Saturday, December 7, 2013
My USD wave count is all new, and I have created a new outline that I will be following until it gets broken. I like to trash my own wave counts as soon as I feel things are not acting to my last script. All the worlds a stage and once they no longer follow my script to a Minute degree, I know something is amiss. It is a signal that I better put the actors on another script. Elliott Wave is much like any movie script you want to write, as each scene has to flow into the next scene to make a movie understandable. Except science fiction of course, anything goes in science fiction much like SC and GSC degree wave counting is today!
I have drawn the dreaded trend lines, but this time it may actually prove useful in boxing in the potential down side that may happen. It is very common to count out a triangle to early, and the only way to fix that is to look for an area that needs to be extended. This is usually done by dropping down one degree somewhere in the past! I have done this with all the SC and GSC degree counts as well, and there are no shortages of where SC and GSC degree wave counts can be extended.
My "A" wave in Intermediate degree is now at the 2010 location with many wave degrees in the Minute degree levels. My lowest is 5 waves in Subminuette degree which is 5 degrees lower than my Primary degree wave three, still back at the 2008 location. When comparing this wave 3-4 in Primary degree to wave 1-2 in Primary degree it is still far too small, so wave 4 in Cycle degree will be pushed into the future yet again. This wave count also fits a potential gold rally as well.
I have to warn readers, as I made some major changes in Cycle degree wave counting, which only Cycle degree wave analysts will understand. Knowing when the USD heads down or up, for any length of time is paramount in understanding how far gold, and the gold stock rally will go.
Breaking Record Pages Viewed At Elliott Wave 5.0 "Reboot". The Gateway To All Things In Cycle Degree!
I would like to thank all the readers for helping to break a major record on Friday. A record 753 pages were viewed which includes any news links I put up as well. Many page views originated from the Forex Factory as some of my links got posted there. XAU/USD & XAG/USD - Gold & Silver FX Traders Thread - Page 1487 @ Forex Factory Thanks "Venzen"!
I am in the process of a major change in my Cycle degree wave counts and this may not sit well with most readers that have no understanding of the Elliott Wave Principle, as I may lose many readers in this process. I did not start this blog to give mindless and meaningless wave counts to the masses like the majority of Elliott Wave blogs do today, but Elliott Wave 5.0 is all about Cycle degree wave counting where Primary, Intermediate and Minor degree turnings are paramount.
I have to give readers a heads up, if I feel that my wave counts need a "Reboot". It looks like I have to run a new program in Cycle degree. Elliott Wave 5.1? This may not sit to well with readers that do not understand Elliott Wave Principle, but what I am going to do is "trash" one of my wave counts in Cycle degree. I am killing an "easy" wave count position, because I am not completely satisfied in how our present 2013 decline is acting. It only takes a Minor degree or Minute degree that is not acting the way it should, to start throwing off signals that something needs reviewing.
I have, "unceremoniously" dumped my wave 4 in Cycle degree, and now call it missing in action. There is no difference between a myth and a theory, as I see it, as any single future Elliott Wave forecast is only a theory until it is confirmed. How do you confirm a wave count? I do it one painstaking Minor degree at a time! This changes the dynamics in the entire Cycle degree wave counting effort. My Cycle degree wave three still stands, but everything after it is going to get redone. It will not effect our present course, as I am very bullish until the Barron's Gold index hits the top lines in the next year or two.
For those Elliott Wave enthusiasts that have dumped SC and GSC degree wave counting, then this is the blog to start into Cycle degree. It is going to take some time to fill in the waves, as I cannot do this overnight. You have to take my word for now, but I already "have" spent years counting without wave 4 in Cycle degree, so it it is not something new to me at all.
The best time to see the biggest wave counts, is when we are close to, or at a strong major turning.
I have one wave count completed with three up on the right, as my new target wave. There is much more to this crazy gold bear market than meets the eye, especially in the first set of waves. I will post a few more charts here with other trend and support lines, and hopefully I can make my case for a wave count that is seriously under extended. This gold stock bear market looks like a triangle but it is very deceiving. All this will get translated to all the other gold stock ETF's as well, with the XAU up already. I still plan on posting the GOX and GDX and GDXJ and more.
My goal is to find all Cycle degree turning points and subdivide them down to a minimum of three degrees, which would make Minor degree my smallest.
The beauty about Elliott Wave Principle is that it is scalable, so if I started a post talking only about Minor degree or smaller, then we would run into all 5 core patterns many times. Every wave turn and descriptions learned or mentioned in Minor degree would then all be scalable, up to any degree you need to work in.
If I talked about an expanded flat in Minute degree, then all that wave talking knowledge, can then be applied to an expanded flat in Cycle degree.
I hate channel lines as they are so subjective, and you may only see me do it to theses charts rarely, as I am presenting a very subjective Cycle degree wave count. When the public hates gold stocks, and just wants to bail, I have faith in my support lines to see another potential direction other than down. As you can see, the support and resistance range goes all the way back to the 1980's. I have one other support line missing and that is the higher low trend line from the 2000 bottom, connecting with the 2013 bottom. It's still a bull market in the conventional sense.
This is the same Barron's Gold Miners Index but with a much bigger picture, where we have some large degree trend lines to contend with. I have worked this chart for years trying to see how this all fits in, and frankly gold stock investors always forget the past, and they will end up in yet another bull trap a few years from now.
All the Gold stock ETF's I cover, have their origins from this BGMI base, and I will post more of them this weekend. GOX,GDX,GDXJ, HUI and more.
I will not fill in the detailed wave counts as I can not do them all at one time.
As I mentioned many times before, every wave count produced today has a virus in them! No different then any vicious computer virus today, as viruses disrupt the sequential flow of data. Elliott Wave Principle does not react well when a virus is embedded in the wave count. Think of a wave count as a DNA string or a computer code! Why do you think I start with a new wave count every time? I never deliberately, or for very long edit a wave count inside my computer! Never have, as I terminated those other two famous viruses doing exactly that. The "WXY" virus I have not been able to kill just yet!
