Tuesday, January 27, 2015
This is another pattern where I would be very bullish on the US dollar even though the USD has still dropped further. Stocks all seemed to have made a correction this morning as most indices gapped down and the VIX gapped up! Some of the durable goods orders did not come out as expected but these reports are lagging information from the strong us dollar. In other words it should not have been a surprise for orders to slow down.
The markets tend to take most of the month to fill around and then when it comes to the end of the month they can violently change in a short period of time. In response to the US dollar decline gold reacted perfectly but a correction should take place. If my bigger correction is already finished and gold is impulsing, or should I say, "Gold still has a pulse" then the $1280 price level would be support! That would be the obvious part of it but I also have what looks like an expanded pattern where no pretty trend line is going to give it support. I found out the hard way that easy and obvious wave counts are not the right ones as the market hands out those types of patterns by the dozens.
The markets always act to fool the greatest numbers of Elliott Wave analysts so simple or obvious wave counts are never the real ones, besides it's where you count from that is important.
Monday, January 26, 2015
There is a very high probability that gold has just suffered a triangle 4th wave correction. Gold came very close to my $1275 price target but prices never hold unless our wave counts are perfect. One thing about wave patterns is when they are over they are over. Looking back in hindsight to the Dec $1170 bottom it was clear only a few days later, but at that time it was impossible to be bullish.
There is no guarantee that any price will hold and in the short term gold can become very bearish indeed. If we reverse the gold/oil ratio and just figure out where gold should be if we were at a normal 14:1 ratio right now, then gold should be at $637 today! That would be pretty hard for gold bugs to understand but it may be one of the main reasons why gold has been so lethargic in this bullish phase. Any bull market in gold or any other asset class that does not demonstrate some nice clean 5 wave impulse waves is open to being in just a big bearish rally. Bearish rallies can be between 60 and 80% of the net decline, which would still give us a $1600 gold price if we only had a 60% bearish recovery.
In order for me to be able to switch my bottom "B" wave to a potential second wave, gold would have to move more dramatically as we would not even be near any wave three top right now. It would be a Minor degree 5 wave run I would be after, but I am struggling to make that fit.
Our next big resistance price level for gold would be the $1320 price level, which is a far cry from the $1132 bear market price low we have achieved so far. What is that $1132 price level? I sure can't confirm it as a full fledged 4th wave bottom as silver did not confirm it and many of the gold stock ETF s also did not confirm it.
GDX has also backed off considerably but it has several gaps still open below present price levels. The other good thing is that GDX created an open gap on the way down. There is no guarantee that the gold stock decline has completed as GDXJ does not confirm GDX. When something does not confirm each other like two different sets of gold stock ETFs have two sets of different bottoms then this puts them each on separate wave counts. GDXJ would only have to fall another $6 from present levels and then it would see another record bear market low once it reached $21. It is still a fine line between a bear market rally and the return to a full blown bull market.
My updates are going to be very thin this week as I am down with a nasty flue bug and have not been able to create good Elliott Wave counts.
Even though many of my recent price targets with the US dollar have been achieved, it still may not be finished as we fight through another potential two zigzags, one down and one more going up.
What I am looking for is a longer term down trend as that's what's going to give gold the big boast that is required to maintain it's bullish phase. For the US dollar to find it's strong top then all other inverse currencies should also find their bottoms very close together.
My neighbour is convinced that the Euro is doomed as he is into all the conspiracies theories, but then you can say that about crude oil as well as crude oil crashed just like the Euro did. The Euro is not going away anytime soon, just like our Canadian dollar is not going to disappear.
The US dollar "may" crash down to my bottom trend but there is no requirement for it to go that low. My wave two bottom is the max for this wave count to still work.
Saturday, January 24, 2015
I still have far too many variables in the short term to give a good wave count but what we do have so far are lower highs which started back in late 2014. What this means is the Nasdaq has been in the start of a potential bear market for over 7 weeks, yet the analysts make it sound like the Nasdaq is still in a bull market. When I look at Apple's chart pattern we have something looking about the same as the Nasdaq. Apple sure looks like it still can push higher and the only question is when.
