Technical Analysis Of Major Markets

Gold

A week or so ago we changed our longer-term count in gold to what is shown on the attached Long Term Gold Chart. Our original count had a double (a), (b), (c) corrective drop that started at the wave 3 high of 1923.70.

Our current count has the same double (a), (b), (c) pattern except that our second wave (c) is now looking like an ending diagonal triangle. Within that diagonal triangle we are working on wave -v-.

One important note about our long term count is that if the end of our second wave (c) drops below the wave 1 high of 1033.30, then this drop cannot be wave 4, but will be labelled as wave ii of 3, which is very bullish, and in this scenario we absolutely believe gold will be heading into the $5000 plus range.

Let us look at the attached Second wave (c) Daily Chart, for a closer view of our second wave (c) ending diagonal triangle.

As we know, legs of diagonal triangle consist of a single or multiple .a., .b., .c. patterns and we can have up to three such .a., .b., .c. patterns, separated by .x. waves.

Within wave -v- it only looks like all or most of wave .a. is complete at the current low of 1062.00. This suggests that we should see gold rally in wave .b. to be followed by another drop in wave .c. to complete all of wave -v-.

With gold now following the USDX, we should assume that if wave .iii. is complete at the 99.96 high, then wave .a. in gold is likely complete at the 1062.00 low.   

We are long 20 positions, with puts at 1085.00!

Crude Oil

Crude held near its recent highs in the overnight session, with a current high of 42.58, at the time that this Post was being written. 

In our last End of Day Post, we talked about the possibility of a huge spike higher related to the unstable situation in the Middle East and the idea that the Saudi may limit oil supplies.

This is a very volatile situation that cannot be ignored.

Our current analysis remains unchanged and if it is correct and wave *iii* ended at 39.92, then we would expect a very sharp rally in wave *iii* to be the next big event.

We would consider a $10/$15 spike to be a big event.

Our initial subdivisions for wave *iii* are:  

.i. = 42.37;

.ii.:

*a* = 41.26;

*b* = 42.73;

*c* = 40.42, to complete all of wave .ii.. Our 78.6% retracement of the entire wave .i. rally is 40.44.

.iii. rally is now.  

We want to see this market break above the 42.74 high, to ensure that the all of wave .ii. is now complete at the 40.42 low.

We are long 15 positions, with 42.00 Puts, as stops!

S&P500

As you can see on the attached Long Term S&P Chart, it appears that this market is now heading to all time new highs in wave (v). Wave (iv) ended at 1867.01.  

On this 120 Min Chart, wave (v) is an ending diagonal triangle, as we have overlap with the bottom of wave -iv- and the top of wave -i-. Legs of diagonal triangles consist of at least one three wave pattern, but can have up to three such patterns.

Within wave (v) we are now working on wave .a.. The S&P is ignoring world events and we should see the usual Santa Claus rally again this year. We expect higher prices in the short term, as wave .a. continues to unfold. Our minimum target for the end of wave -v- is the all-time high, in the S&P.

We profit-locked our last short positions for a profit, and are now flat!

USDX

As you can see on the attached Weekly USDX Chart, we believe that we are getting close to the end of wave .iii. It is possible that all of wave .iii. is complete at the 99.97 high, or we might see a little more upside trading, but the next big event in the market will should be a wave .iv. correction.

We expect that this wave .iv., correction should retrace between 23.6 and 38.2% of the entire wave .iii. rally. When we are sure that wave .iii. is complete we will provide those retracement levels.

The wave .iv. drop in the USDX should coincide with the wave .b. rally in gold. 

We are flat the USDX!

NatGas

NG reached a high of 2.351 in the overnight session, before setting back to a low of 2.261, at the time that this Post was being written.   

We are still working on the idea that our wave .iv. triangle ended at 2.41, and that we are now dropping in wave .v., to at least the 1.95 low.

As is always the case with triangles, we cannot rule the possibility that our wave .iv. triangle is going to extended  and in that case the drop in wave .v. will be delayed for a couple of days. Upon completion of wave (iii), we should expect a multi-month wave (iv) rally.

We are flat NatGas!

HUI/GDX

There is no doubt in our minds that the GDX is going to be heading below the 12.62 low, to complete all of its wave B low.  If wave .a. in gold is now complete then the GDX will rally along with it, but will drop again, when gold drops within its wave .c. of -v- leg. 

Since the HUI and XAU are both at the bottom of this respective ending diagonal triangles, we believe that the drop below 12.62 will very limited, after which the GDX will rally sharply!! 

We are long the GDX, ABX, KGC, NEM, CRJ, and TSX:XGD, with no stops!

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