008 have been corrective then all these wild moves to the bullish upside will get corrected by 100% or more as the US dollar bull market has a limited life span.
Our present little correction looks pretty small and trivial when we compare it to the rest and that's the way it should be. The US dollar could still fall for a short term move as a possible 4th wave bottom may still need to finish. This would follow by one more US dollar bullish phase that should finish and clean up this USD bull market. How high that last little push will go should clear all previous corrective peaks, closer to the 90 price level.
Recently gold topped out at about $1255 and then has made a declining pattern which I find very suspicious as it should have completed my potential 4th wave top already and declined much faster than gold has been doing. On Fridays close gold finished at about $1230 and to help confirm a potential gold bullish move the old top of $1255 will need to be retraced. Further price confirmation would happen at $1280, with $1340 then starting to be the first serious resistance price level. Ultimately gold could hit $1400 before completing it's bullish run.
Moves like this will force all the Forex Gold unit bears to change their positions which in Forex is not a big deal but with futures traders it is a big deal as the bears can never handle big reversals as they would suffer huge drawdowns.
We also have a triple bottom in gold that I am sure gold will eventually still entertain us with a "downside breakout" as triple bottoms are unresolved patterns.
Since the peak in the markets on Sept 19, 2014 we have had a very choppy decline which I can get into several patterns, all of them corrective so far. So far I have a wild impulse return rally which suggests we had a 4th wave bottom. If the 4th wave scenario is true then the Sept peak should still get retraced. It would be nice if the markets gave us a complex correction and then resumed another leg up, but a slow moving choppy rally will bore us to death, but will also tell us that this rally is going to run out of steam.
The VIX is still suggesting it may have more downside to go so this bullish cycle should also have more to go even though I'm expecting a stronger correction.
We are also at a mini H&S pattern but we know we can't trust them as they can only produce corrections. This wild ride up so far is a clear example in how protective buy orders can get triggered. Of course the same is being setup for another return trip heading down, as protective "sell" stops are being piled up below. In Forex with the US NAS 100 units you can't see a single gap but in futures they are very clear. It is one of the reasons why I never do Elliott Wave analysis in Forex charts.
Creating wave counts in Forex charts has to be the most time consuming, mundane "chart slavery" I have ever seen, besides I don't think we can relay the information fast enough and clear enough to impact any amount of traders. Besides any backlash would stop players out, and the market would roar without them.
It may take some time yet, but eventually this entire rally will all get retraced and a new record bear market low will be achieved.
Thursday, October 23, 2014
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.