Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Major Top in Gold this Year ? - Elliott 5th Wave Peak ?

Commodities / Forecasts & Technical Analysis Feb 28, 2007 - 06:23 PM GMT

By: Roland_Watson

Commodities

Gold and silver were caught in the downdraft of selling on the stock exchanges today but having surged from last October's lows, a respite was always looming as the price increased.

However, the subject of this article is not the short-term movement of gold but where the next major sell point will be. There are various commentaries suggesting that gold will move fairly easily into quadruple digits with some breath to spare. I agree with these analysts that gold will move into four figures and then some. The only argument is when?


To put it briefly, I believe gold will move higher but there is coming a major correction to outdo all that has come before it since 1999. I think it will happen this year and we will after it have another great buying opportunity in gold and silver. However, to be caught in it without taking some money off the table could prove demotivating for some investors in the precious metals.

There are several reasons why this may be so. The first is that my own Silver Leverage Indicator is refusing to drop with any vigour. The second is the Elliott Wave analysis of gold.

The issue lies in Elliott Wave analysis and when this gold bull market actually started. Did it begin in 1999 with the Washington Gold Agreement or later in 2001? The answer is crucial and affects the overall analysis. A typical Elliott Wave analysis based on a 1999 start may look like the chart below.

The gold bull starts at wave 1 in 1999 and progresses on to our recent highs of $731 with the ensuing correction. The alternate counts for waves 3 and 4 are given in parentheses. So, according to the main wave count here, the good times are just starting for gold with a higher degree wave 3 at the top right of the chart.

Okay, that may be acceptable but a couple of thoughts were nagging at me. The first was brought when I examined the same gold chart in Canadian dollars. The reason I bring up this chart is because if this is a real gold bull market, it will be international. And if it is international, we should expect similar wave counts in other currencies. If we don't the wave count is brought into question.

Note that if we follow the same pattern for the "Loonie" we run into trouble. A major rule of classical Elliott Wave is that the lowest price of wave 4 cannot be less than the highest price of wave 2. In other words, wave 4 cannot intrude into wave 2 territory. In this chart it clearly does as it cuts below the "VIOLATION!" line. In fact, if this were an OHLC chart, the incursion would be even more noticeable.

In that light, we reject the main wave numbering for the ones in parentheses. In the new number scheme, the wave follows the preferred guideline called "alternation" where Waves 2 and 4 usually alternate between Zigzag and Flat or between a Triangle and a Flat. Moreover, wave 3 is the longest wave and is not the shortest (which would be another rule violation).

Now some may object to this by saying that in this enlightened age is okay for waves 2 and 4 to cohabit. I do not accept this relaxation of the rules mainly because the less rules there is the more ambiguous the wave patterns will be with subsequent false sell and buy signals.

But one more clinching argument comes from the world of gold stocks. When did the bull market in gold mining stocks begin? A look at the HUI chart below leaves us in no doubt to that answer.

The Elliott wave pattern on the HUI is pretty clean with a final wave 5 in the offing. Wave 3 only lasted one year and we don't expect much more of wave 5 as it spikes to end phase one of the 30-year gold bull market. I also expect it to at least match wave 3, but in the madness of a final buying frenzy, who knows?

To confirm that HUI wave count, I also include the venerable Barron's Gold Mining Index for the same period (see chart below). Wave 3 is greater in size than wave 1 but again, we wonder where the final wave 5 will end? We note that the Barron's Index set all time high back in 1980 of nearly 1300. So far, 1175 is the highest closing weekly price.

So, an expected end to the first stage of the great gold bull is approaching this year. That of course is only my opinion but we think that the other indicators are pointing that way too. What about that vicious correction I talked about? Since the degree of correction will be less than the higher one that started the great gold bear of 1980-2001 but more than the ones we have witnessed since 2001, we think it will lie somewhere in between. I think you may agree that is a correction worth taking some money off the table for. The task before us is deciding where that top may be. That is where we hope other indicators will help, but that is another subject.

But once it hits bottom in 2008 or 2009, all I can say is keep that money handy, you'll be needing it again to load the gold and silver boat again!

By Roland Watson
http://silveranalyst.blogspot.com

Further analysis and comment on the silver market can be read in the subscriber-only Silver Analyst newsletter described at http://silveranalyst.blogspot.com where readers can obtain the first issue free. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk .


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules