Weekly and Daily Take on Gold Prices

Feb 11, 2009: 1:56 PM CST

A few readers have asked me to take a look at Gold prices and I will do so, starting with a possible Elliott Count on the Weekly chart and then dropping down to see resistance and an interesting structure on the Daily Chart.

Gold Prices ($GOLD) Weekly:

Gold Weekly

Ok, let’s take this slowly.  I’m not saying this is the exact Elliott Wave Count, but to me it is a plausible one and I encourage other readers to comment your thoughts.

If this count is correct, it assumes that the whole structure from 2008 onwards is a massive, complex corrective phase, perhaps winding into a double Zig-Zag of sorts – or Double Flat.  The “X” Wave is a separator between ABC Corrective phases.

Gold peaked just above $1,000 an ounce in March, 2008 before heading down into a nasty, confusing pattern.  We may have had a three wave ABC into September’s lows (each wave subdivided into 3 waves) and then a connector wave (X) that then resolved into a second ABC pattern.

If this is the case, then we’re missing the final C wave down to complete the pattern, and it seems – until proven otherwise by a break above $950 – that the market wants to finish the pattern, but this is clearly not the only interpretation out there.

As I write this, Gold is up around $930 per ounce, so the entire bearish projection is invalidated with a close above $950 (which also gives you a great risk-reward).

If you’re thinking bearishly, keep in mind that we’ve officially broken and closed above a downward sloping trendline that connects the three prior price highs from early 2008.

Let’s drop down to the Daily Chart.

Gold Prices ($GOLD) Daily:

Gold Daily

Taking the larger structure into view, we see a possible ascending triangle (which perhaps has bullish implications) however, we also see some elements that give the bulls pause.

We may be completing a “Three Push” pattern (which is a bearish reversal pattern) into key resistance, as confirmed by the negative momentum divergence that’s set-in.

Also, one can draw an Elliott 5-wave impluse up, but I caution against that because each 1, 3, and 5 wave seem to be about the same length (in price) and also proposed wave 4 would enter the price territory of Wave 1 so we most likely have to rule the move from November to February as another complex Corrective Wave (meaning going against the prevailing larger correction or downtrend).

However you interpret it, Gold is at an extremely critical level right here.  Just a little strength to the upside and we will have momentum to make a run back to $1,000 per ounce if we break out of these levels here… but on the same ticket, we could fail miserably at the current price levels and head back down to test the $700 level which would likely end the corrective phase and launch us back to new highs after that swing completed.

Dig deeper and do your own analysis here – the resolution will be interesting.

For a different take, watch Adam Hewison’s recent video “Fibonacci Analysis in the Gold Market“.

Corey Rosenbloom
Afraid to Trade.com

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11 Comments

11 Responses to “Weekly and Daily Take on Gold Prices”

  1. Andrew Stanton Says:

    Here is the thing with gold. I can count a completed correction to the October low as W-X-Y-X-Z in place of your A-B-C-X-A. The problem is what then is the last rally? It is a clear five wave structure with overlap of 1 & 4. If the correction ended in October then this must be a leading diagonal wave 1 but it lacks the required 5-3-5-3-5 internal count. The preferred count in gold must therefore consider it to be a B wave as you have it and the next big move should be C down. Either count actually requires a move down now either as a C wave or a wave 2. It will get interesting soon, especially if gold confounds the Elliott counts and goes up!

  2. Anon Says:

    Corey,

    Good analysis. I suppose you did this technical evaluation before the 20$ jump in gold prices today. Does that 20$ jump change any of what you posted? I will appreciate your comments.

  3. Bryan Says:

    I read your blog everyday, great post. I have a heavy weighting to gold stocks right now and today was a nice surprise after yesterday`s overall market drubbing; keep up the good work – BH

  4. Anonymous Says:

    Corey,

    The B on the weekly chart, Jun-Jul 2008, is more likely the peak of wave 5.

  5. Corey Rosenbloom Says:

    Andrew,

    Precisely! However you count it, it just feels like the final swing is not in place – like we’re lacking one more swing down.

    But also it ‘feels’ like gold should go up due to economic uncertainty as well so we’ll see which force wins.

  6. Corey Rosenbloom Says:

    Anon,

    I captured this chart before the day’s close but after the impulse up – $GOLD updates end-of-day and I’ve been meaning to get this analysis out since the weekend. May have been very poorly timed 🙂

    It doesn’t change unless we close above $950. If so, odds are we go to test $1,000 then evaluate from there. From a risk-reward (edge) standpoint, the ‘edge’ is to the downside (thanks to the low-risk stop) but it’s quite possible we do break to $1,000 or perhaps to new highs.

    It’s just at such an interesting juncture right now.

  7. Corey Rosenbloom Says:

    Bryan,

    Thank you for reading!

    You might be the benefactor of a good gold break-out indeed. Just a few more dollars per ounce and we’ve officially cleared almost all overhead resistance and I suspect a big trend move up will occur if we clear $950 and then $1,000.

    Still feels like there’s one more down-swing to go but maybe we don’t get it.

  8. Corey Rosenbloom Says:

    Anon,

    I don’t see how that’s possible, as Wave 5’s are supposed to – at least – form a double-top with the prior 3 (truncation) or go on to new highs as most do.

  9. murphblog Says:

    looks like an inverse head and shoulder chart. I know that isn’t your style but its something else that gives GOLD a bullish case.

  10. clint Says:

    i am afraid loosing a biog profits. I know its easy for others loosing small profits but for me its not the best time to trade.

  11. Anonymous Says:

    is an outside day the same as bullish engulfing?