Sep 092012
 

It is a while since I posted Elliott Wave Analysis of Gold. Septerber 2012 has started off with a a sharp rally in this precious metal and there have been persistent requests for an update. Lets look at the charts and see what clues we might get.

I frequently go back to the most recent significant low and see if any sense can be made of the moves from there. Accordingly, I am starting my wave counts from the October 2008 low of $680. (By the way, when I am doing a fresh analysis, I don’t cloud my mind with any wave counts that I might have made several months earlier. Markets change, and it is always good to start afresh). My first attempt produced this chart you see below.

Elliott Wave analysis Gold - first chart

You can see that wave 3 was 161.8% of wave 1. So far so good. But is it possible that wave 3 was an extended wave? Lets take a look at the next chart. Here the internal wave counts (the sub waves) within wave 3 show that perhaps this is a better way of labelling the chart.

Elliot Wave counts of a third wave in Gold

You can see that wave 3 has travelled a distance equal to 323.6% of wave 1. Clearly, this is an extended third wave. What is more! As the next chart reveals, the fourth wave came down by exactly 38.2% of the third wave.

Fourth Wave correction in Gold

Having sort of settled down on how the recent moves can be counted, we turn next to figuring out pressure points for the future moves. A fibonacci retracement grid revealed that the key resistance at the 61.8% level falls at 1770. This is not only going to attract, but there is a chance we might get a small correction from there. Remember what I discussed in the article today “what next for the s&p500″ posted earlier today? We should trade in the direction of the trend, and where the odds are in our favor. Clearly, if we are going to get a 5th wave higher, there is a lot of room on the upside. Besides, the recent action by the ECB only increases the chance for high inflation and that is fundamentally good for Gold, In these circumstances, we should avoid selling at minor perceived resistances, and focus on identifying low-risk entry levels to join the next step higher. So although a resistance lies at 1770, we should be more willing to buy any correction from there, rather than selling at the resistance.

Use the 61.8% retracement to signal a dip

Use the 61.8% retracement level to signal the possibility of a dip that you can use to join the trend, even if it is a short term trend. Now let us pause and consider whether Gold can collapse for some reason. Sure, anything can happen. But in my view, even if Gold breaks down dramatically, we will likely see a rebound to near last week’s highs before it follows through. And if a trader had gotten long on a dip, then there would be a good chance for a safe exit if things turn unexpectedly bad. It is intelligence like this that Elliott Waves offers a thoughtful trader, and hence, why it pays to learn the techniques. It goes without saying that a trader who trades without a stop-loss order in place is a gambler. He is not a trader. Good luck.

  75 Responses to “Elliott Wave Analysis of Gold – September 2012”

  1. sir as per my method gold will first test 1200-1250 zone and eventualy will hit bottom around 900-950 dollar in 2013.

    • Hi Tushar, if your method uses Elliott waves, please post your reasons when you write so others can read it too.

    • Hello Tushar,
      I had a similar view then yours and I would only change my view above U$1.800, and specially above U$1.900.
      Today I looked to my oscillators and in all time frames Gold looks very bullish!
      I will wait for a retracement, and possible go long with the Ramki views from today!

      • Hi david,
        Please please do not go long in gold as in nest 45 days gold will hit 1225 dollar level so please wait till next 45 days to avoid big loss other wise do one thing buy and sell gold in differnet account and if gold closes below 1638$ THEN CLOSE LONG POSITION AND ENJOY PROFIT TILL 1225 AND IF GOLD CLOSE ABOVE 1810 THEN CLOSE SHORT POSTION AND ENJOY PROFIT TILL 1980 BUT CHANCES OF GOLD CLOSE ABOVE 1810 IS 0%….SO CHOICE IS YOURS
        mine is a mixture of w d gann and my own system….

        • Tushar, thanks, but any recommendation needs to be substantiated with the analysis. So it might be of interest to readers if you upload a link to where yur gann charts are posted. Secondly, may i point out that you are making a classic mistake that only beginners tend to make, that of buying and selling in different account. Such an action will leave you with no position until you close out any one of the two trades. Good luck.

  2. According to Elliott Wave, how long usually wave V is ?
    Thanks

    • Hi Alma, there are a few possible end points and these are explained in detail in my book FWTFF. But you could find explanations in any standard book on Elliott waves too.

      • Hi,

        I have bought your e-book on Amazon but I’m still not clear on this. A flat has 2 motive waves (A, C which are in the direction of the correction) and one corrective wave (B which is opposite to the correction in the direction of the original trend).
        Motive waves are always supposed to be 5 waves but in a flat the A wave is in fact 3 waves. A triangle is the same, it contains more motive waves that are 3 waves. A zig-zag is fine because both A and C are motive waves are are 5s.

