Thursday, January 29, 2015
This March 2015 crude oil contract has slipped to a new bear market low and overtime it does this the mass media goes wild. Hyping the oil bear market sells and playing crude oil short is the thing todo. The world oil glut shows no signs of slowing down except for the pattern this decline has been making. We are getting price forecasts of $40 and even $20 but the $20 forecast is what would put crude oil into a previous low support range as $40 really means nothing. I would even like a $34 forecast better than all of them. What they are all focusing on is in how "low" crude oil can go but they have no clue in how "high" it will go after their great forecasts get hit.
All the experts that said we were running out of oil in early 2008 never suspected that it would be followed by two world oil gluts. Since 1999 this is now our Oil Glut 3.0!
The above wave count is Minute degree and smaller and I still feel a potential counter rally will happen. If crude oil stop at these price levels that would make it a potential large degree running flat and this makes no sense at this time. The other best price target would be oil at the $34 price level which would work as a regular flat from an Elliott Wave perspective.
There is one indicator that the majority of price forecasters and oil analysts seemed to completely ignore and that is the gold/oil ratio. To give us some perspective as to what the gold/oil ratio was in early 2008 we hit a ratio close to 7:1. This made crude oil extremely expensive and it was doomed to crash no matter how bullish every expert talked!
Now we are on the inverse side of extreme as the ratio has topped 29:1 many times but on average well over 28:1 most of the time. I cannot remember a more extreme reading that oil is cheap compared to gold. If the gold/oil ratio was normal today oil would be at $89. Some say that oil will never go above $100 but they are already doing things that will force a new price bull market in crude oil. Investment into oil production is dramatically being reduced already and that has always choked supply in all other world oil gluts. It's not about demand pickup it's about choking supply that will have the same effect.
When prices are low the physical buyers start buying in droves but initially that does not raise the price as there is no supply shortage. In the future I am confident that oil will cross the $100 price level again and even push to new all time record highs. Before you know it crude oil $200 will be on everybody's lips once again, along with Peak Oil 2.0.
Most of the last half of January the US dollar created inverted patterns, (diagonals) which usually is a sign that one wave count is coming to an end and another new pattern is about to start. With the counter rally now stopping at 95, it would be an excellent time for the US dollar to implode. The great imploding US dollar has been a myth so far and I am sure the US dollar will fool us again, by just correcting.
I would love to give another precise :) price forecast but we know that will never happen even though many wave counters brag that they can. Any price forecast is totally dependent on the wave pattern being correct, also unknown spikes and extensions are virtually impossible to price forecast.
I try to work on a range and sometimes two different patterns will end up getting us close to the same price range.
This price range is between my two open gaps and it may be the resting spot for a wave 3 bottom or a "C" wave bottom as well. (91.500-90)
Of course this all depends on the US dollar not making anymore new bull market highs which would put all those US dollar bulls into a bull trap right now. Buy orders are stacked above present price levels and sell orders will be bunched up below. Buying on the dips in futures is a myth as far as I am concerned as it is more like panic and fear even when the dip presents itself.
A very steep decline will hint that a "C" wave is in progress but if the decline subdivides fairly well then a wave three down would be my choice. From any given point there are always 5 probabilities that we can get and the trick is to eliminate 4 of them as quickly as possible. Most of the time we are stuck with at least 3 choices as we are never certain at what specific wave we have ended at.
The US dollar has been the shinning star in the world currency wars but no trend lasts forever, and the trend changes I like the best are the ones which forces a complete reversal of all participants. There are not to many traders around that can stay bullish if the US dollar crashes to 90 or even lower!
Silver also is in the process of making a deep correction. Silver can add on more 5 wave sequences but then silver may crash to new lows. I am hopping that the decline is starting to find support but we have to be aware that it may only be temporary support, otherwise silver should see another leg up. For a potential 4th wave bottom silver is fairly deep already so any rally that does not produce great looking impulse waves will remind me that this is still potentially a big bear market rally. It's not about if it goes higher but "how" it gets there.
Silver is presently at a nice previous low so it will remain to be seen if we start to see nice bottom.
GDX and GDXJ have completely different wave counts in how they bottomed as they bottomed about a month apart. GDXJ has very little in higher lows that we can follow therefore it is walking to a different drummer. This may be insignificant or unnoticed to most but when counting waves it's a real big thing. The difference being one is showing us a bear market rally and the other is showing a fairly clean 5 wave sequence. In effect its like having an expanded pattern and ignoring it.
Silver and gold act the same way as silver has on many occasions refuse to confirm gold. Gold can run and look very impulsive while silver refuses to play the same game. GDXJ has to breakout and crash through the top trend line, otherwise it's going to confirm a bear market rally.
Yes, I admit that this entire gold bullish move does not seem to be your typical true bull market, but that it fits better into a bearish rally. A true bull market will display very well developed impulse waves at the smaller degree scale, as they have a power and act in a specific way that sets them apart.
