Elliott Wave 5.0 "Reboot"

Thursday, December 17, 2015

Gold Intraday Crash Review



There is not too much of a surprise here as the gold price and just about every other asset class was pushed around by emotional traders in a panic, to get in or out. The only people that made money are the trading houses that scoop up on fees for each contract traded. Now that any rate increase is old news, any new rate increases have also been well publicized. All this wild commotion, for a quarter point move in rates!  

I believe that another "ABC" has formed in the shape of a zigzag and if this is correct gold should roar up and take out yesterdays peak price level of $1078. That is what corrections are supposed to do, if identified correctly.  Pattern identification is always a challenge, but the rest of this week and next week will tell us more if this base holds.  

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Obviously I posted the above wave count too early as gold continued crashing down trashing the above wave count in a big way. 



I have added an additional chart to show how gold continued to crash. This does not solve the problem that gold can be in a triangle decline, but a diagonal is definitely not ruled out either. 
These are some real ugly waves, but the key is that they overlap. If the diagonal decline is in progress, then a new record bear market low should happen as well.  I will update this page one more time later today. Lets hope this is not one of those moves where gold drops like $200 in just a few days. 
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Updated late December 17


I mentioned  that I would update this three times. I don't know for how much longer I can keep flogging this wave count as gold keeps breaking to the downside. Of course, it's all the US dollars fault as it kept breaking higher. Just kidding here folks, but the US dollar has everything to do with gold when it is quoted in US dollar terms. 

The decline we have had in December seems to be a mix of a triangle combined with bad diagonal waves.  The triangle would send this pattern north, but the diagonal could keep gold going south. 

I have three trend lines all the same angles and all based on the top trend line.  If the resistance is too great then the first two trend lines will give us some early clues.  Overall, we could also be in a situation where the bottom of the gold price falls in a shocking $225 drop, or something close to it. I am not saying that this is definitely going to happen, but I will not be surprised if it does.  We need a super long spike to the downside to flush out all the last bulls still hanging around.  Market sentiment has only reached a low of 30% last week from a 24 month low of 28%. This isn't low enough to send gold into a wild bullish run going to the moon just yet.  I would like to see a rally to clear out all of the December peaks, before heading south one more time.   

The gold-cash/oil-cash  ratio matched the all time high of 30:1 again today, so this is a double from all the calculations I have done.  Many may think that oil will not rally, but that gold has to crash. Ok, then if we apply the standard average ratio (15:1)then gold should be about $550. I don't treat oil as money as it is consumed and ends up going up in smoke. I have never seen gold yield to oil, but a normal ratio would put oil at about $70 per barrel.