Possible Fractal Elliott Wave Count of Gold May 12

May 12, 2009: 2:36 PM CST

Per reader request, here is a possible Elliott Wave count interpretation and simple structure forecast for Gold prices going forward.

The caveat is that this is one of various Elliott Wave counts, and I’m only taking into account the recent fractal wave structure.

This count implies that we are in the 5th Wave up in terms of the monthly chart, and might even be displaying Wave 1 (which is a 5-wave structure) of that 5th wave… or it could be completing the terminal 5th wave… but I don’t want to get too complex into the count at the moment.

The main idea is that odds seem to favor higher prices yet to come for gold with the exception that prices stay above the $860 per ounce level.  Any bullishness would come into question should prices break down beneath $860.  Otherwise, the Elliott Structure shown above implies that we will be breaking to new highs within the coming months, though I am not showing specific Fibonacci price targeting (which Elliotticians use to project price targets as functions of prior waves).

Beyond Elliott, we’re having another “Cradle Trade” forming as the EMAs align at the $900 level which – for any bullishness to occur – should hold as immediate support.  A failure at $900 will likely set-up a test of the $860 level before long so watch that level closely.

Standard Elliott Wave disclaimers apply – Elliott Wave analysis is one of many forms of market analysis, and no technique or strategy (that I know) can guarantee 100% accurate market forecasting.  However, it can be helpful in expanding your perspective to see larger structures and, more importantly, a possible pathway for prices to take into the future… though a pathway based on odds and probabilities, not certainties.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Join the Market Club.com for trading signals, commentaries, and videos.

23 Comments

23 Responses to “Possible Fractal Elliott Wave Count of Gold May 12”

  1. aac74 Says:

    gold over the past year looks like a large inverted head and shoulders with the neckline at 1000 ? Surely after 3 attempts to break 1000 if the market does it this time and holds above it we have to have much higher gold prices 1200, 1500 soon ?

    MACD and RSI also look bullish for setting up an impulse to 1000.

  2. chris Says:

    I would see $1000 as strong resistance and don't expect it to be broken.
    I was surprised at todays movements as we had the inital onset of panic/an ensuing reversal and heavy buying of defensive sectors which was almost toally reversed by the end of trading in the offensive direction. I know the odds are against me but I take this to be a remarkable show of strength given the length of the rally and current conditions hence the bearish prediction for gold and positive outlook for stocks and the economy.

    Chris

  3. stockchartist Says:

    Let me give you a prediction. Gold (using GLD as the proxy) to 145 by end of 2010. I arrived at that price by measuring the distance between the last major support at 69, what might be considered the bottom of the inverse head-and-shoulders mentioned in the last comment and the neckline at 100 (or 144%) and extrapolating that by an equal percentage.

    This move will really pick up steam after the breakout above the 100 however will likely first test the 100 neckline as a support.

  4. tgarfield Says:

    Thanks for the chart Corey.
    If it gets through 1000 shorts will be covering and a nice bubble could start.
    Personally I have read every reason to own gold and I think they are all wrong. I couldn't care less about gold but that hasn't stopped me from buying somethng that I thought was going up before. Because so many think like me – is probably what will give it legs.

  5. u2com Says:

    Boillinger bands historically tend to be important S/R for gold. Once we reach them sooner rather than later we get pullback/rally. In this graph we should wait for a pullback. But problem is that moving averages are very close, so any pullback may be limited in power. Unless we would see larger decline, broking 20 and 50 moving averages. In this way, EW interpretation changes.

  6. Tom Says:

    Dear Corey:

    I love your discussions on Elliot Wave which I do find to be very complicated even for me a seasoned observer. Sometimes I wonder if we should not , in the interest of simplification , particularly for those less seasoned, look at weekly and monthly charts for possible direction as opposed to relying on Elliot Wave. A simple weekly chart is often the best starting point. Could you expand upon this theme in your future writings maybe? Look at a daily chart but look also look at a weekly on on longer time frame.

  7. Corey Rosenbloom, CMT Says:

    That's my take with the information we have so far – it's not just Elliott Wave which is pointing higher for gold prices.

  8. Corey Rosenbloom, CMT Says:

    Well there's no certainties, and $1,000 has held back price in the past. But it looks like gold has been building strength to mount another challenge and if that level is broken, odds would favor much higher prices once that key level is taken out.

  9. Corey Rosenbloom, CMT Says:

    Right, good observation!