Since Dec all the patterns look corrective in nature matching Apple's sideways corrective pattern. If the markets produced a short free fall ending on another spike, then I would turn bullish very quickly. It would be something if the Nasdaq was still heading to 4800 and an upside breakout.
Every downside breakout never lasted and proved to be a fake, just like most of them do.
Why should the Nasdaq be the only index that has "not" cleared any 2000 highs while others have done it several times, especially if the world is running on technology. The question is will the Nasdaq still create another leg up before it dies again? I think there is a good chance that it can and the correction we have just started will tell us more as my top trend line can still be breached.
The markets have refused to die as a potential triangle could be playing out.
It took this expert about 30 seconds to pan out gold until he could see some gold flakes. It takes about 40-50 flakes to make one gram of gold. One gram of gold at todays prices is about $41 US dollars.
Friday, January 23, 2015
Canadian Drilling Slowdown Threatens 23,000 Jobs; 'Companies Are Going To Die'
Here was a dramatic piece of fundamental bearish news which is the result of low crude oil prices and not the cause of low crude oil prices. This has all happened before including lay-offs in the oil patch and our crashing Canadian Dollar. This has now happened three times since I have been following the markets and many are saying oil is going to stay down and flatline. Not on this planet and with leveraged commodities. Many are complaining that demand in oil is not picking up! So what, all we need is for supply to dwindle and the crude oil price will explode.
Saudi Arabia's King Abdullah dies - World - CBC News
Crude oil barely flinched when the news came out but the media made a big deal out of it anyway. Crude oil went lower after the news so any bad news is already factored in. Opec oil policy will not change as everybody that can pump is pumping crude oil as fast and as much as they can. Where to put the stuff is the problem as many are storing it in super oil carriers and land based storage units.
The February 2015 contract is dead which forces me to look at the March 2015 contract. Oil is still pointing down and even may go lower, but that is what the majority are expect crude oil to do. Short term they may be right but longer term it is the gold/oil ratio that is the major indicator to watch. I have gone over this gold/oil ratio dozens of times recently and if you still don't understand it then I suggest you track it for a few years and fully understand what the two extreme numbers are. As a normal ratio I use 14:1 which means crude oil should be around $92 per barrel.
All these short players that think this trend will continue are in a trap of their own doing as above any oil price are many "buy" orders. These buy orders can get trigger very easily as they produce the spikes we see. Of course sell orders are stacked below but they would be selling at record lows already.
We have not seen a new record low in the last 10 days but the media sure make it sound like it has. Who on this planet has not heard about the oil price crash? Only some lost tribe that just landed on earth may say, Yup, short the hell out of crude oil. The point being is, once the hype is all in one direction, being broadcast by the majority, who is left to come in?
I know this may sound silly but it is the intensity of the hype that is important, not the news itself.
Now that we have another peak we can draw fancy lines from, we would be seeing a Scalene type triangle from the bottom up. In order for the gold stocks to be in a true blue bull market we constantly need higher lows to form to maintain this so called bull market. Of course there are many false bull markets that can go so high it just boggles the mind when they retrace 100% or more.
The good part about the correction is that a gap opened on the way down, but we have several open gaps below, with the worst one being close to the $20 price level. GDXJ did "not" confirm GDX as they are on a different path when we count the waves. GDX fits well with the HUI which also had the same type of gaps in it.
We need a healthy correction otherwise this spike will get too long and thin and that would not be a good sign at all.
When we look at the US dollar weekly chart and it's amazing bullish phase, we can inverted and we would see the crude oil price crash, Or the Canadian Dollar and the Euro crash. Now that one price level I was after has been achieved it quickly becomes irrelevant and no longer has meaning. This 96 price level was part of a long term trend line and the US dollar has already started to back off.
