Elliott Wave 5.0 "Reboot"

Saturday, March 19, 2016

XAU 1986-2016 Review With Recent Charts: Crazy Bottoms Deserve Crazy Wave Counts!

All the way from 1986 down to late 2000 sure looked like an "ABC" decline. I have repeated the statements that when an "ABC" crash  completes, specific to the degree, then the  "ABC" crash will completely retrace.  In a triangle this may not always happen instantly, but all 3 "ABC"crashes in a triangle  will get retraced by the following impulse "thrust".  For any new reader of this blog any "ABC" crash always has the "C" wave facing down. 

Once we hit the late 2000 bottom this entire process started to work again, but that bullish  waves produced some of the choppiest wave structures I have seen.  The "C" wave to that bullish phase ended in 2011 and the rest was history.  I would not even take the time to discuss this wave count as many will think I'm crazy, but, how crazy was it when the XAU completely retraced, its entire bullish phase. Every major mainstream gold expert called this some secular bull market, which surely was heading to the moon, yet when everybody was bullish the XAU headed south, torturing all the gold bulls in the process. 

Last year, many of the contrarians were also given a hard time as nobody thought it would rally. Even brokers that are supposed to know a bit better were very bearish last year.  They were all running from commodities as fast as their little legs would carry them, which is essentially exactly the same thing they did in early 2000. 

Now we can see a massive head and shoulders spanning more than 15 years and they are still saying this is a fluke and a mistake and it will go nowhere.  

Even if we are wrong and a new low is still to come we are still faced with an extremely oversold market, which has to make a counter move to come back and even out the excessive pessimism that gold stocks had. 

With the XAU completely retracing it's bull market this may open the possibilities right up, to how high gold stocks can go and what pattern we may expect.  I will talk about this with the XAU chart below. 

Nobody expected a bull market back in 2000 and nobody was expecting anything in early January as well. Whenever I can, I try to build an idealized wave count as soon as possible, or take one off the shelf already made. There are always five core patterns we need to have ready to go. From my perspective, the questions that always must be asked at every turning.  
  1. What do we have up to a certain point, in wave count and degree.
  2. What do we need next for the entire move in a wave count and degree. 
This is so we can see when we are wrong at the earliest possible time, and it gives us time to adjust and look for a new start or better fitting wave count. 

Let's say that a potential Primary degree 4th wave bottom, is in. The obvious choice in what is required to fill a 5th wave in Primary degree is 5 waves up in Intermediate degree. 

Wouldn't that be exciting! With a start like this the wave 1 of the entire move that we would need from my Elliott Wave perspective,  would have wave 1-2 as being the shortest and we may not even see any Minor degree subdivisions in this first move.  I have covered this many times already, but we may have to dust off  the Intermediate degree Impulse. The only way to eliminate it is by running it, and catch it when it starts to fall apart. 

If we hear rampant reports of gold stock insiders starting  to unload or my favorite contrarian sends out a bearish sell signal, then all bets are off instantly, until we see what type of a correction that will follow.   One big thing is if this bull market turns wild and choppy again, then that would send out bear rally signals.  

We should still see a move higher before wave 1-2 with Intermediate degree hits us,  as we may need more of a vertical move to finish this move.