My basic rule has always been, start with a fresh wave count every time, always look for a better fit, and never edit a wave count on line.
You can count a wave pattern 100 times, and you figure it's good, then on the 101st count you find a dramatically better fitting wave count that destroys years of your work. Are you going to change it, or just cosmetically change it like the majority of wave counters do today?
It may take me the rest of this year to count out in detail, the largest wave count I am working, so do not expect some mindless "WXY" waves or mini,mini,micro,mini wave counts to appear over night.
Friday, December 6, 2013
This weekend I am going to concentrate on gold stock related posts, as I spent many hours with the Barron's Gold Mining index reviewing my Cycle degree wave counts on paper. The XAU is the closest brother to the Barron's index, so I though I would show it first.
I am not going to fill in every little Micro or lower waves, but I have made some changes, that Cycle degree wave counters can understand, but others may not. Cycle degree wave counters can look to my top of the channel line , and see a Primary degree "B" wave. Only Cycle degree wave analysts will know what it means, and what pattern is supposed to happen after the top of this bull market. To confirm anything in Cycle degree I use a minimum of 3 lower degrees, and to confirm Minor degree waves, I use a minimum of only two lower degrees. This way it does not take much to dump a wave count, when a bad Minute degree does not pan out.
In the shorter term everything is a go, as I do expect a bullish phase in gold stocks, but I think we are blinded by the Cycle degree wave 4 in commodities, as being secured. I will trash my own wave counts at any time, if I feel they do not maintain the best fit. There is no such thing as an easy wave count, as the majority can find them quickly, but they all have GSC degree bias to them. I had to go all the way back to 1980, and recount the entire gold stock sector again as a non triangle beast, which I thought was dead, but now I have to run it for the remainder of this bullish cycle.
In the impending bull market I am looking for a potential zigzag that can blast to new highs but should run into problems at the top channel line.
I have worked this, "Non triangle, non diagonal beast" many times before, years ago, and even have some of it posted in silver, but it needs refining.
I am also going to post the GOX, GDX, GDXJ, and a few others. Including several different versions of the Barron's Gold Miners index.
As we can see the fear factor jumped up during the markets decline, and now has started to retreat again. That big middle spike is what happens many times in the charts. In the VIX it is far more amplified as I new the speculators positions were very bearish, and the commercial traders were extremely bullish. In line settings this VIX decline is a 5 wave affair and the VIX may travel to new lows next week. If so the bearish stance I have will get tested next week sometime.
A good sign is that the VIX also produced another gap as it move down, we know that volatility will return and close that gap. We need higher highs in the VIX to help any downside trends in the stock market. Many Head and Shoulder patterns are also forming so these are potential bullish for the VIX.
No fancy Elliott Waves on this chart, as I will not make it my job to analyse it full time. What I do look for are signs of any 4th waves that may be forming in the price structure. If we look to the left of the screen, we can see a sideways pattern that resembles a smaller 4th wave triangle. This produced a "thrust" in Bitcoins price, pushing it to $1242, as the last price I saw. We are seeing close to $400 swings, which is not the sign of a stable currency. Imagine if gold moved up $200 and then down $400 in less than a week! These types of price swings are telling me that Bitcoins have no real connection to gold at all at this time. The US dollar is more stable than the Bitcoins are.
At the $800 price level we are at a potential support base that could be another 4th wave as a big potential triangle may be in progress or completing.
When the short term movement in gold is fuzzy, then it is always a good time to review the largest degree I am working, to make sure it fits into the script as well. With my Cycle degree wave counting I never lose sight from where my wave three in Cycle degree ended and wave 4 in Cycle degree started.
This Cycle degree wave 3 terminated in 1980 after about a 4 year run which started around 1976. The 1974-75 bear market in gold was my last Primary degree bull market, and I am sure I would count that bull market as a diagonal 5th wave as well. That mid 1970's correction was an expanded wave four correction and the majority of wave counters do not count it as such and completely miss it's meaning and forecasting powers as well.
If you want a quick peak into the future potential of gold, just jump back in history (time travel) to 1975, and look up from there to wave three in Cycle degree.
From the peak in 1980 ($850)gold started it's Cycle degree bear market, but it did not create a triangle. The gold bear market between 1980 and 2000 was a Primary degree flat with a triangle as it's "B" wave, and in 1996 gold crashed as the stock market mania roared to it's final push to 2000.
From the last bottom close to the 1999 Cycle degree wave 4 , gold started a bull run that produced a collection of choppy waves that were extremely hard to justify as good clean impulse waves. I used to have wave one in Primary degree at that bottom, but it never made any sense even early on. Until I switched into diagonal wave counting.
The gold bull market does not make sense as a clean impulse wave, but once we look for the diagonal waves I can make it fit into a diagonal 5th wave extremely well. I have no problem counting this way technically as the book clearly allows a diagonal in the 5th wave position. Under the rules of an Impulse, wave 5 "always" subdivides into an impulse or a diagonal! This makes a diagonal run an extremely powerful pointer to where I think I am.
Silver has the same wave count but much more compressed and more obvious than gold, but I sure use the same method counting silver as I do in gold.
All diagonals should use, (ABC1,ABC2,ABC3,ABC4,ABC5) labelling to clearly identify it as any diagonal. Many times the charts do not allow us to put in all the "ABC's" well enough, and I do slack off in showing them at times.
The first bump that started the gold bull market was an "ABC" in Intermediate degree which terminated wave one in Primary degree, much higher than what we would expect. Immediately after the wave two bottom the wave pattern got ugly with the over lapping, clearly not displaying impulsive patterns. These choppy waves pushed into my second "A" wave in Intermediate degree with another powerful crash down into the bottom in 2008. 2008 was an Intermediate degree "B" wave bottom pushing another "C" wave bull market to the top in 2011.
