Smart Investment - mexicomike.ca

[samxxli]

I am busy celebrating Chinese New Year with my family this weekend. I am taking easy focusing on short term moves only using SPX and gold as examples.

The internal momentums last Friday call for more strength the begining of next week for both SPX and gold. IMO the choppy prices actions last week will continue into next week or two as triangular consolidations. There will be one more leg down to new lows to finish first part of the down corrections.

I have not changed the long term counts; one can always scroll down to the post dated Sun Jan 24, 2010 to grasp the big pictures.



SPX follows Dow Jones Index; it is also in the wave d up of the expanding triangle Cycle Wave (4) down of Super Cycle Wave (III) up. Wave d up is an abc Zigzag. SPX is currently in first leg down of b down of the Zigzag.

Above chart shows the first leg down of b down of the Zigzag Wave d up. From the choppy prices actions last week, I have come to the conclusion that the first leg down of b will likely be a Zigzag; small wave b up (green) of the Zigzag will likely be a triangle as shown in the chart. The b triangle (green) will last another week or two and follow by c leg down to complete the first leg down of b down of Zigzag wave d up.



From the choppy prices actions last week, it seems to me now that the whole pattern for first leg down wave 1 of triangle C for gold price will likely be a double zigzag WXY as shown in above chart. The b up for second zigzag Y will likely be a triangle. The b triangle will likely last another week or two follows by c wave down of the second zigzag to complete first leg down wave 1 of triangle wave C. Gold price will mimic the moves of SPX.

I did the chart Sunday, currently (Monday at 3:30 pm) gold price is at 1100 and is very close to the downtrend line since all times high of 1226. Nevertheless as long as it is below 1126, the contracting triangle b is still in play. It gold price move up above 1126, then we have to assume a more bullish scenario.

The target price based on triangle breakdown is 1000 or just a bit lower, but higher than my old target of 970. I now target gold price to bottom at 970 to 1005.


Happy Trading,
Sam

[samxxli]

Hi Gabrielebo,

The prices actions last two days for gold did not convince me that the rally is of higher degree. I would expect huge up days following reversal day last Friday for gold prices to qualify for intermediate trend rally that you preferred, that has not happened. The current rally has the feel and look of lower degree rebound. I stick by my calls of last Sunday’s post for gold and gold shares. Your view for gold prices has been and still is my alternate count.

Regards,
Sam

[gabrielebo]

hi sam
this is my blog update on the matter.
i see you changed your mind more bearish, but i stick with the previous view. good news is we recognize very soon if it works or not.
nice anyway we re just around 1032 (1044) expected.
i think useful too is the BobHoye article (linked in the post). he seems to be optimist about the ended bullish (nasty) action of the dollar.

let's see..
regards


_________________
gabrielebo
http://goldoilnatgas.blogspot.com

[samxxli]

I guess most of us agree now that the markets (gold and general markets) are in bear run. Gold, silver and HUI are currently in C waves down of major wave II. B wave for gold price was significantly longer than wave A, the most common pattern for long and strong B wave is double three running combination with C wave being a contracting triangle. Silver and HUI should follow gold price tracing out double three combination pattern, I now target wave 1 down of C triangle for gold to bottom at 970, silver to bottom at 12 to 13 and HUI to bottom at 275 to 300.

I am biased; double three combinations are most favorable scenarios for C wave down. Silver and HUI have double tops, C wave down usually undo all B rises in double tops flats and C wave down for long and strong B top for gold price can take on normal 5 waves down, then we should see much lower gold prices. General markets can also decline deeper than I forecasted. We just have to be prudent and play cautiously next few months. Staying in cash may be a better option.





The charts for gold and HUI are my favorable counts at this juncture, of course they also have other scenarios. We just have to constantly recount our calls based on new price actions and act accordingly. The followings were my reactions to gold markets last week.

