Thursday, September 3, 2015
The jobs report that will come out this Friday can always send markets into a frenzy as they could swing violently in both directions before they do something completely unexpected.
Some stupid news like Janet Yellen not raising any rates which she has been brainwashing us for months. Who really cares it's old news? If the economy is strong enough it can handle any rate increase, but the way she is undecided sure does not support the idea that the economy is strong.
At this time the stock pattern suggests we are in a bear market rally as a potential 4th wave triangle. Most wave counts are all about true and false assessments, like any true and false branching that a computer program has to make, except in a computer program it is more solid of a decision.
If and when this triangle starts to a new low it can be very short but it also dictates a degree change must happen by at least one degree higher.
With the US dollar creating 3 wave declines it only had one choice but to break above these "ABC" patterns. The same can be said when the reverse happens with an inverted "ABC".
In this case we could also be in an expanded top and a sudden plunge can happen before the US dollar cranks up again. My 4th wave decline is a three wave pattern which would have to be confirmed with the US dollar traveling above early August highs one more time. Any Elliott Wave book we have with idealized patterns in it show us that, "ABC" three wave patterns get completely retraced specific to the degree we are working. Even all triangles get retraced and they have five "ABCs" in them. It usually takes at least one degree higher to retrace a previous "ABC" pattern.
For this to be a wave two rally crude oil would have to die very soon and resume its plunge heading south. The 5 waves down could also be an expanded pattern but that will only be confirmed if crude oil bounces much higher. In other words crude oil must go well above the $49.50 price level we see on this Oct crude oil contract.
The US dollar has rallied at the same time that oil has gone up but gold has plunged during the same short period. I don't have a problem with that when it happens as panic buying or panic selling can dictate prices in the short term.
The $46 price level now becomes my base if crude oil is destined to go much higher. I have to keep my wave two rally alive as well, but if this is still true then oil must drop to dramatic new lows far past all August lows.
Wednesday, September 2, 2015
Since the spike in Dec 2013 the Russell 2000 has gone sideways while at the same time producing overlapping waves that many times can contain triangles inside the "B" waves. In this case I am not counting it as a triangle but as a 3-3-5 expanded flat. I can switch it to a triangle fairly easily but the RUT would still have to crash below the 1050 price level.
There is not that much I can add but it will not take long to see if another down leg will happen.
As I post crude oil could see a counter rally but I would like to see a 5th wave extension before that happens. Gold has also displayed a Head&Shoulder pattern from which we can get great bounces.
We will have to wait and see what type of pattern is being made on the next crude oil rally as that will determine if any rally is just a bear market correction.
Crude oil has already been declared in an official bull market as it jump far above the 20% requirement. So technically if we are to believe the popular description for a bull or bear market then when oil hits below $40 in this Oct contract we would be back into a bear market.
In the Elliott Wave world and if this crude oil was dropping down to a wave two bottom then 50 and even 60% declines would be normal. My ratios would all be calculated on the net move of a pattern not the gross move that the majority use.
As I post crude oil has seen a dramatic rally so we have to see if this rally has any legs.
Gold is sure making a cone head pattern which is another name I use for Head&Shoulder patterns.
In this case the right shoulder should not hold at my trend line as the rally has contained many key waves that overlap.
This makes the rally we have been in a small degree bear market rally and technically the rally should be completely retraced making $1117 the price level to beat. Even the rally back in August has far too many waves that overlapped in critical locations which also adds suspicion to a potentially fake bull rally.
The US dollar is still undecided which way it wants to go and without it, gold cannot establish a longer term bullish phase.
The gold/oil ratio compared to the Oct crude oil contract is about 25.77:1 which is still extremely cheap when compared to gold.
When we look at how the SP500 rolled over at the top we see nothing but overlapping waves which can be the "B" wave in a 4th wave correction. "B" waves have a notorious record for containing triangle moves next to containing ending diagonals. There are many gaps that are open above present prices so I am sure these gaps will get closed, the other question is will they close this year?
