I don't have any fundamental objection to the idea of gold uptrending, and in my view that would have gold moving higher in a fifth wave within the Elliott Wave system. Also, from a Fibonacci perspective, a study I undertook in perhaps August 2008 indicated that the level 1192 can be a significant target level. But if we look at the size of the correction from 1033 and consider it to be a 4th wave (as I've got it marked on my weekly chart, and Tony also has it although he marks its internal waves differently), I feel that a fifth wave would be likely to carry well above 1200. Part of the reason for saying this is that I see it as a complex correction (a flat down, followed by a flat up, followed by a zigzag - that's my view) - and it is definitely not a triangle. Therefore we would not expect a short 5th-wave thrust as from a triangle. So, if we see an impulsive fifth wave, it could be a real big one in my opinion. So, looking at Tony's count, he's got a 1st wave up and I don't know whether or when he counts its 2nd wave correction as being done. Somehow, my sense is that the huge rapid rise we saw last week would be more consistent with a first movement of an impulsive 3rd wave up, rather than a "b" wave within a 2nd wave correction. So - if you are following all this Elliott Wave discussion - we've got to respect the possibility that gold's pullback the last day or so is only a small one prior to the next huge move up.
Are there other possibilities? I think so. The (B) wave up idea that I've mentioned remains viable, in my opinion. Here are a couple of thoughts on that. One, while I respect Tony's wave 1 count, I've got some concerns about tracking its internal structure. Another is that I had marked off two targets for the move up, one at 999-1000 and another at 1024. The reaction from the one at 1000 makes me think it may be valid. It was based on a C=A calculation that readers here may remember (including the idea that the 681 low was a truncation, an idea I first came to as a result of trying to work out the wave count into that 681 low and during that time frame). And the very fact that it works out mathematically as a C=A lends more support to the (B) wave count up than to a 1st wave, again in my humble opinion. It also had a very regular look within my uptrend channel, includes substantial overlaps (which Tony's count has to work around IMHO); and the last leg up had an internal triangle that would, in an impulse, have a target falling short of the 1000 mark. Well, look, I don't want to try to "talk down" the gold market - I just want to assess both sides in the effort to get the most probable count on this.
Sure enough, looking at what gold did this last week, its rise was impressive but not enough to make a new high, at least not in dollar-denominated gold (sorry I haven't check it in euros, Swiss francs or other currencies). In fact when I put the Fibonacci tool on it this morning, it shows that the fast rise went to the .618 retrace up and then weakened off. From a pure-play price level, it suggests that the move up can be a second wave pullback up and that the next move is a third wave down. (Interestingly it also resonates around that ~958 level marked as a bold blue horizontal bar.) When looking at the charts of both $GOLD and GLD (below), the indicators look to me poised to go either way. Definitely in position to support much higher, but also where they can be vulnerable to rolling over downward. So - there's a huge difference between a third wave up and a third wave down! Traders need to be sure not to position the wrong way for a third wave!
How about we keep it simple?! If gold moves above last week's high, that negates the idea that a small 2nd wave up completed at that high. It doesn't "prove" that gold must go into Tony's wave 3 up, but certainly that could happen - and I would not want to be short into that. Conversely, continuing lower from here and of course going under last week's low supports the possibility of a third wave down. Now - moving lower can also be just more of Tony's 2nd wave pullback, especially when you look at my weekly chart of $GOLD with its channel support trendlines, as well as the 850 pivot level. But I still would not want to be long into that. This means that one possibility (NOT a trading recommendation of course! just a comment! ;) is to tilt short with a stop at last week's high. Here are the charts (followed by a few more comments):
Some additional resources to consider for those interested in gold, in addition to Tony's work and my thoughts posted here, will be Tim Wood's Cycles News & Views, the subscription services of Raymond Merriman, the ChartsEdge cycle forecasting for gold, and other available work such as the discussion at the COTsTimer blogspot (all included in the "other sites" listed at right side of the page). I also note that Merriman mentioned the relationship of the current time with the year 1843 in his public comments (which I posted here earlier this morning), in addition to referencing the Federal Reserve again. If you have done your homework, you know about not only the Panic of 1907 - Wikipedia, the free encyclopedia (sometimes called the 1907 Bankers Panic (and I keep thinking people hope Warren Buffett or George Soros will be the J.P. Morgan of this one)) ... when the market fell 50% rapidly and which led to the creation of the Federal Reserve itself, intended to prevent such things from happening again! (guess it couldn't prevent 1929-1935 either!)... You know also the banking and financial Panic of 1837, Panic of 1847, and Panic of 1857 (nice articles in Wikipedia, maybe the 1947 one can use some work). It is beyond the scope of this post for me to work out the significance of 1843 in that mix, other than to note it bottomed a Kondratieff wave (see the Elliott Wave Principle ("EWP") book, Fig. 7-2 at p. 186), as well as a major stock market low (EWP book, constant-dollar chart in Fig. 5-4 at p. 161). Frost and Prechter have that low showing about 1843 (maybe a bit earlier in stocks than in commodities) as a stock market wave "a" after the large Wave (I) of 1837. The 1847 high is a swing high on the way to what looks like an expanded flat "b" wave peaking about 1857. Followed of course by a "c" wave drop into what they mark as Wave (II). While all this may not answer just what the "right" Elliott Wave count is for today, it does give an intriguing dimension to the counts that have this as an "a" wave down to be followed by a "b" wave up. Especially if the "b" wave might actually turn out to be another expanded flat (and I remember Tony has mentioned the idea of a flat being a likely structure for the current correction). It seems extremely unlikely today for a "b" wave to take the markets to new all-time highs in a relatively short time - and I'd feel foolish for predicting it - but I guess the theoretical possibility exists. Especially if the fundamental reason for that would be not earnings (which have dropped precipitously) but inflation or hyper-inflation.
The Kondratieff wave ("K-wave") implications deserve consideration. Readers interested in this may already be subscribing to Tim Wood's Cycles News & Views, as Tim also studies Kondratieff wave cycles. Personally I would not guess that we'd have bottomed the current down-cycle in Kondratieff. Perhaps the relationship to 1843 may simply suggest that this is an interim low in that cycle, rather than "the low" for that down-cycle. These possibilities are somewhat interesting for equities investments, but particularly interesting for investments specifically affected by inflation such as gold, oil and other commodities. It adds an extra dimension to these charts, even though it alone doesn't tell us exactly what month, week or year to expect a significant low in them.
Since the K-wave pertains to deflation and inflation, this all raises the possibility that we may indeed be on the verge of a new inflationary push. Even if it may be followed closely on by another deflationary wave down. Indeed, that may have been what happened in the Panic of 1857, when you read up on that. All very sobering reasons to make careful choices in the current time frame. Still, I want to add that we still have our current set of choices in gold in the EW counts, because I don't think any of this answers the "exact timing." The idea of a C-wave down, if it remains valid - or even the remainder of a second wave (or b-wave) down, in either of Tony's scenarios - is reason to wait and see whether or not gold pushes above last week's high.
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