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How to Trade Elliott Waves

What is Gold Telling Us? MAP WAVE ANALYSIS

Commodities / Gold and Silver 2016 Feb 14, 2016 - 04:04 PM GMT

By: Marc_Horn

Commodities

Cycle analysis is something that is not well understood and reinforces that markets are not propelled by any form of intrinsic value of anything, including gold and money! They are propelled by expectations of the future and nothing else!

So starting with that we will look at what the analysis says, and then we can look at how that fits in with human behaviour, because that is what drives prices which reflect nothing more than investors future expectations!


On the 5th Feb I commented 

"Gold today broke out of its expected trading range!
This means that either the bottom is in, or the wave count is one fractal out.

If the bottom is in then this will only be confirmed with a break above 1307.59.

A high this month below 1222.05 with a close below 1197 will only suggest that W-2 is D-2, and the recent December low is W-3 and this months high is W-4

The later is my preferred option, but a confirmation is a break above 1307.59 or a break of the December low. This would fit in with the behaviour of people and be a false breakout to reassure the bulls and shake out the bears and by making new lows would put the majority on the wrong side, which would result in a panic bottom with a nice spike to confirm a major pivot!"

Well today it broke that without pausing!

Gold 122205 no problem

So where to next?

As a minimum my preferred option is valid due to the break in MAP Wave counting rules. This means that the December low is as a minimum W-3, and we are in wave W-4 as shown below.

Gold M prefered count Feb2016

What can we expect for the rest of this month which has been pretty dramatic so far and the year for that matter?

Starting on the yearly level:

Gold Y Feb 2016

You can see the monthly channel (dashed down sloping orange) and this correction is expected to make a normal correction within that channel to the Q012SPMLUtoQ3 (up sloping dashed golden line) and if an extreme correction to the Q012MLL (bottom solid golden line). Pivot M-3 was made on the ML of M0-1-2 and M-4 retraced 50% of the channel amplitude which is all as expected.

Further the December low was made on M0-3-4ML and M0-1-2MLU, which often gives a pivot, but usually one fractal scale smaller. This combined with the wave structure on a smaller fractal scale make it a low probability Q4  and if it was not for the overshoot on MFM-1-2-3 of Q3, the December low would be a highly probable Q4. One final wave feature that makes December's low a low probability Q4 is that prices opened below the potential Q234MLL, but as the Wave off the December low highlights this can result in a delayed sling shot move which can be seen on the hourly chart above.

With MAP Waves alone Q4 can only be confirmed with a break of 1392.08 (The Q interval overrules this to 1433.08 - see below). 

Gold Y Q4 or not 2of2

The count that can be determined from this interval is shown UNLESS December's low is the bottom.

Yearly resistance starts at 1258.42, followed by 1355 so nothing out of the ordinary here.

Going into the quarterly interval:

Looking at the monthly forks described above we can see why the wave structure is not supported already on the Quarterly interval,

Gold Q M forks 012 034 234

and in particular if we look at M-1-2-3 below;

Gold Q-1-2-3

we can see that M-4 retracement was not as expected.

Quarterly resistance stands at 1255.92 and 1308.29.

At this level we can see that confirmation is a break above 1433.08, and the confirmation on the yearly interval is 1392.08 is actually a sub wave! This is why it is important to monitor multiple intervals!!!!

So again on the quarterly interval there is nothing unusual here either. however there is clearly noise on this fractal scale that is not present in the yearly interval.

Moving down to the monthly level:

Here we can better see wave formation and how we have still not had retracement to the M-1-2-3ML, and can look closer at targets.

Gold M M-1-2-3

For the count shown so far to remain valid prices should ideally turn at 1255.92 next month or s spike this month of 1261 , the first resistance level on the monthly interval. If that fails then the count will change with the next resistance level which lies at 1300, with a spike high of 1308.29 which would change the count as shown below to the pivot numbers above the monthly MF channel.

Gold alternative counts

The resistance levels thereafter rise to 1330, 1383 and 1403 for February.

If 1308.29 fails then it is possible the December low is Q4 and the new bull market is underway and we should have new ATH by end 2019! (The count shown above below the MF M channel).

What a wonderful setup to keep the bulls and bears tugging at one another.

How will this play out?? Maximum effect to get extreme sentiment! This month we hopefully get confirmation, and to keep the suspense going we should see prices trading within the triangle shown below before a breakdown to a final low below December's low.

That should squeeze out the longs and shorts which is what is needed for a trend change. We are not quiet there yet! Purely from this behavioural view as there is no way of being able to tell which wave formation is correct below is the MOST LIKELY wave count and would mean that we had two minimum monthly waves with wave M-3W-3 being and extreme weekly wave! This is all within the expected extremes of wave superimposition!

Gold M MAP Count

Stil nothing out of the ordinary yet. To confirm December low we need a break above 1403.00 this month.

Now if we look at fundamentals for gold. Fundamentally gold has little value! You can't eat it, you can't drink it! You can only trade it for what someone else is willing to trade. Someone else will only trade with you if they believe in the future they can get more of what they want with it, even if that is only to show off with by wearing it as jewellery!

But actually you hear many old wives tales about how it is inflation proof. Well how true is that? Based on that we have been in a deflationary period since 2011 and that certainly seems to stand that test, albeit only over my small sample of nearly 5 years!  Looking at a bigger sample of data how does that old wives tale stack up?

Gold 1982 dollars inflation adjusted.jpg

OK blown that out the water!!!!

Next let's look at another myth that gold goes up when markets go down.

Again just a small sample but I think it makes the point pretty clearly! Gold reasonably tracked the DOW moving in unison until last October and since then looks like the old wives tale seems to work for a short while and this month things have gone haywire again! Could it not be that the DOW lags gold - if you shift the blue line (gold a bit to the right it more or less has the same shape!). So does this mean maybe the DOW is due a drop?

What other classic wives tales are there???? Oh yes gold is real money! Of course how could I forget! When was the last time you paid for anything in gold? I have never and imagine neither have any of you. What is money other than a accepted proxy used for the exchange of goods and services where users have faith that it will remain universally accepted and will retain its relative value to exchange for other goods or services that they may want. Also history shows us absolutely anything can be money from sea shells to cows, to clay IOU's to paper, to rice to other metals! Sorry but real money is anything that is used to trade!

Historically gold was a compact method of moving wealth, and it has historically often been used for that, especially during times of political crisis. Unfortunately that is a rather well known fact and governments have clamped down on this as you can see in the west gold transactions are recorded nowadays and limits have been put on its movement including in the form of jewellery. When I arrived in Kuwait last month the customs officials opened a couples luggage and pulled out a lovely gold necklace and they got interrogated over that! Even in a culture like that where gold played a massive role in society they are being forced to clamp down and report on its movement and nowadays there is no chance of moving gold in any reasonable quantity without it being found. This is because our politicians are not quiet as stupid as we wish to believe - they actually believe they know how to hold onto power and that includes taking everything from the people until they have nothing left and that results in revolution!! Again read a bit of history because this is not the first sovereign debt crisis mankind has faced in recent history!

We are in a mega deflationary period as we can see with the prices of raw materials, not only gold and silver but also copper and oil amongst many others making lows not seen in some cases for decades! This is a big swing and the Baltic Dry Index has broken to new lows not seen in over 30 years! The BDI is an excellent indicator of what is happening to the global economy as most goods are moved by ship!

Don't totally fear though because foreign exchange forms a much larger market than actual manufacturing! Services form a large part of GDP and times have moved on! However FX does not generate real wealth if it is defined as making things to improve our quality of life as opposed to just moving the existing wealth around. And on that note when you look at GDP figures they actually include the governments who only consume wealth and do not create any!

Generally this is in the region of 20% in Western economies with a rather massive get out clause........

General government final consumption expenditure (% of GDP)

General government final consumption expenditure (formerly general government consumption) includes all government current expenditures for purchases of goods and services (including compensation of employees). It also includes most expenditures on national defense and security, but excludes government military expenditures that are part of government capital formation.

 

So add to that between 3% to 5% for the military expenditure and we around 25%.

At a guess we can add at least 10% for pensions and that is only growing exponentially taking us upto 35% ish of GDP.

So our servants are costing nearly as much as we produce and the gap is closing rapidly. For those of you who recall Maggie Thatcher one of her most enlightening quotes was....... "There is nothing wrong with socialism until you run out of other people's money!".  Even Winston Churchill before her had this to say.....

This might explain the hunt for those nasty 1% ers who are not paying their fair share of taxes! Whilst I was in the UK last summer we were trying to get labour for some house renovations and guess what - you can't get these guys to work for anything but cash in hand..... oh so they can dodge paying their fair share! So let's just quickly follow the money if there are a million voters dodging $1000 in tax and 1000 dodging a million it adds up to the same thing! BUT if I chased them for taxes as well as the 1% ers, I would loose a million votes! So lets take what we can from the rich because that way we can retain power. This is the major downfall of democracy.

Sound familiar?