Sooner or later the markets will establish their highs for the year but it is still a bit early for that to happen. We have to wait and see if our present pattern turns into a 4th wave or not.
The VIX is hanging high but it also has many gaps open below, so these open gaps in the VIX still represent a bullish move in stocks yet to come.
Tuesday, September 1, 2015
Oil has gone about as far as I would like to see if it were in a bull market correction. Of course as soon as oil jumped by more than 20% everyone claimed it's in a bull market. 20% is just a number and means very little in anything related to the Elliott Wave Principle (EWP) This move can fit into a 4th wave rally just as easily as it could fit into a much bigger bullish phase.
With this wave count I am working oil as a bear market rally and it still could run down and just make a double bottom and then charge right back up again. My wave two had 7 small waves in it which always dictates that it is a bearish rally and the 100% or more retracement confirmed it.
If there is more downside to come in oil then a complex sideways pattern would help to see a bottom even if it is temporary.
The gold/oil ratio has just hit about 25.8:1 which makes oil still very cheap when compared to gold.
The way everything is crashing and banging around we would expect it to be the end of the world.
Today stocks plunged but so did oil and gold along with other indices. Even the Nasdaq dropped but it added a huge open gap on the way down. Apple also dropped so the general bearish theme seems to remain.
With this rapid decent it looks like another potential "ABC" decline which means another bullish charge could still be coming this week.
So far the bearish decline in most of the big indices do not resemble the beautiful impulse waves that I am always looking for but all the declines started with overlapping waves that will not fit into any pure impulse.
If we are still in a bigger 4th wave or the leading waves to another "A" wave is still a best guess scenario. Since the 24th bottom the waves have overlapped as well, suggesting that this is all a bearish rally.
I will also give this pattern far more leeway as it can dip into the previous highs very easily.
What should have been my 4th wave rally no longer works so it must be thrown out with no mercy as there are always others patterns that must be considered. The so called 4th wave dipped well into my wave two and therefore it could work as an ending diagonal. In the big scheme of things we don't want that as and ending diagonal will not give us a big US dollar decline.
Since the US dollar decline sure can fit into a zigzag which means if it is true then a 100% retracement would happen and even create one more bull market record high.
By Friday the jobs report will come out which could wreak havoc in the markets as it has done many times before.
It is amazing how China has so much money floating around to try and save its stock market. They have been trying for sometime already but the index just keeps pushing lower. I am working the decline as an "ABC" decline but this may not work in the long run. I can turn my "AB" into a "1-2" wave at anytime but that could make the 2000 price level a potential base. Eventually the SHCOMP should retrace the 2008 bottom closer to the 1700 price level.
There are also many open gaps above present price levels which means that the entire SHCOMP decline will get retraced sometime in the future. Right now the SHCOMP still needs to add on a small degree 5th wave and then one more bigger degree wave 3-4-5.
Monday, August 31, 2015
I would love to give you a very bullish gold wave count but just because it has gone up in price does not mean that gold is in a bull market. The general public does not know the difference as they declare anything that goes up by 20% a bull market. When I look at the recent bullish pattern it has too many overlapping waves in it to call it a pure impulse wave. The difference of opinion with Elliott Wave as to how deep a correction can go is dramatic. Any wave two bottom in a true blue bull market can correct by 60% or even 80% before it turns and soars to new highs. So in my world a 20% rally or 20% decline means nothing!
Many waves are just impossible to read and they can also soar to new highs before they come crashing back down again. Expanded flats are notorious for this but zigzags will not expand unless it is in a diagonal or running triangle.
If all of August is actually a bear market rally then gold can crash down via a 3 wave crash traveling to new record lows. This could happen if stocks are just correcting and a new push higher is going to happen this week.
After all we just passed the super moon and the full moon which can be very bullish for stocks. Anytime that stocks become bullish gold and gold stocks could take a back seat and go the opposite way.