All the contrarian gold experts would be jumping for joy because the so called bull market in gold can really take off. I would like to say that but gold has acted very lethargically and oil just wants to keep pushing lower. If gold soared and oil declined some more then this would push the gold/oil ratio to an even further extreme from what we already had. At 28:1, we are breaking all records and if gold starts to make higher highs then oil must eventually follow, until the ratio becomes 14:1 again.
Even now the USD may still charge above 76 so this would still be bearish for gold/silver and oil.
Thursday, January 22, 2015
The US dollar is breaking past the 93.500 price level but it still would have to go further past the 94 price level. I am getting wave structures that are now overlapping themselves on a regular basis which are inverted zigzags. This indicates that one pattern is nearing completion, but we would still need about 1 full point to go, until the US dollar starts to face strong resistance again.
The worst nightmare would be that we just completed a running triangle. Much of the US dollar bull market is a run to a perceived safe haven asset class, which includes gold. Go figure, as gold and the US dollar seemed to be a safe haven asset class at this time. Gold corrected all right but then blasted right back up like the gold correction is over already.
We will have to see how much power the US dollar still has in how much it travels through the top trend line. Any potential blow-off can still cause the US dollar to spike as well.
At the 94-96 price range the US dollar is up against a major bearish trend line, so this will be important to watch.
Wednesday, January 21, 2015
Gold news has turned bullish on the most part but much of it has to do with a run to a safe haven asset class. This is what we have been told over and over every time the price of gold goes up. To put it mildly we have had a great run that as of this morning started what looks like a correction.
I have applied a very bullish wave count to gold as if we are going to see much higher prices like the contrarians claim we should. If the Dec 2014 bottom was a truncated pattern then I may squeeze gold into the start of an impulse wave pattern. To help confirm this, gold would have to travel much further as it is still far away from completing any Minor degree wave 3 peak. Gold would also have to break out from all bearish trend lines starting way back from the 2011 peak, in which it has already done so. It has done this with one single spike with very small corrections which I don't think can continue without bigger corrections.
The HUI and GDX both have similar wave patterns and they are both riddled with gaps.This does not mean that these gaps will get closed this time but if left open, will get filled at a future date.
Silver definitely did not confirm gold in Dec 2014, silver broke to a new record low, which gold did not.
I love it when many gold analysts try to give us a bottom support price but in this case I am sure gold will not be a willing partner. Bull markets, where there is even a slim chance that it is in a bigger bearish rally can cause corrections to go so deep that it shocks the gold bulls surprising even the seasoned contrarians. It would be more of a surprise if gold kept right on going because it would have to break through the top trend line again and again.
Good luck in trying to find a corrective bottom, as I have as many as three. $1275, $1255, and $1225 all make good previous bull market corrective bottom prices. Strange how they all end with a 5 and jumps of $20-$25. The worst case scenario from a wave counting perspective would be if gold keeps going up like oil crashed going down, relentless with barely a break. That would indicate that a potential "C" wave bull market is in progress.
Picking a price bottom that is not anywhere near a previous low is just a mythical number and means very little in the long run. Even worse would be in trying to find a bottom with a Forex gold unit if gold created another "ABC" crash. Any gold correction that ends up going much deeper than we all expect, sure would help to confirm that gold is in a big bearish rally.
Gold's next strong resistance price level would be $1320 and even then gold has to break this trend line with conviction.
This gold correction happened one day after the new moon date of Jan, 20, 2015 which it has done many times on previous new moon dates.
The anticipated correction has finally arrived and it happened one day after the new moon date. Any moon cycle dates can have dramatic effects on the metals as it has happened many times before. The problem is that many silver support forecasts may not work as this entire bullish run has been very suspicious. The bullish patterns also give us a clue that this bullish move is going to bring us many surprises. Many wave structures over lapped themselves which are never the best building blocks for a great bull market.
