Clearly
the gold price has not moved into the strong upsurge expected for Large Wave
III, as postulated in Update 20. The decline that started at a London PM fix
of $986.0 on 15 July 2008 has already reached $882.0 (5 Aug 2008), a decline
of $104.0 or 10.5%.
This decline
exceeds that 4%-6% range of a minor correction, which is the magnitude that
one would have expected if the market was in the very early stages of Large
Wave III. The large size of the present correction suggests that it must be
part of Large Wave II, meaning that the gold market has not yet completed the
corrective wave Large II. The peak at $986.0 on 15 July 2008 must have been
the end of Small B within Large II, with Small C down to complete Large II
currently underway.
Wave Count A
below is the continuation of the old wave count in Update 20 with a minor
change in that the triangle in Small C has been discarded for a more
conventional a-b-c format. Under this count the 5 wave up move from $862.2 to
$986.0 (15 July 2008) would have been the first minor wave i in the new major
up move. Under this count, the magnitude of corrective minor wave ii should
have been 4%-6%. Once this level of decline was exceeded, it cast doubt on
the validity of this wave count, which is now rescinded.
The revised
Wave Count B in the chart below is now the preferred wave count. It reflects
the peak at $986 as the top of Small B with Small C still underway.
This count
suggests that the gold market could possibly decline to test the lows reached
in Small A at the $845/$850 level. Other possible targets for the low of
Small C (and thus Large II) can be calculated as follows:
In the new
preferred count, Small A declined from $1011.2 to $853.0, a decline of
$158.2. If Small C is equal to Small A, the target for Small C would be about
$828.8 ($986.0-$158.2).
If Small C
is 61.8% of Small A, the decline would be $97.8. (61.8% of $158.2 = $97.8)
This places the target low for Small C at $888.2 ($986.0-$97.8). This is very
close to the latest PM fixing of $882.0 reached on 5 Aug 2008. Any lower
fixing will eliminate this target.
Data updated
to 5 Aug 2008.
The good
news is that once Small C (and thus Large II) is complete, gold will enjoy
the anticipated sharp up move in a “third of a third” situation.
The gold market will be in Large Wave III of Major Wave THREE, and they
don’t come stronger than that.
Corrections
are often complex, confusing and difficult to analyse. The current action in
the gold price is a case in point. Occasionally in the past, the weaknesses
of the Elliott Wave technique have been outlined. It is probably a suitable
time to repeat them.
The weaknesses of the EWP are as follows:
- An incorrect reading of even a single minor wave can put one on
the wrong side of the market for some time.
- Corrective waves are notoriously difficult to evaluate and often
their conclusion can only be determined after the event.
- The exceptions, e.g. 5th wave failures and wave
extensions, can lead to some serious mistakes and major lost
opportunities.
- Often the minor waves are confusing, difficult to interpret and
conflict with EWP rules.
- It is difficult to comprehend by other than seriously devoted
students.
For sake of
clarity, the revised naming format for the various waves is repeated once
again:
The bull
market consists of five Major
waves designated ONE, TWO, THREE, FOUR and FIVE. Major TWO and Major FOUR are
corrective waves with a 25%-30% magnitude of anticipated decline.
Major upward
impulse waves, ONE, THREE and FIVE will each contain 5 Large waves designated in Roman Numerals, I, II, III, IV
and V. Large II and Large IV are corrective waves with a 16% magnitude of
decline, give or take a couple of percentage points.
Large waves
I, III and V will each contain 5 Small
waves designated 1, 2, 3, 4, and 5. Small waves 2 and 4 are corrective waves
with approximately 8% magnitudes of decline.
Small waves
1, 3 and 5 will each contain five Minor
waves designated i, ii, iii, iv and v. Minor waves ii and iv are
corrective waves, each declining 4%, give or take 1-2%.
The gold
market is in the process of completing Large wave II of Major wave THREE.
Once Large II is finished, Large III of Major wave THREE will commence. As
detailed in Update 20, this should be a strong upward impulsive wave that
could reach to above $1,500 before it is completed.
These
forecasts are based on the rhythms detected in the gold market during its
early stages. The magnitude of the various corrective waves helps to identify
the type of wave sequence underway and assists in pinpointing errors when
they occur.
Alf Field
Disclosure and
Disclaimer Statement: The author is not a disinterested party in that he has
personal investments gold and silver bullion, gold and silver mining shares
as well as in base metal and uranium mining companies. The author’s
objective in writing this article is to interest potential investors in this
subject to the point where they are encouraged to conduct their own further
diligent research. Neither the information nor the opinions expressed should
be construed as a solicitation to buy or sell any stock, currency or
commodity. Investors are recommended to obtain the advice of a qualified
investment advisor before entering into any transactions. The author has
neither been paid nor received any other inducement to write this article
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