I would like to talk a bit about this storm that rolled in starting Saturday. The storm took out the power for many of us and I figure we were close to 48 hrs without power. Needless to say all the internet and cell phone junkies were desperate to find places where they can regard their iPads and cell phones. Any mall that had power, every available plug was used with 3-4 cells plunged in.
It sure was something to see. Anyway, power is back but my updates are going to be erratic this week.
Crude oil saw some spectacular movement just on news that inventories were lower. Does that mean the glut is over or are we still going to see $20 oil prices? Only time will tell how deep the correction will go.
Many traders that have made greedy bearish bets are now paying the price as oil has gained a little under $12.00. This price explosion came from a 30:1 gold/oil ratio and now has compressed down to just a bit over 24:1 again. Any normal gold/oil ratio would put oil closer to $80.
Crude oil has already started a sharp decline but this could be a 4th wave correction still to play out.
Previous support would be around $45 and $42 and it must show some type of ABC or triangle pattern if another small leg up is coming.
Saturday, August 29, 2015
My small 5th wave impulse wave fell apart as wave 4 crossed over into wave two last week. With this wave count I am running a giant or specifically an Intermediate degree bear market rally containing a triangle. Any Intermediate degree cannot have any degree higher than a Minor degree as a correction, otherwise everything falls out of sequence. Short term I may use the wrong degree but eventually it all must be reviewed to bring the sequence back into line.
From the US dollar 2011 bottom stock mania took off and the gold sector started to crumble with 2015 still looking like it is containing a triangle at this time. Triangles can create the last "Thrust" before it implodes again and it would have to fall well below my 4th wave levels.
Triangles are also warnings that a degree change must be initiated by at least one degree higher and many times two degrees higher. In this case a Minor degree must end with the potential of an Intermediate degree move as well.
I consider Apple being a good company but when its stock price goes down all sorts of bearish news will make it sound like it's the worst company. The triple top in the stock price was a setup for the crash that dropped Apples stock price right down to about the $92 price level before blasting back up again.
This action left a big spike in its wake which has the eerie signature of a Flash Crash, but at the same time spikes like these are very bullish signals as any flash crash in the past the prices always travelled much higher. Many times spikes like this are also the trailing "C" wave of an "ABC" crash.
Remember, the general public only pays attention to price not the pattern as they have declared Apple being in a bear market already. Of course most mainstream analysts and most of the Austrian economists all say markets are going to get much worse. This may all be true as you don't hear too many forecasting a $200 Apple stock price anymore.
There is a huge open gap close to the $130 price level which could still get filled this year, but if the pattern starts to slump producing over lapping waves then the rally is a fake and a new low below $92 will happen. Right now I am running an expanded flat with the Apple chart which dictates that Apples stock price eventually goes above $135 again.
Friday, August 28, 2015
When I look at any individual month with an oil contract I will get different patterns between daily and weekly charts. No way can I find and equal wave 1-2 to match the physical size of my wave 3-4-5. Back in Jan/Feb 2015 the gold/oil ratio maxed out at about 29:1 after which crude oil jumped about $14 in price.
At this last major bottom the gold/oil ratio hit about 30:1, the most extreme that I have ever calculated. The crude oil price has already jumped about $8 and I think after a correction oil should go much higher. Oil could crash back to $41 before it cranks up again but only time can tell us if this oil rally is also a fake. Either way if it does end then I would be looking for diagonals waves as inverted zigzags will start to form. Worse would be a triangle forming in an unsuspecting 4th wave which dictates and end of a run as well.
The market crash into August the 24th was not a crash with a normal impulsive waves as the top clearly has overlapping waves. I can run the counter rally as a 4th wave rally just as easily but I think there is a bit more to go with our present rally. The SP500 did not confirm the DJIA as the SP500 fits a bearish rally much better.
We do have a long spike into the 24th which most of the time dictates a major bottom with an equally impressive rally going the other way. The Nasdaq suggests there is a long way still to go as it is riddled with gaps but one gap is now open below present price levels.