In commodities the 5th wave is the longest wave many times, and I calculated a potential $1300 price length from the bottom in 2008 to 2011. If wave one is the shortest then wave 3 and wave 5 can be even in length.
If we add $1300 to the bottom in gold at $1200, this then would give us a price forecast of $2500 for Cycle degree wave 5 top. I have mentioned $2225 many times already. In the end any wave 5 in Cycle degree above $2000 would be great. This still may take 2-3 years to achieve as we have to work through our present bear market in gold.
The chart below seems to be a slightly improved version with smoother lines, and much better labels for each solar cycle number. Elliott Wave International has done many stock market, to solar cycle comparisons. Many others have done the same thing in far more detail than what I really need. I have records going back 100 years, and I can draw no other conclusion, that the sun cycles "do" effect the stock markets, and in turn effect all commodity cycles as well.
This process is called the, "Mass Human Excitability Factor". In other words we get cooked by the suns micro waves, or ( magnetic storms). This all translates to the Elliott Waves we see in the stock markets everywhere!
To be pretty blunt, you do not want to be out or short at any solar cycle bottoms. Resistance is futile, and any Elliott Waves we can dream up will never work.
Two solar cycles also make the 20-22 year cycle, which in turn has several 10 and 5 years cycles as well. SC #24 may not be completed, as if it was, there would be very strong media coverage.
The solar cycle below is the key to understanding gold's 20 year cycle as well.
Sunspot activity seemed to back off last month, as a slight dip in the solar spot count occurred. I have been spot checking the sunspot count everyday for all of Oct and Nov 2013. I am looking for a specific relationship in how the sunspot activity declines, and increases between the moon cycles twice a month. I also have back checked 6 months looking for this relationship.
There is a clear connection starting on a full moon date, that the sunspot activity does rise, and at times dramatically, but when we head to the new moon date, sunspot counts start to diminish.
The solar cycle #23 top matches the stock market top,( Cycle degree wave 3) but matches the gold market bottom at the same time. (Cycle degree wave 4) The magnetic drawing, or repulsing power of the sun is extremely important for wave counters to understand, as these solar cycles effect prices on earth.
Solar cycles will crush and destroy large degree wave counts without mercy.
You never want to bet against the power of the solar cycle. Look back in history, (hindsight), down into 2009, do you think it should have been the time to buy stocks? Do you think it would have been safer to buy Apple stock in early 2009, or even gold stocks in late 2008? GSC degree wave counters had an extremely bearish wave count in 2009, exactly when they should have made a
4-5 year prediction of a stock market bull run!
From the 2000 solar cycle #23 top, gold was at a rock bottom, but when the solar cycle started to decline, gold went on a rampage bull market the entire time that the solar cycle crashed down in activity. The highest spike in the 2011 solar activity matches the peak in golds activity as well. The soar cycle crashed and gold started into it's 4th wave decline.
The 20 year cycle does not wander off it's time base very much, maybe plus or minus 1 year. I have exact dates but in general these cycle times, we need to know about. Dec 21, 2020 will be the end of a 20 year cycle which started in May 31, 2000, with November, 20, 2040, completing another 20 year cycle.
During one complete 20 year cycle, economies and markets completely change, until they are unrecognizable from the previous 20 year cycle.
Thursday, December 5, 2013
So far so good, as it looks like my small 5 waves have finished, and after every five, a pattern switch is mandatory! In this case we could get three up, but that three is a potential wave 2 in Minute degree. (another zigzag ?)
The first moves down looked like an easy 5 waves to count out, with no real battle in seeing it, and a nice expanded flat for the 4th wave. This decline instantly dictates a degree change as well, as the expanded flat works just like a triangle.
This nice decline can be so deceiving, as it could just be part of a bull market "C" wave, and the next move could be 5 waves up! I have been trading the Wall St 30 unit in a Forex demo account, along with this chart in delayed time. I closed off any short positions, in anticipation for a potential rally in the next two days. If I see the DJIA traveling up, anything but in an Impulse, then I will be forced to go short again, as a wave three could develop.
You can get a free Forex Demo account to practice with, and I setup another demo for another friend yesterday. He loved it right away. I use my iPad with a trading app from the same company and it works great.
Updated Dec, 6, 2013
I got my wild spike that I wanted, as we can see the DJIA shot straight up on Friday morning. This spike are bears getting trapped as buy stops get hit in a domino effect. These spikes happen all the time and if you are confident enough that we are on the bearish side then they are shorting opportunities.
This could be the last time that the Mini DJIA can hit 16,000 and any new downside breakout could seal its fate for another week of declines. If this decline continues then at some time we will run into a 4th wave that may contain a triangle. When that happens another degree change will also be in the cards.
I will make one more update on this page at the end of the day, and for now no other reviews need to happen for awhile. This very exact same move should have happened with the DJIA on a much larger scale back in 2009, when wave two in Primary Primary should have kicked in. Elliott Wave Principle is scalable as all logic in this small of a degree is applied across "all" degree levels. Just because it may be Minute degree or Primary degree, the logic is always the same when I count down 5 waves.
I regularly look at all the gold indices, and even though there is a lack of chart data, all the gold indices and ETF's must fit with the bigger picture like the Barron's Gold Index. Bare minimum, I need the location of my previous 4th wave in Cycle degree, which ended in late 2000.
I am going to talk a bit about the time cycles that are showing, and draw some conclusions from them. We are in a 20 year cycle that started in 2000, and which would end in late 2020. From late 2000 to the 2008 bottom, clearly shows a Fibonacci 8 year cycle. Backtrack, and this 8 year cycle breaks down to a 3 year, and a complete 5 year cycle up, and then down, into the Oct 2008 crash.
From late 2000, we can see the complete trashing of clean Impulse waves, except for Minute degree runs. Robert Prechter saw these waves as a bear market rally, and never made any buy recommendations that I could remember.
he was not excited enough to turn bullish. His gold projection was still a bearish wave count, as he still figured gold would crash down to $150. Needless to say it was the last time that I listened to this GSC degree wave counting crap. Missing a bull market with Elliott Wave is the worst mistake we can make, as missing a bull run is the same as losing money!