Starting out with too many overlapping wave structure is one big clue, but even in very big bearish rallies we want to milk as long as possible. The thing is with EWP any "ABC" or "ABCDE" triangle crashes are just corrections. The majority will never understand this. Even Elliott Wave counters do not understand that when a decline is in progress and the waves overlap or are very choppy in this decline, then there is an extreme probability that the entire decline will get completely retraced by 100% or more!
Idealized charts all show us this but the book does not tell us this directly. It was not until 2013-2014 that I started mentioning this on a regular basis, but many wave counters that have been doing it for 20-30 years have never mentioned it as well. EWI missed the entire gold bull market as they were still bearish on gold when it peaked at close to $1000.
We can count out the 20 year gold bear market and make all sorts of "ABC" wave patterns and still not understand what that actually means!
Back in the early 1990s after gold's first zigzag crash, we should have had a clue already that gold would eventually match or exceed the $875 price level again. The only question would be the time frame that this would happen in.
This also works in reverse, when we get an inverted "ABC" as this virtually assures a complete retracement of such a move. Producing mindless "ABC" or "WXY" wave counts is a complete waste of time if we have no clue as to the forecasting power of these "ABC" patterns.
From my perspective "price" is irrelevant but the pattern is everything as "no" price will hold if our pattern is not identified correctly.
This happens on a smaller degree scale as well and it is especially true if the correction contains a single small hidden expanded pattern or if it contains two of them. I can't count this out as a prefect declining impulse wave, so when it's not a five, it's a three and a correction. Gold smashing up against the $1305 price level is not good enough, as the $1320 price level would be the next price level that gold has to fight through.
There is a good chance that a 4th wave has completed and another leg up would have to happen. Even if gold added another leg it could extend that leg as in commodities waves 3 and 5 do all the extending. Any deviation from this potential move forces a complete intraday wave count review.
Yes, gold has made a strong bounce from the $1132 price level and there should be more upside yet to come, but if stock mania strikes again then all bets are off. The general stock market will always compete with gold and gold stocks which has been clearly evident since 2011.
Many wave counters have gold in some type of SC or even GSC decline but these extreme high degree wave counts have never been confirmed by anyone. Just because we have had a big move in gold does not mean it is a big degree as well. Most of the time it's the complete opposite as the small degree waves come out when something extends. You can compare it to a rubber band that is not stretched and call it a minor degree rubber band, when you pull and stretch it, it's still a minor degree rubber band.
Wednesday, January 28, 2015
This morning Apple investors must have been jabbed with a red hot poker because Apples stock too a leap of faith that produced another massive gap in the process. We have been reading good results for weeks already so no earnings reports should have been a big surprise.
In reality all the protective buy orders planted by the Apple bears is what got triggered. Remember that all the buy orders are above any price not below. Sell orders pile up below a certain price level usually below the last support price level. In this case I see the $105 price level as last support so you can bet all the sell orders are stuck below that $105 price.
The easy and simple wave count would have Apple blasting to new record highs but this may all end up being a big pipe dream. Apple's chart pattern at best could be a diagonal 5th wave and they are indicators that an even bigger reversal is imminent.
The Nasdaq didn't even flinch with Apple as it seemed that the Nasdaq just ignored all the good news about Apple and headed down.
I now have 4 major gaps in this Apple chart and my lines are located after these gaps would be filled.
It's never a question "if" these gaps will get filled, but it is only a question of when.
The VIX still has many open gaps below so this is a bullish draw for stocks. There is still lots of room for stocks to swing violently in both directions and these are indicators that we are in a correction.
Even many of the stocks in the DOW that have declined recently have some major gaps in them. A quick count gave me about 8 DOW 30 stocks that now have some rather large open gaps above todays price levels. Just based on gaps those are all bullish indicators, even if stocks still take a big surprise decline.
Tuesday, January 27, 2015
All the indices dropped like a rock on bad economic news. Or was it the snow that has shut down most of NYC and canceled many flights. The snow is not as bad as expected but it is dumping the worst of it onto Canada's east coast. Either way we can inject all our standard economic reasons which triggered this crash. What they don't tell is the huge gap that formed in the Nasdaq on the way down, which is actually very bullish.
The VIX also gapped up which is also very bullish for stocks as these gaps will eventually all get filled. There is the potential that another zigzag going up can develop and that this zigzag would have to break to new record highs for the Nasdaq. This still may not take the Nasdaq past the 4800 price level this time even though the VIX still has many gaps to close.
A miracle would have to happen for the markets to suddenly head into a downward spiral even though there are still many gaps below in the Nasdaq that need filling. The speed that the Nasdaq fell at suggest another "ABC" is playing out. If that is the case then 100% retracement to this "ABC" is due.
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.