Silver created a nice spike on the daily chart which has no real support price level at this time. My best bet would be $17.50 as this is where the bottom bullish trend line is pointing to at this time. Of course $15.50 could be another price level that silver can bottom at. Calling for a price support level that has "No" previous bull market support is also a price picked out of thin air. Arbitrary rectracement ratios do not work just because everybody is using them. It boggles my mind how many people use Fibonacci retracement levels yet they can't pick a consistent level that works.
Just because silver has gone up does not mean it will follow conventional retracement levels.
Gold and gold stocks have started into a correction after a straight up vertical move. No move like this can be maintained for very long as good healthy corrections should always be part of a good bull market. Just because gold stocks have exploded in price does not mean it is in a real bull market. Fake bull markets can fool us for a very long time and until they start to correct nobody knows how deep they can go.
The top of my trend line should be support but there are so many open gaps in the HUI that even the bottom trend line may not hold. Jumping on a gold stock bandwagon when gold stocks are pointing straight up will always cause these emotional investors pain. The trend is not your friend in a potential bear market rally as these can turn on you in a blink of an eye.
At this time I will treat this as a correction and we need to see some clear corrective wave forming push gold stocks into the next leg up!
This will be another case where ratio retracements will not work. 20%,30%,40%,50%, 60% or even an 80% net corrective move can happen before gold stocks crank up again. About the only thing we are sure of is that this gold stock move needed a good correction and fundamentals be damed, as fundamental news is all lagging news.
Gold stocks need to show us a clear pattern of higher lows as they are the building blocks of Elliott Wave bull markets as well.
Tuesday, January 20, 2015
On the down move the SP500 broke to a newer low which now makes it an expanded pattern or a really bad ending 5th wave. There is lots of room for the VIX to move down as I have many open gaps still open in the VIX.Having the VIX gaps open below works like a complacency draw which means stocks can rally dramatically even in the short term.
Many believe that the markets are ready to tank big time, and yes this may be the case but then any rally would have its limits as we would need to form many more lower highs. At the 2035 price level we would meet the secondary high and that mythical lower high trend line. Lower highs can be very misleading when we are in a potential 4th wave as at best we may only get two of them before the market turns and roars back up.
Each index I cover can produce a different wave count for each one and these wave counts can contradict each other dramatically. In the end keeping an eye on the VIX helps to see a potential rally coming.
Crude oil has past any short term bullish scenario I had, but all is not lost if the present decline stops well above record low prices. With gold making a rocket move you would figure crude oil would tag along. No such thing as oil refuses to play the bullish game for now. With gold heading north and crude oil pointing south this pushed the gold/oil ratio around as well. We just broke a new record as the gold/oil ratio past 28:1 today. This is an extreme ratio that has not been matched since I started using it.
What this means is eventually we will get a massive crude oil move that would have to take oil back up to an average ratio. If I applied the average to gold right now, oil would be at $92 per barrel. Oil is massively oversold already but that does not mean it can't get worse.
There is so much unrest in the world today it feels like WWIII already. This can produce unexpected supply line problems as these terrorists love to blow up shit, especially somebody else's pipeline or refineries.
Nothing new and exciting has happened with the solar cycle but they have declared 2014 as the hottest year ever since the 1880s. Any global warming is always blamed on mankind, and yes man has done some serious damage to our immediate landscape. Deforestation, grass lands turned into deserts, with massive amounts of burning every year all across Asia and Africa. In order for scientists to have a job they need a problem so they can solicit funds from governments to finance their pet projects.
What is hardly ever mentioned is the Greening Of The Deserts projects being implemented in China and Africa. In Africa its called the Great Green Wall Of Africa.
If they implemented this everywhere then it would take as little as 10 years to see dramatic results and after 20 years you would never believe it that deserts could be turned back in such a dramatic fashion. Permaculture is the key and in China it is a way to reduce all the dust storms that get blown into the eastern cities.
The dust storms of the 1930s was also created by bad farming practices and those dust storms blew into New York as well. They stopped all those dust storms after that by implementing good farming practices all across the Midwest.