I am all in day and swing (few days) trades now. Gold price moved up to 1088 last Monday in pre-markets, clearly a new leg up had started; I sold all remaining bear ETFs for huge profits and bought some gold shares and some bull ETFs within half an hour after markets open. Wednesday Gold price dropped below uptrend line since Monday, markets showed weakness, I sold all long positions and stayed all cash. Gold price surprised me and dropped 20 dollars Thursday in premarket. I bought aggressively with bear ETFs (gold and general markets) within 15 minutes after markets open. Friday gold shares (HUI) seemed stabilized and might form abc flat with c leg up. I sold all bear ETFs for a nice profit. In afternoon I bought some HGU when HUI broke out above resistance of 375 with target of 400 (25 points) and sell stop of 370 (5 points) for rewards to risk ratio of 5.

General markets seem to move in tandem with pm markets recently, I also expect general markets to follow gold price for short term moves as shown in above charts.


Happy Trading,
Sam

[samxxli]

Hi Kobv,

It is normal for wave 2 longer than wave 1 in times. Lot of times we saw stocks prices spiked up and doubled in a week and then spent months long in consolidation and sometimes retraced almost all the gain. CDNX doubled in prices in a few months from late 1999 to beginning of 2000 and then it spent 2 and half years in consolidations.

Gold price, HUI, and CDNX were 3 waves down in late 2008 low; TSX was also 3 waves down in March 2009 low. In theory, the lows could be the end of wave II or they could also be the first part wave A of a more complex ABC wave II correction. They all depended on the nature of the subsequent rallies.

The rallies since the lows were corrective in nature as prices were overlapped with frequent pullbacks and there were no prices alternation between wave 2 and 4. Gold price had a triangle in midway of the rise that could only be counted as b wave; wave 2 cannot be a triangle. The corrective prices actions confirmed the rallies for SPX, TSX, CDNX, gold price, silver price and HUI since the lows were counter trend B rallies and waves C down are waiting in line to unfold.

Markets seemed reverse in trend. I sold all my bear ETFs and loaded up with gold shares and some bull ETFs for other markets early morning. Original sell stops were set at last Friday’s close but now the sell stops can be set a bit higher.


Regards,
Sam

[kobv]

Hi,

do you think it is possible that for the CDNX Wave I lasted 6 years and Wave II will last 8 years if you use EW-Theory?

Thanks

kobv

[samxxli]

For the week HUI dropped from 403.89 to 374.04 for 7.39% loss, silver from 17 to 16.2 for 4.68% loss while gold from 1092.7 to 1081.5 for 1.02% loss. Gold price significantly outperformed silver and HUI. This also implies that if gold price eventually bottom at my target price of triangular breakout level of 970, silver may be much lower than the corresponding triangular breakout level of 14.5 (12 to 13 is another solid support zone) and HUI may be much lower than the corresponding triangular breakout level of 345 (275 to 300 is another solid support zone). I use only gold prices to time future price moves for pm markets.

The prices patterns of silver and HUI also call for much lower prices. Both B up for silver and HUI were shorter than A down, if ABC corrective pattern is not double three combination with C wave down being a contracting triangle, the 5 waves C wave down normally undo all the B rise. The B bottom for HUI was 150.2; the downside risk is high for gold shares if the current C wave down turn out to be a normal 5 waves down.

The markets will be volatile for a triangular consolidation, each up or down wave is 3 legs and can take on many different forms. It is real hard to make correct call. The 2 times and 3 times bear (or bull) ETFs will lose value even though the underlying market is flat. The triangular consolidation is for short term trading only and only the savvy traders can do well. The best strategy is to stay on the sideline with cash only and wait for the end of C wave down before parking the money to gold shares (and general markets) again and that may take a few more months.





I am including two charts of gold and USDX to show the medium term moves. I am too lazy to do a short term chart. Both gold price and SPX are close to the end of 5 waves move down. It seems there will be final leg down for gold come Monday or Tuesday the latest to finish wave a (blue) down and then start a large b (blue) rally as shown in the chart. I target gold price to bottom at 1050 to 1060. TSX and SPX will also reverse at the same times to upside while USDX reverse to downside as b wave (blue) down.

