The incredibly strong move in
the XOI increases the probability that wave [3] has commenced and I have
changed the Elliott Wave labeling scheme to take this into account. New
changes in trend are marked by rapid price movements above a former high in
an equivalent or lesser period of time (as in the move the past week). There
still is the chance the XOI goes sideways until September, but the rapid move
up can not be ignored. The upper 55 MA Bollinger band is still rising and the
index has not even caught up with it. The lower Bollinger bands are all
declining with none curling up, suggestive a top is not in place yet. Oil
prices are at record highs and stand to go much higher. As the price of oil
continues to climb, investor interest will climb. How will be know if the XOI
is in wave [3]? If the XOI takes out 1300 by December that would be positive
reinforcement for the count.
Figure 1
Red lines on the right hand
side represent Fibonacci price projections based upon the price action of
upward trending wave price action projected off the subsequent lows. Areas of
line overlap form Fib clusters, which indicate important support/resistance
levels. The XOI blew through 1128, suggestive the current move up is the
start of a new trend. Moving averages are in bullish alignment (50 day MA
above the 155 day MA above the 200 day MA, with the 200 day MA currently
acting as support at 1098. Full stochastics have the %K above the %D, with at
least another 3-4 weeks of upside.
Figure 2
The weekly XOI is shown below,
with Fibonacci price extensions of wave [1] shown at the top of the chart and
Fib price projections of wave [1] projected off the upper lows of wave [2].
There was slightly more than a 1:1 equivalency between wave [1] and [2]. The
lower 55 week MA Bollinger band is relatively unchanged from last week; I
thought that the lower 55 week MA BB would climb closer before the start of
wave [3] but as seen below, it might lag for the entire bull market. Full
stochastics have the %K above the %D, within a diamond structure that has
been underway since early 2004. Should the %K break above the upper trend
line of the diamond, it will trigger an extremely significant breakout.
Figure 3
The mid-term Elliott Wave
count of the XOI is shown below. I had the Elliott Wave count for the most
recent non-limiting triangle as the first leg of an internal triangle to the
larger one developing since September 2005. The incredibly strong move the
past two weeks suggests that the termination of the prior structure
represented a change in the trend. As such the labeling scheme given now is
that wave 1.(1).[3] is currently underway. If this count is correct, then
wave [3] should complete by December 2007. Lock and load because energy
stocks are going much higher over the next 12-16 months. All of wave [2] is
shown below and was a running correction. This suggests wave [3] will be the
strongest wave of the entire bull market.
Figure 4
The long-term Elliott Wave
count of the XOI is shown below. A defined impulsive move for wave [1] is
followed by a large running correction in wave [2]. Wave [3] should complete
above 2000 by the end of December 2007.
Figure 5
Well, that is all for today.
Geopolitical tensions all over the world, CanWest Petroleum remains above
$6/share, gold prices are firming up etc. etc. All of these poses well for
commodity-related stocks over the coming 3-4 years. Make no mistake, the debt
implosions coming in the next 4 plus years will really strain the system, so
even though bullion prices might go to $5000 plus, the shares may languish
due to debt repatriation. By mid-2008, 50% of investments should be converted
to bullion.