Our sun and its cycles have a huge effect on our stock markets and the late 2008 bottom is prime example. 1-2 years before any solar cycle bottom we should expect a market crash, followed by a 5-8 year bull market in stocks. Our recent stock cycle started in early 2009 and is still in the process of topping out.
In early 2014 solar cycle #24 may have peaked but another double top may still happen. There would have to be a big increase in daily sunspot numbers and that would have to be maintained for many months to pull off another new record high for sunspot activity. Either way solar activity is destined to crash into 2021 from which the next cycle will start from. A solar cycle bottom for 2021 would give us 13 years between bottoms, which is a Fibonacci number. From 2000 to about 2020 would be one complete 20 year cycle from which another 20 year cycle would start again.
Gold has blasted up but has started to correct just before the $1300 price level. So far on the smaller intraday price level gold is correcting and we have to see how well it keeps making these corrective looking moves. The bullish ride has been very choppy to say the least, even more choppy than anything we had during its heyday bullish move. All the gold stock related indices and ETFs are loaded with gaps which strongly suggest there may be a deep correction due. If this correction gives us lots of choppy waves down then chances are good gold will recover and then make another newer high past the $1300 price level. Gold has stopped just above the $1286 price level and has blasted back so we will have to wait and see if the counter rally has legs.
The US dollar has spiked close to the 17th but the decline seems to be a corrective decline which means one more shot at a higher high can still happen. The USD may end up dropping down some more before it creates another new high. I would like to see the US dollar closer to 94-96 before it makes a strong decline. Right now the USD and gold have been traveling together which does happen during a major trend change. With the Euro in turmoil it sure can make the US dollar seem like a safe haven asset class. Recently gold has also made dramatic up swings which indicates fear buying or safe haven buying as well. Much bigger wars seemed to be coming in the Mideast as Iran is sitting on Israeli borders already. France has already declared War on ISIL and Germany will be next.
The Swiss took of controls of their currency and it has created a nightmare with all loans in Euros.
The problem with buying under fear never lasts that long as fear cannot be maintained.
Saturday, January 17, 2015
Steepest Drop in U.S. Oil Rigs Shows OPEC Prevailing - Bloomberg
More drilling rigs are being shut down and our Canadian tar sands are reducing workers. Scaling back future projects and other bearish fundamental news will eventually cut into the glut of oil in the world today.
I searched and read many stories that all sounded like they were posted last week or so, but the stories were actually form the 1992 and 1999 world oil gluts. All the steps the industry is taking on a collective basis will eventually choke supply and kickstart the next bullish cycle. Prices will lead long before fundamentals start to change again as now we are swamped with crude oil bearish news.
At this time I am going to keep a very bullish wave count until it dramatically falls apart, like a "C" wave crash to a new record bear market low. Even on a potential 4th wave rally we can travel back to the $55-$60 price level. I use one indicator that has worked great for forecasting the price of crude oil and that is the gold/oil ratio. How many barrels of crude will one ounce of gold buy at any one time.
The question everyone is asking is how much lower can oil go? Some say $40, while others say $20!
Forecasts to the extreme are always made when the price is already at an extreme. The big question we should be asking is, "Where is the price of oil going to go after their price target gets hit?"
They will never tell you where because they don't know. They have no clue where the oil price is going to go after $40 or even after $20! Even this oil crash and the fundamental glut it created in just 6 months or so, came as a complete surprise to many experts.
During the 1999 world oil glut the gold/oil ratio hit about 25:1, which is an extreme ratio by any measure, recently we have had gold/oil ratios well above 27:1. This ratio has no choice but to find equilibrium and then travel above to where oil becomes expensive again. Expensive oil will get us to the 12:1 or lower ratio. We have a long way to go, but for oil to be normal right now it would be closer to $90.
Crude oil spiked over $51 and then took a deep crash that almost wiped out my bullish wave count.