I sold some bear ETFs near close last Friday and will sell all bear ETFs Monday or Tuesday the latest. If the markets decline Monday is orderly (not big crash), I plan to enter back to the long side of the gold markets (long positions) when gold price is at 1050 to 1060. If gold price refuse to breakdown, then I wait for favorable setup after HUI breakout of the downtrend line.

I am in short term trading now and I follow strict discipline. I only enter a trade if reward (target) to risk (sell stop) is more than 3. All entries come with sell stops which are usually set with loss less than 2% (or for special case less than 4%). If markets move up as expected, then I will have trailing stops to protect the gains and I will not allow a 3% winning position to become a losing position. This plan allows me to make money even if I am right 50% with my markets call.


Happy Trading,
Sam

[samxxli]

Hi Gabrielebo,

Thank you for posting. Your post really open up my mind, I always thought b wave up for gold price and HUI should have moved higher. Maybe they are still in wave a down. The 2 (red) in your chart can be labeled as a, 3 (red) as b and the lower 4 (red) as c to complete wave 1 of the C triangle.

HUI is way oversold and sitting on major support. I look for favorable set up to switch to the long sides of gold shares for short term trades probably beginning of next week.

If you can, make the chart smaller so that it can fit in one page without scrolling.


Regards,
Sam

[gabrielebo]

hi sam, i was sticking with the old thread (bookmarked directly) and just wandering where were you.. but finally catch the new one and glad to read you in the new year (may be you could leave a message redirecting people like me who access to that page directly).

and now, about gold, i d like to share with you and readers my quasi the same view but coming from another thinking path, that adds value to the thesis.



as you know i use bollinger bands, and recently applied those to see the last was a major top, etc (you can read in the blog if you re interested about the rationale, coming from that monthly study you already seen in the fall09). anyhow, ours "two pictures" are very similar to eachother: specially about the next lower high, and the low under 1000 to the triangle projection. mine differs from yours mainly because my projection is not as far in the future (im still studying, lol) and cause i assume that 1032 should be retested somewhen. i suppose then it could be pretty soon, before go up again. but who knows?

comments are welcomed as always
_________________
gabrielebo
http://goldoilnatgas.blogspot.com

[samxxli]

When market was in critical juncture, the prices actions always tell. The price actions for TSX, SPTGD and HUI beginning of the week (Monday and Tuesday) last week were sluggish and corrective and the price actions starting Tuesday for USDX was impulsive and strong. It gave strong indication that USDX had bottomed and TSX and HUI had topped. I short sell (buy bear ETF funds) aggressively with gold and general markets. I had remained staunchly long since March 2009 and it was the first time I switch direction to aggressively short side.

IMO we should have raised enough cash comfortably by now if we don’t short. If we are still mainly in stocks shares, we should lighten up to our comfort level during next rebound of the markets. The 1929 stocks crashes camps championed by Prechter have called for most damaging leg wave 3 down next few months worse than the markets plunge from Aug 2008 to Oct 2008. I personally call for multi months decline of 15% from highs for SPX, Dow index and TSX. HUI is vulnerable to as low as 340. Be careful.

I have postulated the future moves of various markets (USDX, Gold, Dow Index, TSX, CDNX) based on my preferred counts using Elliott wave. All charts are self explanatory.



USD Index.

As I explained before, it makes more sense to count wave A to top in March 2009 at 89.6 and that was also in sync with TSX, SPX and other indexes.

In Elliott Wave all corrections need 3 waves of ABC to complete and B wave can only be 3 waves. The decline from March 2009 high to December 2009 low of 74.2 was 5 waves; it can only be the first leg wave a down of abc wave B. The current advance since December low is wave b up of B. Since USDX moves inversely to gold prices since December such that I assume wave b up for USDX to take on the same pattern as gold to be a contracting triangle.