I am working gold stocks as a giant Cycle degree 5th wave diagonal, but it is not an ending diagonal just yet! Ending diagonals are very specific patterns, where the 4th wave decline "must" break into wave 2, but never below it.
All the choppy waves can be explained once we look for the diagonal connections that dictate the, (ABC1,ABC2,ABC3,ABC4,ABC5), labelling format.
This same count can also be considered like a (33333) count, but it belongs to the Impulsive side of the family, otherwise know as Motive waves. In 2005, at my wave "A" in Minor degree, I used my first "WXY" wave, which looks great on the surface, but there is an extra wave there, that technically turns the triple zigzag into a triangle.
This brought my wave 3 to an end early, and the resulting 2008 crash produce a flat crash which I am trying as an (A) wave crash in Intermediate degree. Major "A" wave bottoms are always buy signals. This changes the dynamics of our present 13 year down cycle year, into a potential expanded flat as well. If this is the case, then an all time new high will be reached in the future, as this expanded flat is looking like it wants to be a running flat. Our present 5 wave diagonal "C" wave decline, would finish this wave count. My goal is to subdivide all my Cycle degree waves down to a minimum of Minor degree, and all Minor degree waves two degrees below that. If Minor degree moves cannot be confirmed by the markets than, I don't consider them complete and they remain unconfirmed.
This brings us to the present, where we still could be in a 4th wave correction, in Minor degree. We have had new lows in gold stocks, but no new lows in gold, helping to confirm a 4th wave rally still to come. Since the decline is diagonal in nature, then the 4th wave could blast right back up to my wave two, before it proceeds to crash again. Gold stocks may not be this energetic, but gold and silver sure can be. The bottom in gold stocks should sync up to the inverse top to the USD, so we have some time to go before that all clears up.
The diagonal choppy wave structures can also be explained away, with the stock mania behaviour, as gold investors were actually competing with the cash that was heading back in and out, from the general indices. In 2011 this stock mania kicked in with gusto, as stocks roared and gold crashed, as the US dollar rallied.
We are going to run into this a lot more, and I am watching it to see how it behaves when the general indices start to crash.
We are getting late in the year for a wave 4 bottom in Primary degree, but 2013 could end on a gold stock high note.
I have not found any Cycle degree wave 5 top in gold stocks, nor have I found Cycle degree wave 5, in any other asset class as well. This is a constant reminder that there is no such thing, as SC and GSC degree wave counting in our world today. When SC or GSC degree claims are being made then at the very least, they should get confirmed down to Minor degree levels. Despite 10's of thousands of Elliott Wave Code breakers at work 24/7, around the world, they have not been able to confirm a single wave count completed in any GSC degree correction.
Obviously AAPL has blown my last wave count out of the water, and when that happens it sends a clear message that Apple is on a path that was more than a bear market rally. It took a little over 2 months for Apple to trash my last wave count, forcing an instant wave count review. The choppy new high in Sept 2012 is a classic example of what an expanded flat can do. Majority of expanded flats are completely ignore by all wave counters today, even though they are one of the most important wave patterns in my core set of 5 patterns that make up the Elliott Wave Principle. I have counted that 2012 peak as an expanded flat many times, so for now it's back. What an expanded flat means, if it is identified correctly, is that the all time high "B" wave, will be exceeded in the future. The "B" wave, which is Intermediate degree, would take a Primary degree move to cancel out.
All gaps have been closed, or have they? One little gap, up just around the $700 price range is still open. From the potential all time high "B" wave, Apple went into a nosedive, which no expert analysts ever imagined could ever happen, but it did. Experts were calling for $1600 price level. At one time their forecast's were out by $1200. From a massive euphoric bubble high, Apple crashed and now has seen a little over a 7 month rally, can it see 8 months?
From the April low, it sure looks like a wave one up but, I don't think it is, as a diagonal 5th wave could be in progress and we could be finishing a zigzag, into wave three in Intermediate degree. If Apple gives any hint that the next decline is going sideways or is choppy, then Apple would create another leg up, even creating all time new highs.
There is also a little gap down at the $420 price level, which will definitely get filled in the future, but for now it should remain untouchable! Virtually after every vertical rise or peak, is when it is time to expect a correction. All this could last well into 2014, as we are starting to run out of time for this year. We had a low for 2013, and now we need a high for 2013 to match.
Holiday shopping this year, and the 2014 hangover could set the stage for another major decline in Apple.
Wednesday, December 4, 2013
I have mentioned it many times, but it deserves repeating as many readers may think that it is an afterthought when I draw a bullish picture. I always draw the charts to the bullish side when everybody is bearish on a sector, then when this bearish sector blows it's top, then all the charts are drawn to the downside.
This is all done in foresight not some delayed reaction. What good is any Elliott wave if we do not use it's power to look ahead. Elliott Wave analysts miss more major turns in the markets than any good season contrarian does, who has no knowledge of EWP at all. The crash bottom in stocks in 2009 is one example. Having a bearish wave count at such an extreme bottom as in 2009 is the very last wave count we should have. Yet every major wave counter had a bearish wave count.
When the planet is bearish on the gold sector like they have been, then this is not the time to be bearish on the sector. Look at bear market bottoms, as fertile breeding grounds for all bull markets. Contrarians know this very well and they are always on the hunt for sector crashes. They are in "before" it hits bottom not after. Analysts just down graded gold so just to prove them wrong, I am sure gold and gold stocks can mount a surprise rally. Price forecasts by mainstream analysts are useless as they can "never" say which way it will go once it gets to their forecasts. It is a stupid game they are playing only to justify their jobs, nothing else.
Lets look at GDXJ. Did anyone predict a gold stock crash this deep at the top in 2011? I sure did not, but I became very bearish in 2011.