At this time I am going to work a zigzag in Minute degree and it will get trashed instantly if the bottom trend line gets broken. I am looking to $55 or even $60 as the next strong resistance price levels, from which it can crash again. Even now oil could still turn and head south next week but any real fast move down could just be another 3 wave structure to a new low. Any three wave move to new lows can be part of a diagonal move, which is very bullish as well. Worst case scenario is that we are in a sideways 4th wave that will still take a long time to play out.
It is the big sharp decline that suggests that the crude oil is not going drag out or flat line. Statements like oil never seeing $100 are designed to pump fear into the contrarians that buy low. The real seasoned contrarians know what they are doing and never get swayed by these fear tactics.
Many believe oil price crashes and such are just giant manipulations games but they only say that when the price is going down. They don't care when the price is going up as then it is all about supply fundamentals. Crashes as oil has suffered happen because of the leverage in futures and it all has happened before.
I am more confident in saying that we will see $100 oil prices again before we will ever see the $20 price level.
Gas prices at the pumps have a bit of a lag time but in my local area prices have fallen below $1 per litre.
The media makes it sound like we have been getting lower and lower oil prices when in fact we have not seen a newer low in well over 5 days.
My faith in my largest degree is running very low, but for now I can still keep using Intermediate degree. Since the 2011 peak, The Euro has now created new record lows and on Friday created another bottom. It remains to be seen if the bottom will hold next week but the Euro is just starting to get to another previous bull market support base. All previous support bases looked like they meant nothing to the Euro players as terror fears grips Europe. The terrorists are bad enough to produce this fear but then the Swiss get into the act and cause some more currency turmoil.
Next thing you know it will be China that makes a currency announcement. Our Canadian dollar has also taken a huge beating and will continue to do so from a fundamental perspective as we are linked to the crude oil crash and now our housing bubble should also pop!
Finding safe haven out of the Euro is far to late already, as I am sure a huge counter rally will eventually take place. Commercials are net long in the Euro but not by that much as the trend chasers added to their Euro short positions.
On Friday the US dollar roared up and then immediately started to back off and decline. It was the decline that helped to push gold to the $1280 price level. All this is great but gold ended on a very nasty looking spike, from which we normally would see a correction or the end of a trend.
The US dollar started into a nice 5 wave looking decline, but this could be part of a diagonal pattern that should run into a brick wall, which must not fall below my wave two price level, but can dip well within wave two.
This would be the setup for one more, and also the last push to a new record high for the US dollar. The problem is that everybody that needs to know that the US dollar is in a bull market or that the Euro has imploded recently, is already far to late to take advantage of it. Buying gold when it has gone on a vertical move is the worst thing that we can do, but sadly enough the majority do it all the time. There is never any shortage of traders that just love to buy high, but there is always a shortage of traders that buy low!
If the US dollar created another fast move down with a spike, then instantly we would be in another potential mini bear trap.
The US dollar peaked at 93.250 which is very close to the long term bearish trend line at about the 95 price level. It should still take all of next week for this to play out which could be very bearish for gold in the short term.
The rocket move we see on the daily US dollar charts cannot be maintained forever, as a true bullish phase will have much bigger corrections.
Friday, January 16, 2015
The US dollar created another bullish phase record high and we have only the long term bearish trend line to see where the next resistance price level may be. This would be closer to the 94-96 price range which is still some distance away.
Even now the wave pattern is over lapping and a sudden drop and then another push higher can still happen. Gold has been joining the US dollar bull market but that has also happen at a smaller scale.
The Swiss Franc announcement sent shock waves through the worlds currencies but the US dollar seems to have just ignored this news event. Of course the Euro has been crushed in the process and many currency traders are suffering huge losses.
How long this bullish phase in the US dollar is going to keep going is unclear but chances are good it is also acting as a safe haven currency right now.
The USD has already hit 93.200 as I post this so the USD is moving rapidly.
Thursday, January 15, 2015
Since the world news is Swiss Franc related I had to look to see what happen in the charts. It has been sometime since I looked at it last but we can see the sideways pattern which is a corrective pattern. This spike was real and sent shock waves around the world. This type of move does not happen all the time but enough times that we have to be aware that they can happen. Imagine all the buy orders that got trigger in this move and I would bet most of it was computer generated. If there were open pit trades more waves would have developed as well.