        I have Prechters book also and he just glosses over this point with no explanation.

        Thanks.

        • Hi Rick, You have asked a very pertinent question, something that I normally explain in my seminars. Let us start by agreeing that corrections are 3-wave affairs, whereas impulses are 5-waves. Whereas in a zig-zag the 5-3-5 structure is clear, in the case of the zig-zag, Wave “A” is itself a zig-zag, i.e. the internal waves of wave A are 5-3-5, just as the intenal waves of Wave “B” will also be 5-3-5 (another zig zag that will reach the starting level of wave A). If you read my book FWTFF carefully, you would begin to anticpate flats when the prior correction was a zig zag (and vice versa). Hope this clarifies. Good luck.

  3. Sir,
    sir, i read wave 2 never in triangle (if it is triangle it is in combination )please explain the same

    thanks.

    • Hemin, I dont recall Ralph Elliott’s work having said triangles never occur in wave 2.

    • Hi Ramki,

      Maybe you can explain something for me to do with EW theory – the golden rule is always impulses are 5 waves and corrections are 3 waves right?

      But in a flat there are sub-waves are 3s (3-3-3). So the first and last sub-waves are actually impulses (they move in the direction of the correction) but they are 3 waves instead of 5. So this contradicts the golden rule!

      • Hi Rick, these corrections are clearly explained in FWTFF. Wether it is a flat or a zigzag, the C wave will always be 5 waves. So we will get a 3-3-5 in a flat, which we can call ABC. In a zigzag, the sub waves are 5-3-5, and the correction is expected to travel deep. One may consider waves A and C n a zigzag to me mini impulses in the direction of the correction

  4. Sir in your first chart wave 1 is at 1250 and wave 2 at 1050 but in the following charts the wave 1 and wave 2 are at 1000 & 870 .

  5. thx alote sir…very good Elliott waves analysis……..

  6. Hello Ramki,

    After this post on Gold, I believe that a post from you about Silver would also be a plus.
    Keep up with your good work,
    José.

  7. I have your book, FWTFF. When will you publish your next book?

  8. Sir,
    To take the opposite view, the triangle (which Elliott describes as only occurring in penultimate positions, i.e. wave 4, wave b) that played out between June and August could be wave B of a retracement, in which case we could now possibly be in wave 3 or even wave 5 of a terminal wave C. This view would see gold potentially crashing through the floor in the 1520s in the next move down.

    • HI Zenf, Thank you. I always go the market with the conviction that just about anything is possible. WHat matters is how we use our analysis to take low-risk positions. You are a bear and I am a bull at the present time, and both could make money in different time frames. I always have the ability to chang my mind, just as you too could :)

      • Thank you. I am actually not a gold bear. I wanted to share an opposing view, and both views seem viable to me, which is why I am staying out of a gold trade at this time. I feel much more confident in a reversal in equities. Although in that case, as well, a trader would do best by changing bull/bear hats as the situation dictates.

    • Hi, my count agrees with yours, that gold is completing a terminal C where B was a triangle. I see the entire wave 4 correction from the high as either a triangle and the D is now completing or an A B C from the high where B is a triangle and we are completing C or E of the B. Which ever way you look at it 1790.26 invalidates. So the potential for a short with stop at aforementioned price seems a fair R/R trade. On the other hand if invalidated then I am forced to count the move from dec 2011 to feb 2012 as wave 1 of an extended 5th and B triangle that completed on 15th august is not a triangle but rather
      1 2 1 2 1 2 of the 3rd of the 5th impulse.

  9. Very interesting and detailed post, thank you for the analysis.

  10. hello mr. ramki, from what i can see on your chart you have wave 3 at 1920. so, indirectly you are saying that wave 2 ended at 680. according to your book, in order to calculate wave 5 targets accurately we need to find the real wave 0 for this bull market. if you look further back we can see price of gold around 250 +- few points in 2001. that is a good wave 0 to calculate targets imo.

    i have a question, how many extension within extensions are allowed in ewt? for example, if this coming wave 5 of 5 extends. is it possible to get another extension of a smaller degree within that 5th wave and so on. how many nested extensions are allowed? i ask because commodities often go parabolic in 5th waves and that is one way to allow such a big spike moves while still following ewt rules.

    thanks.

    best regards,
    nadir

    • Hi Nadir, As we cannot go back in time to catch the bottom of the first wave, traders should look to get on board the current trend, ie the current impulse wave. I start my count with an impulse wave that started at 680, which is the point ’0′. Wave 1 was 1200 area, and wave 2 @ 1050. Re extensions, yes, there could be more than one extension in a 5 wave sequence, and an extended wave usually has an extended sub wave inside it. I have not seen more than 2 extensions in a 5 wave sequence. In the final analysis, it doesnt matter how you count it so long as you are trading in the direction of the trend! Good luck.