All investors are so obsessed with "price" that they are blinded by the bearish news. Can't see the forest because of the trees is what comes to mind, when the herd is bearish at the bottom. Elliott wave analysts are just as bad, as they wish to get that last little wave to catch a bottom. Give me a break! It is a sad day in Elliott Wave Land when a wave count scares you, or a wave count keeps you out of the picture when most seasoned contrarians have loaded up.
By the time the public has any idea that the gold market is going up, most contrarian accounts will show huge gains, and wave analysts are still playing with a wave count.
The chart above I show my standard breakdown of the Fibonacci whole number price levels, which has a ratio of 1.618 from one level to the next. When GDXJ jumps from $34 to $55 you would see a 60% jump. A 1.382 jump from $34 gives us about $47. In essence $47 is a Fibonacci ratio. With the GDXJ the $144 price level also has a gap, adding to the magnetic power of $144.
Let's say GDXJ creates a false breakout and only goes to $40 before one more crash to the downside. It changes nothing to the entire bearish picture if we can analyse the gold stock crash well enough. If there is even the slimiest chance that the crash was an "ABC" crash, then this is classified as an instant correction, with my understanding of Elliott Wave. Having a bearish wave count and figuring out at what "price" to get in is silly and very counter productive. If a fake run turns due south again my bet is the emotional traders will be selling like mad again, yelling "downside breakout"! Selling at record lows because of some phoney preconceived price level break, is the most asinine thing to do. Selling out at the bottom of an "ABC" intermediate degree crash, is the biggest mistake that investors make, and they do this over and over.
Any market that is so hated as gold stocks are right now, always get the eyes of the contrarians, as they have a good understanding of the cycles in play. Any good wave analysis should be indicating the same thing.
As I mentioned gold stocks have a 5 year cycle which has now come full circle again in 2013, so expecting to take a few years up in this cycle would be realistic.
So far this decline looks good as the DJIA plunged lower this morning. It looks like a pretty 5 wave decline with a 4th wave expanded flat also included. You can not get away from expanded flats, so if we are ignoring them in Elliott Wave we are missing one of the most important wave structure going. This may put us at a wave one with a potential bounce in the next few days. Friday could be news day that may send the DJIA in both directions in wild swings, so be prepared for it.
The bear attack started within a day of the new moon, and this may run for another week before a new solid bottom may be achieved. It is critical for my way of wave counting, to be clear on the first set of any waves in any turning, as the type determines the staying power of all trends. Any leading 5 waves always point to a bigger decline, but a 3 wave decline spells trouble as that can turn quickly back to the bullish side. Any rally that develops and it is choppy with no clean 5 wave structure, would be a counter rally and it will resume it's downward trend.
I can adjust all the wave counts to where we may have a major top completed, but it' is aways wise to keep a bear trap wave count handy. I have about three alternate wave counts up, and they are not dead, but they would just be resumed if need be.
I have mentioned that I will only use 5 core patterns in all my descriptions, which I have been doing for a long time. Impulse,Diagonal,Flat,Zigzag and the Triangle. I will never use any other ones because all other complex wave structure have these 5 waves as their core. (WXYXZ) waves are the same as any (ABCDE) wave structure but I never use these waves as they are not specific enough to give me location pointers. Every pattern should have a pointer! I know when I run into a triangle that the odds are, I am in a "b" wave or a 4th wave.
I know there may be a few forex traders reading my gold related posts and the chart below is from a $100,000 virtual practice account that I started to play with. a month ago. I also show short positions in the SPX 500 and the Wall ST 30, (DJIA) all in the green this morning. The W Txs Oil unit is also a long position.
I only like to work from a screen that is simple and uncluttered, so I can see all the spikes as clearly as possible. The trade above started around Nov the 14th and at the $1286 price level. I kept adding to my positions all the way down and at one point I was down well over $1000 dollars, just a few days ago. (draw down)Now the XAU/USD has popped out of the gate, and even before it hits my first short, the XAU/USD trade shows I am in the green. It shows green before any major rush to buy gold is even showing.
This is what happens when you get in before the bottom, and it is how contrarians buy gold stock related ETF's with GTC ladder of standing orders. The XAU/USD can work just like any ETF and even better than GLD. I have started with $100,000 virtual money and if they allow me to keep it open, I may be able to double it in a year or more.
The best place to practice buying low with any Elliott Wave is to do it in a virtual account first. I also did this inside a virtual futures trading account where I ran a $50,000 account up to over $100,000 twice in about 3 years.
This is all done from my iPad so I do no Elliott Wave analysis on it at all. I do that off line.
I started this about a month ago and so far the account was up $3000 before these sets of trades. These sets of trades already show I am $5000 in the green just a few minutes ago.
I always laugh when I talk to a virtual trader when he says he has made thousands of dollars in the trade, All I ask is, "so you mean you have sold out"?
Their response is, "no I have not!" , My response to that answer is, "You have not made a dime", and they look shocked from the answer. You really do not make a dime until the green portion is captured and your trade is closed.
Just because any account is up means nothing, if the money is not capture or taken off the table.
My last smaller wave count turned into what looks like an "ABC" rally. Sometimes it only takes a Minute degree or less of a move, to tell me I am in a different wave count. By moving my "A" wave in Minor degree over, it changes all the dynamics for the decline. I think the USD is set to plunge as short but deeper plunges come with very little warnings. The first part on my early Nov decline has an Impulse waves in it, so a diagonal decline could still be in progress.
Sudden moves down in the USD can happen for many reason, as shopping in Dec could flood the streets with money. Year end stock selling also can have a big effect. Analysts never talk about the cash that gets dumped into the Christmas Season every year. They all think it's gold buying from India that is doing it. After the 911 attacks billions of USD in cash, got dumped, as billions were sucked from piggy banks at home. A few months after this happened the Fed had to shutdown coin production, due to the coinage that flooded the streets. Imagine losing your job in a money printing factory!