On the intraday scale a small wave 1-2 had already been created in the cash charts but an opening gap also formed with this jump. Once the shock wears off a bit then normal wave patterns will start to develop again. This could be a zigzag with an expanded flat correction so another inverted zigzag can also happen.
Commercials were net long already so they had themselves hedged very well, but it was the trend chasing speculators that paid the biggest price as they all were forced completely out of their positions. I am sure there was pure panic with many home based traders as their stops get hit and they start to take losses.
Back in the 1960s they used to have many drive in theatres scattered around the country and usually just before the end of the film they would make a call that the food bar was about to be closed. It was the "Last Call For the Snack Bar" if you wanted to fill up with popcorn and pop.
Wave counts have a cutoff time or cutoff price as well before the wave count gets thrown out.
This deep correction is within pennies of the $46 price level before the entire wave count gets thrown out and a new one must be figured out. This pattern is also a clear reason why day traders should always sell into these spikes. Most day traders only use candlestick and we only get to see skimpy little spikes in the wicks. Gold has started to crank up again so hopefully oil will do the same thing as the angle of the decline suggest a correction is still in play. It is the wave count that contains a price which cannot be broken in cases like this, not just some random price level created from thin air.
Worst case scenario this 4th wave will not hold and crude oil crashes to a newer record bear market low. Oil crashing and gold soaring again, has cranked up the gold/oil ratio as well. We are now well over 27:1 again which is extremely bullish for oil in the longer term. If we use the normal 14:1 gold/oil ratio then oil should be closer to $90 per barrel. As crude oil has clearly demonstrated it is far to risky to maintain a very bearish crude oil stance but many may be brainwashed that oil is going to $40 or even $20.
The VIX has been struggling going up and the SP500 has been struggling going down. On a bigger down trend the SP500 should be flowing much smoother. Yes, the SP500 broke to newer lows but this happens all the time in a potential expanded type pattern. It really fools the downside breakout traders but it could be setting up for a Friday rally. It is next week on the 20th that we have the new moon date, which have been very bearish for stocks in general.
John Hampson from Solar Cycles is much better at explaining the moon cycles than I am and the link above gives us a better understanding how it looks on charts. He does some great work and much of it fits very well into any Elliott Wave that I do.
The SP500 may just rally short term and barely make it past 2025, but we know how fast the markets can rally with little excuse. Remember, the majority of buy orders are always sitting above present prices but they get moved down. Many buy orders would be sitting at the 2020 price level and if they get triggered for any reason, then 2030 and 2055 would be the next price levels to beat.
The same applies for all the sell orders which would all be sitting below all previous dips.
Gold created another leg up as I hoped it would, but it made this move like a small running flat. Otherwise gold should have dropped below my $1225 price level. The last leg up was rather vertical which suggests speed or a "C" wave up. So far gold is pushing past the $1260 price level which is a long term bearish trend resistance price. Gold may have trouble getting past this resistance price.
The next price level on my list would be about $1320 which is another long term bearish trend line resistance level. The quality of the impulse wave is far from perfect and far from what is needed to really keep pushing gold higher in price. If and when gold starts to show us an extremely complex sideways pattern which happens in a correction or a 4th wave triangle then we have one more leg up but then a serious correction would follow.
At this time I still have to assume that a big counter rally is in play and at anytime we could get a stock mania attack. Stocks in the general stock market will always compete with gold assets, but recently gold has been on a rally right along with the US dollar. This does happen and usually happens during a trend change.
Even with all the wild moves in both directions the gold/oil ratio only moved to 25:1 and if I am close, this ratio should slowly move back to the average of 14:1
Even the Swiss got in the act this morning as they made a surprise currency move.
Shear panic has hit the crude oil bears as they scramble to save a few of their profits that they had as oil was crashing. Profits are going up in smoke and the longer they take to buy their shorts back the more money they will have left on the table.
