Elliott Wave 5.0 "Reboot"

Saturday, January 16, 2016

Gold 2011-2016 Bear Market Review

For now I think a Cycle degree top for 2011 can still hold. As much I would love to give you some long winded story about how gold is going to the moon, I can't until we have the US dollar also declining at the same time. Obviously with all the fear and uncertainty in the world today you would figure that gold would be soaring. Sorry to disappoint you on that, but that has always been a myth created when they need a desperate reason to explain why gold is going up. 

Most of the time gold crashes or turns into a bear market because stock mania returns. This started in 2011, and gold reacted perfectly to the rally in the general stock markets and the US dollar. Even with stocks crashing gold seems like it has a bad attitude and really doesn't seem to care. 

Gold stocks have taken an even more severe beating, with the XAU is already completing a complete bull market retracement. The HUI still has some to go before it does the same thing, but this bear market is not over just yet. There is also a US gold index called XGD which made some very nice potential impulse waves. I will post it once I have a closer look at it. 

I work on this gold bear market as much as I can and I always end up printing it out. I also invert it as that alone helps to see this bear market in a different light. The first thing you may see is the bottom trend line still pointing to a major decline. Don't freak out just yet, because we are not in an impulse decline where trends travel between two lines. I also cannot get this bear market into the standard triangle.  My lines are all parallel to each other except where I may have the Intermediate degree running triangle. 

Many may say that this bear market has been one of the longest, but I have counted out bear markets that have lasted 13 or 19 years. It all depends on what you call a bear market. Any bull market that gets completely retraced is just a big bear market rally. It took silver 13 years once from 1919-1932, and then again it took silver another 13 years to decline from 1980 to 1993. It took gold about 19 years to do the same thing. Each rally during its bear market was completely retraced.

I am not saying that we are still going to suffer another 8-10 year bear market as this market is already oversold. The bullish consensus has not pushed low enough to warrant a super bull market but a net .618 rally can always happen. This would push gold to about the $1600 price level if a big zigzag is in play.  There are about 5 choices, how high any counter rally can go, but it depends on the pattern that is made during the rally. This makes forecasting a top, a futile Fibonacci effort, as millions of ratios are active at any one time. 

The $1050 price level is still holding but I am not optimistic that it will hold as the present rally has broken from its impulse pattern. In 2013 gold changed direction and the overlapping waves really started to come out of hiding. Diagonal waves are a good sign as they precede a change in direction and usually are followed by very violent moves. Any triangles are also good signs as they precede a change in degree. If I have an Intermediate degree decline, then I must stop at a Primary degree bottom. 

Using the February contracts the gold/oil ratio hit 37:1 last week, which is another new extreme reading!