The VIX still has many open gaps below present prices so those gaps are all bullish indicators for stocks.
The rally in gold is now about a month old which I have labeled as a wave 1 at this time. I can convert this into a potential "B" wave just as fast as there is very little difference in the start of a zigzag and the start of a 1-2-3 wave structure. The XAU has broken to new downside lows as for the HUI,GDX and GDXJ they have produced double bottoms before this recent rally.
During the early August rally we have many over lapping waves which throws a pure impulse into doubt. Then the top in August fitted better into an ending pattern which would cap the entire bullish move we've had in the last month.
The rally so far just does not fit as well as I would like to see so we have to be patient to see how deep the next correction will go. Many times we just don't clue in fast enough to suspect a fake rally is taking place, then technically speaking that rally will completely retrace from its start by 100% or more. It usually takes at least one degree higher than anything I am using. It takes a Micro move to correct a Submicro wave count.
The majority of analysts and participants do not look at pattern as they only look at price and they have no clue in the difference between a big bear market rally or a bull market. If something moves 20% they call it a bull market and if something declines by 20% they start calling it a bear market.
With Elliott Wave from my perspective, it can gain 80% and be a bear market rally or even drop 60-80% and be a bull market correction. In a bear market rally all declines must eventually go lower than the last conventional bull market peak.
We all get excited when a bullish run starts but this is also when we have to scrutinize the pattern the most as many times all it takes is a few waves that don't comply to impulse rules.
Thursday, August 27, 2015
One thing I can always expect is that markets perform the opposite way once everybody recognizes a trend. Markets and its Elliott Wave patterns will never let the majority win with real money but the majority does win on paper at least during a bull market or the bears in a bear market.
In short, oil has made another turning and only time will tell if there is more power behind this rally. I started out with an impulse but any impulse can get trashed very quickly. Eliminate a wave count as fast as possible as there are always many others we have to try. If crude oil is starting as an impulse then there should much more upside to come which will also change the gold/oil ratio.
With the US dollar blasting higher gold has payed the price and dropped like a rock. Gold has also traveled well past any potential 4the wave nullifying any expanded pattern I may have had. Gold stocks have broken to new record lows and many times gold has to play catch up as many time gold stocks will bottom before gold itself does.
In the last day or so gold looks like it may be making a 4th wave turning but that could only lead to more false rallies as this last part will only fit into a diagonal. If the last several weeks was a false start then there is no other option but for gold to make a new record bear market low.
My price level for that would be the $1050 price level.
I have been working this US dollar decline as an impulse but this morning the US dollar has broken the mould and is just a few hundred points away from making a diagonal. The 1-2 wave can now end up as a zigzag which also fits into my bigger triangle picture. To help confirm this the US dollar must still rise well past any August 2015 peaks which I have labeled as a "D" wave in Minuette degree.
Gold has been paying the price for this US dollar rally as gold has also pushed much lower than anticipated. Some gold stocks have already pushed to new record lows confirming that gold stocks were in a false breakout.
As long as the US dollar is still destined to go higher, this will keep downward pressure on gold and gold stocks. Any decline in the US dollar should be choppy as that would indicate another correction and after every correction prices push higher.
Wednesday, August 26, 2015
The majority of analysts use the cash oil charts and seldom look at individual months. I do both as they don't all update at the same time. The chart above is in line mode and switching between daily and weekly settings seems to produce the same pattern at this time.
If we go back to the 2008 top and try and see what pattern has been emerging, I still don't see a completed pattern either a zigzag or a flat. If it is a zigzag then there is still much more downside to come, and even if it was a regular flat then the $30 price level would have to get hit. Most of the time "C" waves travel well past the "A" wave lows by about 61% which would make $21 as the main price target.
All this still makes no sense when the gold/oil ratio has hit 30:1 already. Also any 5th wave is usually as long as wave three is, when wave 1 is the shortest wave. In this case wave 1 is definitely the shortest wave. Imagine if oil did fall to $21 and the ratio stayed at 30:1 then we would get a gold price of $630.