Notice how the previous bear market high also served as resistance and then served as an upside breakout. Immediately after the upside breakout oil has now started to correct. Hopefully this correction is another 4th wave.
I am looking for 5 waves up in Minuette degree and that is a tall order as it is pretty rare that I can keep a 5 wave count going even this long. Oil could crash back to the $47 price level before it starts another leg up. The count is also based on wave three being the longest wave, with a good chance that the last 5th wave will also be extended.
My $50 price target has been hit and my $60 price target may be the tough one as a monster correction should happen before then. This could be all part of a bigger zigzag but so far the crude oil move has legs. Riding a falling knife as your friend will always backfire as that knife is now turned against you.
Once the crude oil bears have figured out that they took forecasts from the guy with the long wooden nose, they will join the oil bulls.
Wednesday, January 14, 2015
The best wave count that I can fit into the USD at this time is a potential triangle, but I think I am pushing my degree to the limit as I may have to jump up by one degree. There still is the chance that the 94-96 price level may need to get hit as that is also part of the bearish trend line starting in 1985.
What we would need for the next decline is another zigzag, but I am sure it will be a different zigzag than what we have had so far. The good part is also that my "C" wave top can easily be recounted as an "E" wave top in which we would then get 5 waves down in Minor degree. Exactly what I would need for a 5th wave bull market in gold. That 75-76 price level becomes important again for an "E" wave bottom but would not hold for a 5 wave decline down to a 5th wave bottom.
This long bullish leg up will not last forever and when it gets serious in reversing we will see gold rally and shock us all.
No trend ever last forever but investors are always bullish, it is the traders or contrarians that don't care as they can play in both directions.
Gold has started to swing wildly in both directions which does happen in a 4th wave position. This entire bullish phase sure does not reflect perfect impulse waves so if a much bigger bullish phase is in progress then gold may have to crash down to the $1205 price level.
It would be nice for the $1224 price level to hold and then gold add on another leg up, with a few extensions to make it interesting. The massive bearish mood in gold has come and gone but the rally has shown more choppy waves than anything in the 2000-2011 bull market. This may be indicating that my wave three top in 2011 may be bigger in degree than what I have been using or a bigger triangle may be in progress.
Gold could produce some strong unexpected crashes but as long as "ABCs" (higher lows) are formed it will resume another leg up. All that could get thrown out the window if the decline in stocks suddenly reverses and stock mania picks up again like the SP500 did this afternoon.
The gold/oil ratio has hit record spreads at over 27:1. This works like a rubber band pulling the ratio back up to its average. This will never happen overnight but if it were then oil should be closer to $88. All those smart crude oil short players are now scrambling to pick up all the money that they are leaving on the table, much of their profits have gone up in smoke already as oil exploded in price this afternoon. Very few if any futures trading accounts can handle a drawdown like crude oil just gave the oil bears. Many traders get confused between being up in their trading accounts to actually making money. There are always two parts to any trade and only closing the trade will lock in any profit or loss. Otherwise we have not made any money at all.
The same applied to the gold bears as there is no chance that any gold bear trading account can handle over a $100 counter rally. They hated gold when it was $1132 but they sure seem to love it more now.
There is not much we can add to any SP500 wave count as the DJIA does not confirm the SP500 very well at all. Each index I follow has a different wave counts which usually does not mean a synchronized crash is underway just yet. We are so close to a downside breakout which is always a conventional reason to sell, as they have been brainwashed to sell downside breakout positions just like this.
Besides, all the sell stops would get triggered further aggravating the stock bulls precarious positions.
Since the end of 2014 the SP500 has not had any net gain but has consistently been losing ground. Once investors figure this out then investors will find something else to chase.
The VIX just broke 23 but it has so many open gaps below that only a stock bullish phase will close. With 3 open gaps below on the VIX, this offers a very strong magnet like pull down on the VIX and if that happens stocks would roar once again.