The commercial traders are still net short by a wide margin, and this does not force me to look for a bullish USD wave count. This is all bullish for gold in the longer run. Now if the USD declines or has a "mini crash" and commercial traders switch to being net long on the USD, then I would look for potential bullish USD wave counts.
Since 2008 the USD has not made that great looking top, that I would expect for a 4th wave top in Primary degree, so I don't think the USD is finished in doing that. It is the decline of the USD that will give boast to the gold rally which may be short lived.
Tuesday, December 3, 2013
This is my second posting today, but I am exploring, that my 4th wave is not completed, and the new all time high is now a "B" wave top in Minute degree, and therefore the DJIA could plunge down to the 14,500 price level. This would be a "C" wave decline and if that ends up being true then I am sure the "C" wave we should get, will be diagonal related. I would call this potential flat with an expanded "B" wave. I tried to fit this "B" wave top with a triangle as well, but I will not post that for now.
This would be the smaller version of what we had in 2010 and 2011. My support down at the 14,400 level has two sets of 4th wave bottoms, with the first one containing a triangle. I am working in Minor degree in which I always like to have a minimum of two lower degrees to confirm it. If the next part of any decline looks like a zigzag then we are in an expanded triangle going down to an "E" wave.
If this ends up being the case, then a rocking 5 waves disguised as a zigzag, can blow the top of the DJIA one more time. We could see DJIA 18,000 yet!
The DJIA is still tied to the solar cycle progression, which shows up on the moon cycles. If there is another peak of solar activity to come, then the DJIA can also stay higher. I will talk about this with my next Solar Cycle 24 update, as I have been counting sunspots everyday, for well over two months between moon cycle dates.
I know many price forecasts have been thrown around since 2000, and frankly my wave counting in Cycle degree confirms them all. You want 21,000, 22,000 30,000 or DJIA 1 million! I will say, "sure" it can happen! Elliott Waves have been going up for well over 300 years!
What they will "never" ever be able to tell you is the route, or the path the DJIA will take to get there!
DJIA 1 million is a mythical wish list that may happen 100-200 years from now, but my bet is we are going to see DJIA 5500 before we see ever see DJIA 25,000!
I am already working the January Crude oil futures contract, and there is not enough activity to display a daily chart at this time. Dec contract trading is already starting to slow down, so I go to the next busiest month. (CLF14)
It looks like crude oil could be making a turn that may be more than just a bearish rally. Worst case we are heading up for another very small "B" wave or we are on a bigger trip potentially filling out a triangle. Nothing has shaken the idea that the real wave count in crude oil is anything but in Cycle degree, and that the longer term Cycle degree wave 5 is not anywhere near in sight just yet.
This rally could push oil above my $115 target price but we may still not be heading for the big top just yet. I may have to move my Intermediate degree wave 4 back into a location, but crude oil blasting much higher is not off the table. When oil blasts much higher than the top of my channel lines, then it will be time to adjust the wave count in crude oil again.
Oil is a fundamental indicator of sorts, as if a strong recession were in the cards, then crude oil demand for driving should decline. On reason why that may not happen just yet is due, to the inflation creation of the fed. Crude oil is pumped up artificially with inflated US dollars.
I think commodities will be the first to cross over into the mythical world of SC degree wave counting, and my readers will be the first to know when it does.
Otherwise this blog has been free from bug infestations like the SC and GSC degree viruses. Cycle degree wave counting is like a "no fly zone", where "any" SC and GSC degree bugs will be shot down and terminated.
I thought I would add this long term chart again, as it is important to know where the wave count is coming from, and where my wave count is eventually going to go.
I am fully aware that the real top may not be in, as that is always what we have to battle with, in the shorter term. We still could be in a triangle or a flat to finish the bull market, so those who are short must be prepared to close off shorts and wait for another day. A counter rally may happen in the next few days, and if it blasts up into my wave 1-2 then "ABC" wave counting will automatically kick in. At any turn in any degree I use my inventory of 5 waves that make up the core patterns in the Elliott Wave Principle, and I mathematically go through the process of elimination. First, I eliminate the patterns that cannot happen, which we can eliminate two patterns very quickly most of the time. Second, I figure out what I can have, specific to the major top I think I may have. What we have left, may be the right pattern. We are coming up to our first resistance previous 4th wave, and if the down cycle in stocks is to continue this support will not last.
Since I have only 7 waves in my wave three, this leaves it open to have wave 3-4 and 5 completed. When we hit any type of triangle in any "B" wave then a degree change will be necessary. The Nasdaq is not dropping like this, so a diagonal "A" wave may also be forming. If any "good" fundamental news comes out at any time, and the markets react wildly to it, and then closes lower than the announcement time, then we are firmly over on the bearish side. Good news in a bear market always has a limited effect. Besides fundamental news is extremely lagging in nature and the markets do the opposite anyways. Did fundamentals keep you out of the game in March 2009? The majority were running for the hills at that time.
When bearish news, like taper ending babble talk, no longer pushes the markets down, and prices recover after the bearish news, then a bearish decline will be coming to an end. You do not need Elliott Wave to figure this out, as it is pretty common knowledge for seasoned contrarians.
Updated Dec,3, 2013 1 pm PST
This is a snapshot of the Mini DJIA starting with my wave 4 in Minor degree. Just by extending one wave count, I can see a zigzag right now, This could be the start of a triangle or the leading "ABC" in a flat. Right now we have such a clean top that it is too easy to be true. Easy wave counts are seldom true, it's more like they are never true. So easy wave counts can be eliminated quickly from the choice of 5 patterns. I have three choices in a correction, a zigzag, flat or a triangle. If this flies then DJIA 16,200 will get broken, and if the last 5th wave extends again we could see DJIA 17,000 by years end!
Lets say we get a small upward correction, and then the DJIA free falls a short distance and ends as a spike, then chances are a bullish correction has finished. There are many that are trying to short this market, and they must have buy stops in place above their shorting price. This can create a domino effect up the stop ladder chain, all the way up to new all time highs. Also traders will be waiting just for that to happen, as they smell an upside breakout setup!