All this makes no sense just yet, as any diagonal wave would not have to go so deep.
The US dollar run is getting very close to my top trend line which is the bearish sentiment (BS) trend line. If the US dollar is truly still on a bearish run then technically it should start to turn as we get closer.
Of course the entire drop could still be a zigzag then the US dollar will ignore the top trend line and blast right through it.
It's next to impossible to draw any decent trend lines but if this decline keeps going and hits the $1105 price level, (wave one peak) then it will no longer work for an impulse. I'm pushing it already but if my peak was an expanded "B" wave top, then gold is going to break out past my double top.
Expanded patterns usually happen in wave 3-4 corrections then the $1120 and $1115 price range can still get hit. That leaves about a $5 margin of error which is net to impossible to call at the time.
So far gold is still heading down so by the end of the day we should know more.
If we were fooled again as to a false start then the $1080 price level is the last support price before a downside breakout would occur.
The gold/oil ratio has backed of a bit from its insane reading and now is less insane at 28.65:1.
If the gold/oil ratio was normal we would be looking at an $80 oil price or a $550 gold price.
Tuesday, August 25, 2015
Many are blaming the decline in stock prices due to China stocks crashing. They may be right but the Shanghai index has always been in a big bear market rally so what is happening should not be a big surprise to any Elliott Wave analysts.
Blame it all on government interference if you like but most stocks in China have no real value in them. Many big name stocks have drop billions in just a few days and that was well before the Shanghai peaked out. All stock values is not real money, but electronic money which we are witnessing as going up in flames, electronic flames.
What we did get in the last few days are 2-3 open gaps which will all get filled over time, especially if this decline turns into an "ABC" crash. It would still have a bit more to go before each leg looks more equal in length but time can only help to confirm that.
Back in 2011 when stock mania started I think we ended on a "B" wave bottom from which we started with very choppy wave that overlap at some critical points. So far the entire bullish cycle since the 2009 bottom would be a "B" wave in Intermediate degree and from that we have to figure out exactly what type of wave decline we should be getting counting from the late June 2015 top.
Of course it could all be just wishful thinking but at every turning I have to go through the same logic and try and eliminate wave counts as soon as possible. The RUT never made such a big counter rally as the others did but most other gains were also quickly erased today.
From my perspective my largest degree I am working is a Primary degree in which I am only allowed 5 wave sequences in a certain degree and then depending on pattern I would only be allowed to have one set. In my case this would be 5 waves down in Intermediate degree. If this is the case then we are not even close to wave 1 in Intermediate degree so anything can happen well before we get there.
This is also where the SC and GSC wave counters could drop down in degrees but chances are good they will never do it as they all have been saying there is worse to come even worse than the 2009 fiasco. If any wave analyst is using Primary degree corrections or a Primary degree 5 wave run then they are working a much higher degree than I am. I already spent many years chasing the invisible GSC degree dragon and its younger cousin the SC degree dragon and I have not found anything that will fit.
This Apple stock price had a massive down spike with an equally massive run back which all seems to fit the same MO of any other Flash Crash we have had in the past. Notice the big open gap near the top which will eventually get filled, we just don't know if it will be this trip or another trip.
This is Disney's stock which also had a long spike with a very strong recovery.
DIS also has a huge gap open above which will get closed over time.
Now Home Depot also had a very impressive down spike, second one since 2014.
All Flash Crashes of the past has stock price go much higher and produce newer highs.
The last stock chart I have, is JPM which is probably the longest of all the DOW stocks that I looked at. These types of declines fit better into an "ABC" decline or the bottom could be a leading "A" wave. JPM also has a few gaps that all need filling.
I don't think humans are fast enough to do this as high speed algorithms would have no problem creating drops like this.