    Also consider the possible Bull Flag (with March 1st to May 1st as the Flag and the October lows as the low of the pole. That gives us a target of around $115 or so on the GLD. Would be a large bull flag if successful.

  10. Corey Rosenbloom, CMT Says:

    That's kinda what I'm implying here – if $1,000 is broken, it will trigger short covering + new long buying (most likely) which would create positive feedback (higher prices lead to higher prices).

    That $1,000 level is absolutely key so we must watch it closely.

  11. Corey Rosenbloom, CMT Says:

    You're right – I hadn't noticed that.

    The BBs are compressed at the moment which might hint for a larger breakout. Still the EMAs are expected to hold as support (unless they don't!) so there' s a floor below price. Higher prices would perhaps trigger a momentum move up and if $1,000 is taken out, there's no more overhead resistance.

  12. Corey Rosenbloom, CMT Says:

    Tom,

    Absolutely. I'm trying to simplify the Elliott concepts to make them easier for readers, but also remember that Elliott is only one way among many of looking at the market.

    The larger timeframes are more important in terms of structure and direction, but remember I'm limited in my time and size of posts for what I do on the free blog. I prefer to show small bits of into to highlight a key point rather than give a full forecast.

    I'll be expanding my analysis through a subscription service, but for the free blog, it's mostly for a laser-focused point to teach rather than detailed analysis of the markets.

  13. chris Says:

    oh dear…… I think I just described a doji in a very naive way without realising it, or the implications! Anyhow I'm on the wrong side of the move in stocks for now – I think that makes it one up to you Corey! As ever thanks for the post and the experience will remind me not to walk into the nearest table in the room next time. Its been an expensive day!!!!

  14. Tom Says:

    Dear Corey:

    I love your discussions on Elliot Wave which I do find to be very complicated even for me a seasoned observer. Sometimes I wonder if we should not , in the interest of simplification , particularly for those less seasoned, look at weekly and monthly charts for possible direction as opposed to relying on Elliot Wave. A simple weekly chart is often the best starting point. Could you expand upon this theme in your future writings maybe? Look at a daily chart but look also look at a weekly on on longer time frame.

  15. Corey Rosenbloom, CMT Says:

    That's my take with the information we have so far – it's not just Elliott Wave which is pointing higher for gold prices.

  16. Corey Rosenbloom, CMT Says:

    Well there's no certainties, and $1,000 has held back price in the past. But it looks like gold has been building strength to mount another challenge and if that level is broken, odds would favor much higher prices once that key level is taken out.

  17. Corey Rosenbloom, CMT Says:

    Right, good observation!

    Also consider the possible Bull Flag (with March 1st to May 1st as the Flag and the October lows as the low of the pole. That gives us a target of around $115 or so on the GLD. Would be a large bull flag if successful.

  18. Corey Rosenbloom, CMT Says:

    That's kinda what I'm implying here – if $1,000 is broken, it will trigger short covering + new long buying (most likely) which would create positive feedback (higher prices lead to higher prices).

    That $1,000 level is absolutely key so we must watch it closely.

  19. Corey Rosenbloom, CMT Says:

    You're right – I hadn't noticed that.

    The BBs are compressed at the moment which might hint for a larger breakout. Still the EMAs are expected to hold as support (unless they don't!) so there' s a floor below price. Higher prices would perhaps trigger a momentum move up and if $1,000 is taken out, there's no more overhead resistance.

  20. Corey Rosenbloom, CMT Says:

    Tom,

    Absolutely. I'm trying to simplify the Elliott concepts to make them easier for readers, but also remember that Elliott is only one way among many of looking at the market.

    The larger timeframes are more important in terms of structure and direction, but remember I'm limited in my time and size of posts for what I do on the free blog. I prefer to show small bits of into to highlight a key point rather than give a full forecast.

    I'll be expanding my analysis through a subscription service, but for the free blog, it's mostly for a laser-focused point to teach rather than detailed analysis of the markets.

  21. chris Says:

    oh dear…… I think I just described a doji in a very naive way without realising it, or the implications! Anyhow I'm on the wrong side of the move in stocks for now – I think that makes it one up to you Corey! As ever thanks for the post and the experience will remind me not to walk into the nearest table in the room next time. Its been an expensive day!!!!

  22. sell gold online Says:

    No doubt that gold prices are getting higher and higher as time goes.

  23. Carte Gold Says:

    Thanks for information, I'll always keep updated here!