Of course we can crash right down to my 4th wave bottom if our present top is a "B" wave in Minute degree. Then I would be looking for a potential diagonal "C" wave decline to a triple bottom.
When any asset class is making new bear market lows, then this is usually a downside breakout, and it is what traders are trained to short. It is also a true visual representation how the majority feel about gold stocks. We can have many different opinions about it, but in the end gold stocks go up and they go down. I like to be a bit more specific about it, as markets always go up and down. They swing from pessimism up to optimism, and all the way back down to pessimism again. They do not do this in some disorderly, or haphazardly way as they are extremely structured when we apply Elliott Wave analysis to the charts. From overbought to oversold conditions is the normal cycle in stocks, or in this case the gold stock index. The gold stock index behaves in a different way as nobody is trading it directly, like ETF's are. Gold ETF's like GDXJ will have more wild emotional swings to them, as traders panic in and out of ETF's all the time.
XAU is particularly the worst choppy gold index you can get, and it has no clean 5 wave sequences, except in Minute degree. When the gold bull market began, Robert Prechter was yelling, "it's a bear market rally". I saw the same thing at that time, as not a single move showed clean Impulse waves, which you would expect in a bull market. How wrong can we be! Needless to say, I no longer follow Prechter's wave counting methods. This was another great failure in the Elliott Wave Principle, to not detect a substantial bull market before anyone else can. They also screwed up the gold forecast as well, keeping many out of the gold market when they should be in. Elliott Wave Principle is the best forecasting tool on the planet, but any Primary degree bull market should never be missed with any EWP analysis.
The main reason that the XAU is so choppy, has to do with the stock mania effect in a smaller scale. Gold stock investors were fighting the stock bull market at the same time. If we go back to 2003, we can see a complete cycle in gold stocks, up and then down again, spanning about 5 years. Each 5 year bottom has produced a gold stock bear trap, and if we add another 5 year cycle to 2013, we end up with 2018 as another potential bottom in Gold stocks.
We are now coming up close to the same price level as in 2009, and still gold investors hate the gold stock sector. If nothing tells you that this gold sector is being oversold, than you will miss the impending next cycle in gold stocks as well. You will jump in after the volatility settles down, buying after the bottom, but in reality you are leaving huge gains on the table, and you will end up with the same results as the majority of average investors.
After the 2008 gold stock crash, the rally returned to it's usual choppy pattern, barely pushing to new highs in late 2010. For three Fibonacci years, gold stocks declined completing another 5 year cycle hopefully this month.
From the top, in early 2011 the XAU went sideways in a very choppy fashion, for about 1 year. The XAU finally succumbed to selling, (or lack of buyers), in what looks like a pretty good 5 waves, part of an Intermediate degree "C" wave decline. I call the gold crash from late 2010 to now an "ABC" flat crash. It's not an expanded flat, but it has a triangle as its "B" wave in Intermediate degree. Any "B" wave can produce a triangle but they also dictate a degree change once the "C" wave is completed. A minimum of one degree higher than the "B" wave must happen. This could bring us to a potential deep 4th wave bottom in Primary degree.
When I see any type of an "ABC" crash, it is also forecasting what can happen after this "ABC" crash completes. 99.9999 percent of the time the entire "ABC" decline gets completely retraced, by 100 percent or more. Even the 5 waves of "ABCDE's" in a triangle get completely retraced. (WXY) waves included!:)
Sure there may be more downside left, and the gold sector can still make a few violent counter moves, but you do not want to be left behind when the next bullish gold cycle starts.
Monday, December 2, 2013
Every time that the gold sector gets hated this much then this is the exact time when the seasoned contrarians are buying. You will never hear these contrarians bragging on the internet as the majority think they are crazy anyway. They said the same thing in the gold stock crash in 2008, and I tell you it was twice as fast hitting the bottom at that time. The only way to catch the bottom of any crash is to enter softly, with small orders, not your entire commitment at one time.
If investors have no sense in when something is becoming oversold and are selling this sector, then no amount of Elliott Wave analysis will change there mind.
To catch a crash and an Elliott Wave count at the same time your orders have to be in a long time ago. It is virtually impossible to hit the exact bottom just to try and avoid seeing a bit of red in your gold stocks. When gold stocks are heading down and breaking to new lows this is when the orders kick in.
It's called a ladder of GTC orders. I will use GDXJ as an example and lets say you want to buy 1000 shares of GDXJ! No problem, put in the order in the evening at market, and you will get your 1000 shares instantly before you wakeup in the morning. Then what happens is GDXJ makes a run and your account is in the green, and you wish you had more GDXJ.
One quick bounce and GDXJ resumes its downward crash again, and now you are down 30% on the trade already. By this time you feel bad, and you may even be stopped out. A ladder of orders may have 100 share lots with a 50 cent spread, and you may have ten orders in. While you are away you will add to your positions when GDXJ dips some more. This would correspond with the last 5th wave in Minute degree. This will not work for Forex traders as in Forex you always get stopped out. You can never accumulate positions with confidence, as good as you can with ETF's. For Gold Stock investors that have never concentrated on the low end , they will be scared shitless from buying into a falling market. This is the last fear that any Elliott Wave should give you, but sadly enough it does. Selling or getting out at the end of any "ABC" crash is the worst mistake we can make, but the public does it all the time. They buy high and sell low!
If any Elliott Wave Counts do not teach you in always being prepared, then you are missing the power of Elliott Waves looking into the future.The whole idea is to look ahead and be prepared. GDXJ is down and that represents the majority being bearish on gold stocks today. The difference between the emotional day traders and longer term contrarians is the confidence they have in reading the markets and in the small positions they take.
Contrarians are in "before" the bottom, they do not jump on the bandwagon like the majority do. They will also show good gains by the time the mainstream gets back in.
