Gold Quickly Closing in on $1,000 Again

May 31, 2009: 7:37 PM CST

As many of us have been suspecting, gold is on a steady pathway up to retest and likely exceed the $1,000 per ounce level which has served as substantial resistance in the past.

Let’s take a quick look at gold’s Daily chart structure to see this happening as it unfolds.

I have labeled a small, fractal Elliott Wave count, showing the move from the February highs of $1,000 to April lows at $860 was a three-wave “ABC” Corrective move which ended at confluence support.

Price has now moved in a ‘1,2′ wave pattern and now appears to be completing a 3rd wave fractal move up which could push us the $20 we need to hit that magic “$1,000″ level yet again. Even if we find resistance again at the $1,000 level, if the Elliott Wave fractal I’ve drawn is correct, then the 5th wave fractal (which could be part of an even larger impulse) would be expected to take us above that level.

I previously discussed this very possibility which is occurring now in last week’s “Comparison of the Dollar and Gold” post. I also wrote a post that provided a link to download Robert Prechter’s (of Elliott Wave International) 40-page e-Book on the Gold and Silver Market which is worth a read.

Adam Hewison also gave a brief video update on May 21st simply entitled “Gold Update.”

This time we’ve built a base, and a few readers have even pointed out the potential “Inverse Head and Shoulders” pattern which is bullish and gives us a price projection of roughly $1,160 (that’s taking the head to the neckline and then projecting upwards off the neckline). Continue Reading…

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Elliott Wave Analysis on the Shanghai Market Monthly & Weekly

May 30, 2009: 12:07 PM CST

A couple of readers have asked me to provide a possible Elliott Wave count on international market indexes, namely the Shanghai Composite ($SSEC) and here is my current count on the larger monthly and weekly timeframes.

China’s Shanghai Index ($SSEC) Monthly:

This count assumes that we are still in a large corrective phase.  The 5-wave primary structure off the 2005 lows is quite clear (it has its respective fractals on the lower timeframes) and almost intuitive into the 6,000 highs just before 2008 began.

From there, one can take one of two assumptions:

1)  We are still in a corrective phase, as I am showing, that we are currently in Corrective Wave B up into confluence resistance, waiting for a (smaller) Wave C to begin.

2)  We have completely finished the corrective phase in all of what I have labeled as “A” and we are in a new Primary Wave 1 of a new bull market.

Either way you interpret that, the next likely “swing” is expected to be a down-move off confluence EMA resistance at the 2,750 level (whether it’s down for Wave 2 or down for Wave C).

When I apply Elliott Wave to long-term charts, I want to look for confluence among wave counts (as I showed above) and be open to any logistic interpretation – I’ve found that dogmatic approaches, or bending the Elliott Waves to fit your opinion is not the best method and can cause more problems than it’s worth (plus give Elliott Wave a bad name).

Remember, we’re looking for odds and probabilities, never certainties.

Let’s now drop down to the Weekly Chart for a closer inspection of the recent move down:

Continue Reading…

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Inside the Descending Triangle in the SPY SP500

May 29, 2009: 9:55 AM CST

The dominant short-term pattern on the S&P 500 (and SPY ETF) appears to be a consolidating descending triangle.  Let’s take a look at the pattern on the 60 min and daily charts.

SPY (S&P 500 ETF) 60-min chart:

Classic Technical Analysis texts teach that descending triangles should be expected to resolve to the downside, but that’s not always the case.  All triangles are consolidation patterns that represent a ‘pause’ (or correction) in a trend and it can be very difficult to predict accurately in which direction price will eventually expand.

A clear down-sloping trendline connects the four swing highs in May while a clear horizontal line about the $88.50 level connects key lows on a visual support area.

In the SPY, the key levels to watch for a breakout are $91.50 on the upside and $88.50 on the downside… though it looks like this triangle consolidation could last a few more days or even weeks until we get closer to the apex (point where the trendlines touch).  Price can be expected to break anywhere from 66% to 75% or more of the way to the actual apex.

Let’s set this pattern up in the larger context of the S&P 500 daily chart:

Continue Reading…

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Weekly and Daily Look at Crude Oil May 28

May 28, 2009: 10:17 PM CST

A few readers have asked me to take a look at crude oil, so let’s look at the larger weekly structure and then see what insights we get from the daily chart.

Starting with the weekly structure:

I have called the entire move down from the June 2008 highs as “Wave A” down and currently have us in a potential corrective Wave B up.

Alternatively (perhaps more plausible),  the entire correction has taken place and we have seen the lows in Crude (which will be particularly true if we enter a period of inflation going forward) so keep open to both possibilities for the time being.

We had a massive correction off the 2008 highs as global economies fell into recession and the demand for crude oil lessened.  We came into critical support about the $35 per barrel level before price has almost doubled off these levels – a position many thought impossible at the time.

For now, we’ve come into a critical zone in testing the flat 50 week EMA at $66.30.  If bulls can break this level (I highlighted it), then we have the 200 week SMA at $74.70 and then the 38.2% Fibonacci retracement comes in at roughly $79.00.  These are key areas to watch on the upside.

Now let’s drill down to the daily chart for lower timeframe insights:

Continue Reading…

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Weekly Comparison Charts of Ten Year Yields and SP500

May 28, 2009: 2:14 PM CST

With the recent rally in 10-Year Treasury Yields (falling note and bond prices), I thought it would be a good idea to show you the trend comparisons between the Yield and the S&P 500 – it’s more aligned than you might think.

First, let’s look at the 10-Year Treasury Note Yield ($TNX):

The thing that should leap off the page at you is the tight (though not perfect) strong positive correlation between the Treasury Yields and the S&P 500.  The Yields actually had a leading characteristic to the market, and the stock market led the peak on commodities.

This is consistent with Martin Pring’s “Intermarket Model” that I follow, which hints that bonds lead stocks and stocks lead commodities.

The Yields peaked when the Federal Reserve began cutting interest rates in mid-2007.  In February 2008,  I wrote a post (that actually got published on the Huffington Post at the time) entitled “Is Fed Easing Actually Good for the Market?” which was controversial at the time but spot-on given that the market fell so precipitously in the months and years after the cut.

I purposely did not annotate these two charts so you could get a quick comparison between them.

Next, let’s take a look at a simple chart of the S&P 500:

Continue Reading…

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