The weekly chart above shows the roadmap of wave II up correction of wave C down I expect for USDX. The current wave b up triangle will end in September 2010. The current down corrections for gold and general markets are also expected to end. The 5 waves wave c down for USDX will follow to new low and will last until early 2012 to finish wave B down. In the mean times gold, commodities, general markets and junior shares will move up powerfully to new highs. Wave B down follow by wave C up from 2012 to 2014 to undo all B rise and then some (irregular flat) to conclude wave II up of wave C down for USDX and that may prove to be the most damaging years for general markets, emerging markets and commodities with the exception of gold.





Dow Jones Industrial Average Index (INDU).

I follow Glenn Neely’s call that Super Cycle Wave (II) finished in May 1949 at 162. Super Cycle Wave (III) started in 1949 and is still unfolding. Dow Jones and SPX are currently in Cycle wave (4) down correction since year 2000 highs.

I have covered the subjects with 2 articles late last years. For new readers with Elliott wave training who want to dig deeper, the two articles dated Oct 18 and Dated 29 with my old threads can be found at the following links.
http://www.mexicomike.ca/php/p.....p;start=30
http://www.mexicomike.ca/php/p.....p;start=15

I do my own wave counts for Super Cycle Wave (III) which is different from the counts of Glenn Neely. The yearly chart above show the overall Super Wave (III) counts for Dow Jones Index (INDU) which so far worked beautifully and obeys all Elliott wave rules.

The monthly chart above shows Cycle wave (4) correction for Dow Jones Index. Cycle wave (4) correction is in the same degree of Cycle wave (2) from 1966 to 1974 and the price correction is expected to be in the same order of 50%.

Wave 4 correction in a 5 waves impulsive advance is usually a triangle. I came to the conclusion late last year that Cycle wave (4) will likely be a 3-3-3-3-3 abcde (blue) expanding triangle. The monthly chart for Cycle wave (4) showed that wave a, b and c were of 3 waves (abc in green). The latest c (blue) wave down from high was 7 waves which was equivalent to 3 waves.

The current advance is wave d (blue) up of the triangle (4). Wave d up will be a Zigzag and Down Jones Index is currently in wave b (Green) down of the abc Zigzag. If wave b retrace 38.2% of wave a, then it turn out to be a 15% price drop from high. Wave b down is 3 legs, the first leg down will see bottom in March/April and third leg down will follow USDX and bottom in September. If Cycle wave (4) is actually an expanding triangle, then wave c (green) up of d (blue) should take Dow Jones Index to marginally new high by early 2012 and the very damaging wave e (blue) down will take Dow index to marginally new low (6000?) by 2014.





TSX (Toronto Index) and CDNX (junior shares)

TSX, CDNX and other emerging markets behaved different from Dow Index and SPX, the significant declines in 2008 were first leg down wave A down after a 5 waves advance. I have shown in the charts above that the declines were 3 waves of wave A down.

Both TSX and CDNX follow similar moves of Dow Index in general directions even though the magnitude and timing may be a bit off.

According to the chart and counts junior shares may recover most of the damages in B wave up by early 2012 and then they may go through another leg down from 2012 to 2014 rivaling the first leg down of 2008. Be careful. Junior shares were decimated during 1973 to 1974 markets crash.



Gold, silver and HUI (senior gold shares).

The weekly gold chart I did on Jan 7, 2010 is still current. I am lazy, I highlighted Friday Jan 22 2010 closing price for gold in the chart and use it for the current update.

Gold bottomed in late October 2008 at 681 which was wave A of ABC major wave II correction. The advance from late October 2008 low of 681 to early December 2009 high of 1226.4 was clearly 3 waves up, early December high of 1226.4 was wave B. Wave B top was long and strong which was significantly higher than wave I top of 1033. The most common pattern for strong B wave is Double Three Running combination with C wave down being a contracting triangle as shown in above weekly chart. The pattern also looks right if the largest leg down of wave 1 to touch the breakout level of b triangle of B. I expect C triangle to finish by September 2010 and thus conclude ABC major wave II correction and start powerful major wave III up.

The same also hold true for silver and HUI (senior gold shares) as they had similar wave patterns even though B wave up were not long and strong. The breakout level for silver was 14 and for HUI it was 340.