Once I looked at SIL, then GDXJ also has a similar pattern, it's just longer due to the inverse stock split. Now we have a $180 bull market high, and a crash that is very choppy and erratic. I can draw trend lines, but my wave 1 and 2 are far out and far too low. Basically the entire gold sector crash has no great looking Impulse. It does not contain a true Impulse because the entire crash is an "ABC" crash of the Intermediate degree variety. Just the fact that the entire decline could be a wave 4 crash in Primary degree could send GDXJ flying back up, retracing the entire gold sector crash. There are several open gaps on the trip down which have arrows pointing to them, with the top being at $140. Both big gaps will get filled in the next bullish cycle, with the same degree.
Can we still get a "D" wave rally?, sure we can, but I am sure the insiders will be selling at that time as well. Primary degree declines and Primary degree bull markets is the name of the game in Cycle degree wave counting. If all the other wave counters saw a bullish wave count, don't you think they would be screaming to the world to buy gold stock ETF's?
A bear trap is a bear trap and the gold stock bears are giving GDXJ away. I am sure the contrarians are saying, "thank you very much"!
I managed to get the pop in the USD that I was expecting, but these, moves are only as good as the larger wave count in the US dollar. All these moves could be part of yet another triangle in Minor degree with the USD heading to an "E" wave. Since this last rally was not an Impulse, all the gains will be wiped out on the next move down. When any decline in the USD is an "ABC" crash, the USD would have limited downside this time. Anytime I have an "ABC" crash I always expect a full retracement of 100% or more. The only time this may not hold true is in a triangle, yet in the end all 5 zigzags in a triangle get retraced, by 100% or more.
I am looking for an Intermediate degree "E" wave top, which once completed will give us a sustained US dollar downward trend. Without a sustained USD downward trend gold cannot go anywhere fast, as even a fake rally in gold may still be in the cards. There is a zero chance that the USD is in some type of GSC degree bull market as even my bigger 4th wave in Primary degree has not completed.
It may not show it but Bitcoin made close to a $400 move today in a very short period of time, as measured from the top of the wick to the bottom of the wick.
I see Bitcoins being used more and more, and it may have staying power if the governments to be, leave it alone. Bitcoin is going to be very volatile and you should expect that all the time. I have a Bitcoin Donate button on the sidebar of this blog so feel free to donate any Bitcoin amount to keep this blog going.
I have made a few changes with the Mini DJIA chart as I moved my wave 3 up one peak. These can leave it open for a potential triangle in the wave four position. If this is the case then the downside will have a limit to the 14,400-14,000 price level. Our present all time peak can now be a"D" wave triangle top in Minute degree. A single expanded flat can also be in progress making our present high a "B" wave in Minute degree. 5 waves down should confirm the Expanded flat, but 3 waves down will confirm a triangle.
For the bigger downside effect to take hold, we need more evidence of lower highs to show. If the bottom drops out of the DJIA and adds a long spike, then this would also confirm a potential turning, and a new all time high will be achieved once again. It can keep doing this for some time until one day the Fed says they are going to kill all QE support then the stock market will come crashing down again.
Stock mania is a expression I use for a specific phenomena, when gold declines as stocks roar, with the USD joining the bullish stocks. It is not about how good the economy is going, its all about who has tied up the cash! In the 1929-1932 crash the USD never imploded it roared to life as all those printed dollars were destroyed, and little was left to run the economy. From 1995 to 2000 all the printed US dollars went directly into the stock market putting a huge demand on the dollar, which in turn killed gold with the final nail in the gold coffin in 2000!
In general you will never find or run into a gold mania, they do not exist in commodities, mainly because all commodities run on "Fear". Stocks run on "Hope and Greed".
When you look at this chart we can see that SIL is pointing down. This tells me that the majority of SIL investors are bearish. Since when, were the majority ever right? We can see the volume in SIL dramatically drop off after the 2011 peak, and the talking heads will tell you that the volume at that peak is a good thing as investors are jumping in! The smart contrarians are dumping to the crowd that loves to buy high.
I looked at this chart for a long time, before any Elliott Wave analysis, and it is the top that is a major roadblock to a better fitting wave count. We have three major peaks in SIL, and until that is sorted out any wave counts will not be worth the paper they are printed on. I have never edited any existing wave count but always posted a fresh wave count. There is a reason for this, as it works like a virus cleaner when I start a new chart. Elliott Wave is full of viruses and they have many names, but the most popular one is the GSC2.1 and the SC 1.1 degree virus.
If we head back up to 2011, the crazy patterns around that top started me to look for an expanded flat. Once I did that, then the rest of it started to make sense as well. It may be the Dec 2010 peak that is the real top, with the expanded flat heading down into what looks like another zigzag. Then in 2012 SIL made a rocking 3 wave move up. Do you remember the fundamentals that made that move? Do you remember the fundamentals that made last June July's move? Do you remember the fundamentals that crashed the SIL market in the first place? If you cannot remember than how can we use fundamentals to forecast with? Yet many wave counters regurgitate fundamentals on a regular basis.
I have mentioned it many times, but the expanded flat we may have in SIL, is one very powerful forecasting wave, actually every Elliott Wave has forecasting abilities built into it. These expanded flats happen frequently, and most often happen in any 4th wave correction, or anywhere a correction is allowed. When that "B" wave travels to new highs, and then the markets crash to record lows, months or even years later, that wave is forecasting that SIL will eventually surpass that top of $31! Here we are at bearish bottoms, and the $31 dollar price is flashing at me!
Since it was also a Primary degree wave three top, it will take another Primary degree top to exceed the 2011 highs in SIL. Anytime SIL dips to new lows it would be a buy, as many contrarians are in this market already, and the wave counters will be left behind again, just like in late 2008!
All the wave counting in the world will not help those that refuse to look at buying low, or love to play in an asset class that does not allow you to hold a position for months. It makes no sense to allow yourself to be stopped out when we are at record lows already.