The gold top at about $1168 fitted much better into an ending diagonal 5th wave than a triangle correction. Gold has gone to far already to fit a 4th wave as it is still going sideways as I post this page. Crude oil is on a bit of a rally and hopefully it will continue as the gold/oil ratio hit 30:1 just the other day. Now it is at 28.8:1 which is extremely cheap when compared to gold, or when I use gold as the money. Flip flopping the ratio to try and forecast gold is a futile waste of time as we clearly saw crude oil declining as gold rallied. It is gold that will drag the price of oil around not oil dragging the gold price around.
Last time the gold/oil ratio was this low the oil price jumped $18.
My trend lines do not fit well and they will only tell me something after they have been pierced. I would not be surprised if gold created a false breakout one more time, which means a completed retracement would have to still play out.
I am working this as an impulse but in order for that to come true the Nasdaq and all indices have to resume their downward direction. I can't even come close to counting the SP500 or the DJIA this way so I am sure this wave count will fall apart sooner than later. The best I can do is a 1-2, 1-2 wave count and only two sets of 3-4-5 waves must still develop.
The only way to eliminate a wave count is by running it until it gets broken. I have one gap that just opened up below but I have 3 open gaps above present prices with the last one being open near the very top. The only question remains is "when" will these gaps close, not "if" they will close.
With such a long down spike completed, which would fit a Black Monday very well, there is usually much more to the rally than a simple wave three bottom. As long as stocks appear to be in a rally this could be viewed as a return to stock mania as it coincides well with the USD in a rally and gold in a decline.
This could be just a short term thing as gold may hold up the markets with inflated dollars.
Trillions of dollars have gone up in smoke recently burning up much of the money that has been printed in the last few years. Instead of calling it Burning Man, call it Burning Dollars. The only difference is that it's all electronic money that's burning which has never or will "never" see any ink at all.
What the rich lost in just a few days this week would have used up the entire cash money supply as that cash is only about 1.3 Trillion.
From one point of view the US dollar crash could have been a completed zigzag which dictates a complete retracement. Nothing is as it seems so the next best bet is that a 4th wave rally is underway with more yet to go before it comes close to my top trend line.
Gold is already reacting to this US dollar rally and the US dollar will continue to put downward pressure on gold until the US dollar is ready to turn south again.
Monday, August 24, 2015
The markets have now shown their true side of things as the VIX push all the way to 54 before instantly backing off down to the 33 price level. This cannot be maintained and something has to break and once the VIX heads down stocks should enjoy a strong rally. Even the SP500,DJIA and Apple created a down spike with a massive recovery immediately after that.
This has the makings of a reversal and this week will tell us more. The two lines I have drawn show the length of a single spike which also could not be maintained as the DJIA instantly recovered and spike higher. Apple spike all the way down to $92 before blasting back up to $107. Every major indices that has shown us a big drop also has shown us a big spike.
Yes, sometimes when this happens the trend keeps going down but there are may gaps that need back filling right now. Since the top we can see that now high quality impulse can be counted out which means the choppy decline and crash can be an ending diagonal pattern with the 5th wave being the crash wave.
There are big differences in oil between daily and weekly charts and this is a daily type from the Oct 2015 contract month. As is very obvious that crude oil has crashed some more but it is also adding another spike to the pattern. In the cash chart the crude oil is riddled with gaps which is very bullish, but also gold has not dropped as fast but still may do so.
When oil crashes but gold does not, this increases the gold/oil ratio spread and it now has jumped to 30:1 which breaks every record that I know of or that I have calculated this ratio in the last 15 years.
It also confirms that you do not want to flip flop the gold/oil ratio and try and forecast the price of gold with oil. If the ratio was normal crude oil would be about $82 right now.
Gold made one more run at a newer high which looks moralize an ending pattern than a 4th wave correction so I would expect that gold will go into a correction but it may take a little longer and go deeper than many may expect. Especially if stocks roar back. Gold created a spike up which also indicates a potential reversal is in progress.
It seems like the whole world is crashing and I will not be able to review them all at once. One big crash has been the US dollar and it is setting up for a 4th wave rally or it has just completed a potential "E" wave crash. Gold did not react very strongly to this but it may once the US dollar counter rally starts to play out.