When general markets plunge to new lows from 2012 to 2014 and USDX advance to new high of 90, gold price will undergo lower degree wave (2) of III correction. Markets may see gold as the strongest currency. Gold may even move up to new all times high in late stage while general markets continue to plunge lower in 2014. Gold price moved up to new high during markets plunged from 1972 to 1974.


I am very comfortable with my counts of various markets at this juncture. But I am always open mind and flexible. I am sure the prices and timings targets may be off. If major trend has changed contrary to my counts, I will post it as soon as I see it.


Happy Trading,
Sam

[NORSASK]

Hi Sam,

Thank you very much for the detailed reply.
Took a while to absorb all that thought.
I definately understand better and am naturally delighted that there will be a commodities bull until 2020 with a couple years of winter thrown in.

My only surprise in your explanation was that initially Nov 2008 high was used vs the March 2009 high for USD. But i imagine that's all a function of the previous counts. As a daily chartist, i would have automatically gone to March 2009 but it appears Elliot Wave is different going more with overall wave patterns & counts.

Thanks again Sam.
Cheers!

[thumper]

Thanks for that explanation Sam.

I believe they are predicting 1000 for the Dow by the end
of the Kondratieff Winter.So, that will be some winter.

[samxxli]

Norsask,

In Elliott wave, all corrections need 3 waves ABC to complete. In a set of price pattern, there are always different ways to count the pattern. I learned to be unbiased and adjust my count as new conditions unfold.

USD index broke out of the weekly downtrend line in early December 2009, it should be C wave up according to my old count with wave A topped in November 2008 high at 88.5 and it should have devastating negative effects to general markets and commodities. The fact that it had no effect clearly showed the count with wave A topped in November 2008 high at 88.5 was faulty. It makes sense and all pieces fall into place if I counted wave A to top in March 2009 high at 89.6 as shown in the weekly chart of my previous post.

The decline from March high 2009 to December low 2009 for USDX was 5 waves. B wave in ABC correction can only be 3 waves of abc. The breakout in early December 2009 for USDX was b wave up after 5 waves down of wave a. Wave b up for USDX is unfolding now, I assume the b pattern to be a contracting triangle since USDX so far move inversely to gold price. Wave c down will follow to new low before B wave down is complete.

I follow some of the cycles analysts who call for devastating years for stocks markets from 2012 to 2014 to end Kondratieff Winter and also call for cycle’s lows in march/April and also in September/early October this year. The cycles timing calls fit perfectly to my wave patterns for various markets that I envision. The b wave down of B up for general markets (Dow, SPX and TSX) will bottom in September/early October 2010 follow by c wave up of B wave up to revisit the all time highs by early 2012. The C wave down (or E wave down for Dow or SPX) to follow will undo the entire B wave rise and then some from 2012 to 2014. I have high confidence with this scenario but then the markets always have the final say. I am open mind and flexible.

I am not saying commodities to top in early 2012, I am saying B wave up for commodities to top in early 2012 follow by devastating plunge from 2012 to 2014 as C wave down. A new bull run of higher degree will be born at 2014 lows and will eventually take the commodities to all time highs. The secular bull markets for commodities and gold will last at least until the end of this decade (2020).


Regards,
Sam

[rogerklam]

Hi,
Larry Berman also thinks there is one more leg.
Cheers
Roger

http://watch.bnn.ca/#clip256523

Berman's Call : January 18, 2010 : [01-18-10 11:30 AM]

January 18, 2010
January 2010
Berman's Call
Larry Berman takes your calls and email questions on stocks, ETFs, bonds and more.

[NORSASK]

Hi Sam,

I come by weekly to read your Elliot Wave-based predictions.
Always helps to set my macro focus.
So Big thank you for that!

But i am confused this evening.
How can you have such different counts on the USD?
Warning: I am not an Elliot Wave student myself, so be easy on my mind- but intuitively(?) i understand the rythmns and numbers that go behind it.

Question#2 add-on
What degree of confidence do you put into your longer term counts? ie. early 2012 will be top for commodities.