Technical Analysis Of The Markets

Gold

Gold was stable in the overnight session, being range bound between 1141.60 and 1129.60. Our current thinking remains unchanged with wave ^i^ of *iii* ending at 1141.50, and the current trading being wave ^ii^.

If we are correcting in wave ^ii^, then our expected retracements are:

50% = 1122.70

61.8% = 1118.20.

Note that markets do not need to retrace to the levels that we suggest for waves ^ii^ and ^iv^  It is possible that all of wave ^ii^ ended at 1129.60, but that would be little short of our 50% retracement level.  

A clear break above our purple downtrend line will see gold rally sharply and a significant break of the 1141.50 high now would suggest to us that wave ^ii^ is likely over at the 1129.60 low! 

 Our current count for all of wave .iii. is:

*i* = 1156.40;

*ii* = 1103.80;

*iii*:

^i^ = 1141.50;

^ii^ is underway.

Projections for the end of wave *iii* are:

*iii* = 1.618*i* = 1198.80;

*iii* = 2.618*i* = 1257.50

Gold has begun to rise up within its truly majestic bull wedge pattern.  This wedge, and some as yet unknown fundamental event appear poised to launch our glorious C wave, to new highs for gold! 

We are long 20 positions, risking to 1197!

CRUDE OIL

Crude was pretty quiet, in the overnight session.  If we are working on a wave !e! triangle, then it looks like:

$a$ = 47.08;

$b$ = 44.00

$c$ = 46.91, if complete and we cannot trade above the 47.08 high for this triangle formation to remain valid.

$d$ drop is next

$e$ rally to go, to complete all of wave !e!.

Our preferred current wave *ii* count has now become the one that includes the wave !e! triangle option as follows:

^a^ = 43.21; 

^b^ triangle:

!a! = 48.42;

!b! = 43.36;

!c! = 47.71;

!d! = 43.73;

!e! triangle is still underway.

As we have seen many times, the above wave ^b^ triangle count can extend further, if we continue to rally now above the 47.71 high.

We expect the end of wave ^c^ and all of wave *ii* would end within the following retracement levels:

50% = 43.54;

61.8% = 42.19.

That’s a longer term crude chart.  We are working on the assumption that wave b ended at 37.75, and that the current rally is the start of a multi-year wave c.

With that assumption in mind we have wave *i* ending at 49.33 and we are now working on wave *ii*.

If crude was to thrust higher out of this triangle then we would have 3 wave rally from the 37.75, which would suggest that the 37.75 low is NOT the end of wave b. We will provide more details on this, if it happens.  The bottom line:

We plan to go long 8 positions at 43.20, and buy 42.00 puts, as stops!

SP500

We believe that have completed all or most of wave .ii. of -v-, as the attached 120 Min Chart indicates. We traded above our 61.8% retracement zone, and have now reached our 78.6% retracement zone which is 1988.98.

We would not want to S&P to trade much higher, for our current analysis to remain valid.  

The other option we need to consider now for wave -iv- is that it did NOT end at 2020.86 and is becoming instead a triangle which would look like: 

*a* = 2020.86;

*b* = 1871.91;

*c* = 1988.58, if complete

*d* and *e* leg to go to complete all of the wave -iv- triangle.

Our preferred count for wave .i. and wave .ii. is follows:  

.i.:

*i* = 1953.45;

*ii* = 1979.64;

*iii* = 1908.92;

*iv* = 1952.89;

*v* = 1871.91 to complete all of wave .i..

.ii.:

*a* = 1952.89;

*b* = 1893.70;

*c* = 1988.58, if complete to complete all of wave .ii.

.iii. drop is next.

We will  provide updated projections for the end of wave .iii., once we have confirmed the location of wave .ii. 

If wave -iv- becomes a triangle then our very bearish case will be eliminated, as we cannot have a triangle on its own in the wave .ii position.

We are short 15 positions with 1975 calls!

USDX

On the Intraday Chart, we have a clear 3 wave rally from 95.58 to 96.29.

This is bearish and suggests that as a minimum the USDX is heading back to the 95.58 low.

We are still working on the assumption that wave .ii. ended at 96.88, but the choppy state of this market does not give us the confidence to trade it, at the moment.

Our current preferred count remains unchanged as follows: 

-i- = 93.16;

-ii- = 98.42;

-iii-:

.i. = 92.52;

.ii. = 96.88, if complete to complete all of wave .ii.

.iii. drop will be next.

Unfortunately we have another option in the above bearish count that we cannot discount and it looks like this:

-i- = 93.16;

-ii-:

.a. = 97.88;

.b. = 93.30;

.c. = 98.42;

.x. = 92.52;

.a. = 96.64;

.b. = 94.19;

.c rally is now to at least the 98.42 high to complete all of wave -ii-.

The bullish count is that wave -iv- ended at 92.52 and we are now rallying in wave -v- to at least the wave -iii- high of 100.72 to complete all of wave ii.

We are flat, with no USDX positions!

NATGAS

The small rally from 2.403 to 2.491 looks corrective, on the Intraday Chart, which suggests that we are going to drop back to the 2.401 low, when this correction ends. In the overnight session NG was stable like gold and crude.

We are also flat this market, although we will note that our longer term analysis suggests the approaching winter season could bring a significant rally!

HUI/GDX/XAU

A breakout in gold bullion above the purple down trend line we highlighted in our first chart should see the GDX rally sharply.

Remember that this is a vastly oversold market and we should not be surprised to see many gold stocks double in triple in value over the next couple of weeks. 

Next target for this market is 16.16.

Our current count is :

-i- = 14.71;

-ii- = 13.19;

-iii- is now underway with the following projections:

-iii- = 1.618-i- = 16.57

-iii- = 2.618-i- = 18.66.

It is still not too late to add to existing gold stock and/or index positions on the long side!

Since the GDX is so undervalued next to gold we think that wave .iii. in the GDX could reach the 22.08 to 26.29 levels.

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

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Email: [email protected]

Website: www.captainewave.com

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