If I feel a 4th wave is playing out then I will change my wave count without hesitation.
Sunday, August 23, 2015
Friday, August 21, 2015
When I look at this VIX and see how vertical it went I was amazed, not shocked but amazed because it also left 3 open gaps on the way up. No trend that goes vertical like this can be maintained as it is the highest speed that any asset class can travel it. If only they had a speedometer indicator to register these fast moves. This monster move at a minimum has to correct as this sure looks like a "C" wave up.
Virtually all other stock indices also added gaps with the Nasdaq have two open gaps. Even Apple has a big open gap at the $130 price level which still may get closed. There are numerous asset classes with many open gaps above and if they don't get filled this year I will be surprised.
When we look at the SP500 we see that in the last few days it also dropped straight down, the exact opposite of what the VIX had done. This drop had a very funny pattern in it that does not fit any impulse wave but can fit into an ending diagonal, with the last wave dropping like a rock. Of course the SP500 also added a gap and we have more gaps than what we know what to do with them.
Over all gaps will all get filled but when they get filled is guess work at best. I hope they will still fill this year as the market can come back with a vengeance.
When the markets drop like this the media usually declares the bull market dead but in reality it died back in July
In my last several postings I mentioned that a correction was due in gold. I still believe that as it may also be a much bigger correction than many of us may thing. Except for the gold bears of course.
Even at this point gold could blast up and add another leg to its bullish phase but this could also be part of a bigger impulse wave where the next move is down as stocks make a rebound.
Gold would have to create more sideways action with overlapping waves before I am confident that only a smaller degree correction is in progress. It is still a bit early to tell but I will update this page after the end of the day again.
If gold was in just another fake run then the decline would look more impulsive as it would be resuming its natural trend.
Updated Aug, 22, 2015
Gold has not changed much and if another impulse leg is on its way then gold would still soar.
I am looking for a correction and right now an inverted zigzag still needs to finish before gold plunges again. The US dollar is due for a counter rally so this would put downward pressure on gold.
Finally stocks have shown what they can do. This is the opposite of stock mania at least for the short term. You can use al sorts of reasons why the markets are crashing but North Korea and South Korea shooting at each other may be part of the reason. I could spend all day in trying to justify a crash based on fundamentals and they will all change in a very short period of time.
I have included one "ABC" with the trailing "C" wave as an impulse wave. This impulse wave is now pushed to the extreme and only the waves 3-4-5 remain to be filled. There are far too many overlapping waves for the entire move to be an impulse wave but we have to see if my corrections start to come in.
The VIX has exploded with a vertical move that cannot be maintained as straight up moves represent the highest speed that markets can move at. Since the $11 bottom 3 gaps have opened up as well and chances are good this market could be setting itself up for a reversal. This VIX is telling me that my DJIA wave count will get trash very quickly. I mentioned that $20 could be the next price level to get hit and the VIX did do exactly that. Now we have to see if a 4th wave correction develops after which the VIX can break the $30 price level.
Stocks have been hammered this morning and so has the US dollar but gold has soared. I have talked about this happening and it could last as long as the US dollar cooperates and keeps its new trend heading down. For now I am still running this as potential Minor degree wave 1-2 with a secondary wave 1-2 also being completed but in Minuette degree. This would have to lead into my Minute degree wave 1. In any impulse wave going up or going down, I have little room to allow it to wander of and do something else as when it does that the entire wave count should be under immediate review.
My wave 1-2 in Minuette degree may have to turn into wave 3-4 as the markets love to try and surprise us. There is still more to go as the pattern is far from finishing. Since my Minor degree wave 1-2 contains an inverted zigzag the US dollar has no choice but to completely retrace the entire wave 2 in Minor degree and travel well below 93.200.
If the US dollar turns very steep during this process then the USD could be in another "ABC" decline which would spell trouble for gold and gold stocks.