To this we can add the many promises to raise the minimum wages - oh I wonder who will vote for that! Labour is once again pricing itself out of the market and the move to robotisation is rapidly increasing, and that is only going to result in mass unemployment - just like when tractors displaced 50% of the total labour force from agriculture which resulted in the mass unemployment in the 1930 recession.

And the inevitable result is ....

Add to this fundamental flaw in our political system .......

Do the bank bail outs ring a bell? Well next time the bankers blow themselves up the public will not tolerate it and we will see them strung up again like happened in Wall street in the 1890's because we now are going to have bail ins - yip you have had the trial in Cyprus where they just take your deposits to bail the bankers out!

Of more concern is the rapid movement to electronic money...... Not only will that give the government the ability to stop bank runs just like happened where??? Oh yes Greece where banks were closed for two weeks!

We cannot even transfer our own money and in many cases even have to prove it is our money attained through legitimate means and if we can't prove our innocence the governments simply confiscate! Just look how the limits have been dropping over recent years.

Oh and the government have now imposed maximum cash purchases which over recent years also has been dropping.

What does this mean - by taking currency out of circulation it cannot be hoarded under your mattress any more - they have learned that trick!

They are so desperate for cash that the new disclosure laws the G20 have imposed which come into effect next January will mean you will not be able to hide your hard earned cash anywhere, and if you dont have it declared it will be deemed illicit money and will be confiscated!

The noose is tightening.

 

Add to that the anti terrorism laws where you can be arbitrarily arrested if you disagree with government

And as Julian Assange and Edward Snowden have proven....

 

This is well described....

And as Hitler pointed out.....

 

The point of these quotes is to show that cycles are in existence, what we are facing today is nothing new, the same play just different actors.

Never forget

Gold will turn once the pendulum has reached its extreme, and what we are seeing is the capitulation that is needed for it to turn before it can rise to new highs.

There is so much confusion in the signals we are receiving, the FED recently raised rates and now is already talking about going negative.

Are you surprised there is no direction? Once the 80% move then we will reach the extreme needed for the cycles to turn.

It all boils down to this simple natural law....

 

From a cycles point of view there are always choices.

We can either fill the time gap or the price gap as shown in the gold projections, but we must reach from one channel parallel to the other for the tide to turn.

Good analysis does not need updating weekly, but I really should do a bit more!

 Please check the blog for latest updates FOC.

MAP Wave Analysis is based on the combination of my modifications of Elliott Waves, Babston's Action and Reaction, and, Andrews Pitchforks, all of which unfortunately are so misapplied. It would appear that they all took their secrets with them to their graves.

Their principles are so simplistic, and being a believer in the KISS principle (Keep It Simple Stupid) I quickly took to them.
To me it was clear though that it was not the result of Newtonian physics, but human behavior!
MAP Wave Analysis gives unemotional high probability projections, BUT ONLY IF YOU USE THE CORRECT PIVOTS!

A good starting point is to speak the same language, so start with the Terminology which you can refer back to whilst going through the Theory. For a quick summary see my first publication The Euro as an Example of my Techniques

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© 2016 Copyright Marc Horn- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

maphorn
15 Feb 16, 17:15
Gold to test 1300..

...before heading to final low

By tomorrow gold should retest 1200 and on the 19th test 1300!

Sounds absurd, but welcome to our current volatility as FDR described it capital is like a loose cannon ball on the deck of a ship in stormy seas!

We all know the sovereign debt crisis is here and no one knows where to run! Capital is realising governments have no control and with negative interest rates and bail ins where doe one put it!!!!

Until the majority realises that it will continue to flow into government bond for the final bubble which should be here within a year or so!

Then the fun and games really begin.


maphorn
21 Feb 16, 00:24
1300 retest delayed due to subwave formation

The ideal wave target was not me due to subwave formation which no one as far as I know can predict!

Currently I am running a fully annotated test trade combining MAP Wave analysis with another system which seems to give advance notice, albeit only 2 to 3 days, of subwave formation and the results are looking extremely promising. Unfortunately I await permission to publish it and if that is granted I will publish it.

We should challenge 1269 this week followed by a consolidation before the final high breaking 1300 which break of 1263.37 will confirm , but could be as late as 21 March.

Marc


maphorn
14 Mar 16, 23:59
Gold Top in - retest December low...

OK..... knowing when one is wrong....... in all probability the top in gold has been made.......

3 possible exceptions -

Today's break is noise

What currently is labelled as D3 is actually D1 and honestly the probabilities of that are pretty low - a failure to make a new high before breaking 1191.06 is the confirmation for this.

I messed up somewhere.

So -

Prices broke all pivotal support plus the error allowance for acceptable noise.

Prices broke deci and daily cyclical support

1221 now is the target and puts us in wave -3


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