Thursday, August 20, 2015
This is a very different wave count I am showing but I have posted something like this already. I am going to have another look as it involves creating a running triangle inside a "B" wave. That June 2013 bottom had meaning to it as after that bottom you will notice that the gold bear market pattern changed and started to go more sideways.
This wave count gives us the potential for a rally that could take us to the $1500 price level. If the gold price is truly still bearish then it should run out of steam once it gets close to that price level.
This morning gold also spiked which is usually followed by a correction, but any other time could also be the end of a trend.
What happens if crude oil never hits the extremes the mainstream analysts forecast? Many times when a "C" wave crash is completing an ending diagonal will develop as well. I look towards these ending diagonals as they send a distinct message like this decline is coming to an end and a reversal can get very violent.
This may not happen as I would need a 4th wave rally and then another 5th wave down, all fairly bunched up. The gold/oil ratio has been hitting the extreme side as at one time we were a bit short of 28:1 Last time we got this extreme crude oil popped up $18 in a very short period of time.
Before crude oil crashed the ratio shifted to about 12:1 in a short period of time giving a warning that crude oil was going down in price. Now we have shifted closer to 28:1 making oil very cheap when compared to gold.
If we were to use oil as money trying to forecast the price of gold, then a normal ratio would put gold at about $600. That would be pretty depressing if I constantly use oil as money trying to forecast the price of gold. Yes, gold will always go up and down but I have never seen gold react so fast where oil as money even works.
Stocks are still dropping as I post this. If this decline is continue then no more wave 1-2s can be added. This is my least likely probability as overlapping waves usually means a type of "C" wave decline. In other words this market can come back with a vengeance as we have seen it happen before.
I could see a continued decline if some clean impulse waves were forming but this is not he case so far. I have two big gaps open above which still need to get closed and it would be a tough call if this gaps were to get filled this year. The Nasdaq may yet push north and give us a new record price which would then establish a 2015 high.
The markets imploded again this morning producing a very small downside breakout. One wave pattern we are guaranteed that we "don't" have, is the basic impulse wave. From my Elliott Wave Perspective what we do have, is a bunch of waves that overlap each other.
At 17,000 we are coming up to support which may happen by Friday. So far stocks are still heading down but we could be in an ending diagonal pattern that could see a sharp reversal. This pattern is finishing a correction or it is leading into the start of a bigger bearish correction.
Even though this looks very bearish, the markets can turn on a Friday and give us a surprise rally. If this is all still part of the bull market correction then we still could see a complete retracement and a new record high.
Wednesday, August 19, 2015
We hear from the experts that they think oil is still going to fall towards the $20 price level. OK lets have a look as $20 oil would dip well into my wave two and it would instantly turn my wave count into an ending diagonal 5th wave. At $20 I would have to move my 4th wave as the 2008 bottom would no longer fit.
All this may happen but remember at the top in 2008 they never even saw a bear market coming never mind two more world oil gluts. In a diagonal we are looking at mostly zigzag corrections where wave "A" and the trailing "C" wave should be the same physical length. If I used points traveled or full dollars traveled we have a $113 "A" wave. If I applied the same points traveled to my "C" we would get a crude oil price of $2! Obviously points traveled dose not work yet one of the EWP books I have spends a lot of time talking about this.
Then we can also take a physical measurement with a ruler and my "A" wave would be about 8 CM long. At a minimum we should get another 8 CM from my "B" wave top which only gets us to the $30 price level, still far away from a good looking zigzag. Even if we were in a big flat, the "C" wave in a flat can travel 60% below the "A" wave. ($21)
We are at a crazy gold/ratio already and the last time the gold/oil ratio got this crazy, oil jumped $18.00. If I flipped and used oil as the money, then a normal gold price right now would be well under $575.
Sure they may come up with all sorts of scary oil prices but they will never tell us where the oil price will go after their target is hit. It would not surprise me that eventually crude oil will see the $100 price level again and even blast past the 2008 peak one more time.