      • hi mr. ramki, i was looking for the origin of this bull market to help estimate targets for wave 5. i consider waves 0-3 from 250 to 1920, but you are more focused on immediate impulse wave with a range of 680-1920. if we both calculate targets we get different results for the 5th. wave 4 was much more time consuming than wave 2 so it must be of a higher degree. i believe you have analysed wave 3 (680-1920) and wave 4 both part of a larger impulse wave that began in 2001. both trends point in the same direction but one of us will be getting off the train much earlier than necessary

        respectfully submitted,
        nadir

        • HI Nadir, It is more important to trade with the trend than trying to identify the end of the trend, especially if the end seems to be some distance away.

          • hi mr. ramki, i agree, trend is our friend. here is my long term chart of gold…

            http://uploadpic.org/v.php?img=KoJyfiejB

          • the long term chart above shows wave 3 to be “normal” compared to wave 1 (equal to or less than 1.618 of wave 1). according to mr. ramki’s excellent book we should expect wave 5 to extend. a reasonable target would be 100% of the distance covered in waves 0-3. in my chart, that comes out to a range of 254.35 to 1920.18. adding 1665.83 to mr. ramki’s 38.2% retracement in wave 4 at 1517 we get a target of 3182.83. if gold acts similar to late 70′s, wave 5 may move anywhere from 161.8% to 461.8% of 0-3! let’s see what we get if wave 5 goes crazy parabolic… 1665.83 x 4.618 + 1517 = 9209. wow! the world will be a disaster but atleast you have something of value if you got some gold

            nadir

          • Hi Nadir, let’s not get carried away! While it is usual for at least one impulse wave to extend, it is not a must. Secondly, we have a theory that says gold is likely to go up. That is the more important part of the analysis, not the target. Enjoy.

        • hello mr. ramki, i think we should start investigating hyperbolic functions to anticipate targets for wave 5. bernanke, dragi all hitting the panic button so i don’t think wave 1 = wave 5 is going to cut it anymore.

  11. Good Morning Dear Ramki, thank you for your learning post once again.
    Reminder for prices of NESTLEIND and RCOM—On Friday NESTLEIND closed at 4602.80 and RCOM closed at 50.70.
    Thanks and Regards.
    Good Day.

  12. Hi Ramkiji,

    What could be the probable minimum area of current 5th major to travel? As you have mentioned 3rd within 5th can be extended, Will 5th can be 100% of 1 or 61.8% of 3 or something else which I am missing complitely!

  13. Hi Ramki,
    Thanks for the Gold analysis.
    As per Elliot triangle never occurs in wave 2. Please correct me if i am wrong.

    • Sandy, I believe the understanding is it rarely occurs in wave 2

      • Thanks a lot Ramki.

        One query Ramki, Whether it is possible that wave a (bigger wave B) of triangle retarced 100% of the previous fall (i.e.correction in the form of bigger wave A)?

        • Hi Sandy, In a symetrical triangle, or horizontal triangle, where the two lines are converging, wave B will be smaller than wave A. I am not sure i understand your question…

          • Thanks Ramki,
            Lets take a Nifty example. You have calculated rise from 2008 in Nifty till 2010 is an impluse and then fall as a-b-c-x-a-b-c as a corrective mode. Now if we consider a bigger picture fall till 2008 is wave A and rise from there till high of 2010 is wave a and then fall from there as wave b,c,d,e of a traingle in the form of bigger wave B. because if we see Nifty is clearly forming convergent triangle. So my question is whether wave a of triangle (we are getting a converegent triangle in wave B) can retrace 100% which is the high of 2010 ( considering wave 5 has ended in Jan 2008).

          • Hi Sandy, If you are suggesting that the 5 wave rally from 2008 to 2010 is wave ‘A’ of a three-wave correction, then I am afraid you are probably on the wrong track. A correction, by definition, corrects a prior move, and if your “A” wave itself has covered the entrore decline into 2008, then you should start rethinking your counts. Good luck.

  14. Dear Sir Ramki, today EGX30 at 5697 )))))))) I recovered my losses and on a gain track!! you can do magic!!!

  15. Dear Ramki,
    Following your article in Forbes in January 2012 regarding Athens General Index (Greece) could you please post a new article to explain the current bullish move (+60% since 471 bottom)?
    Regards
    Vasilios

    • Vasilios, Thank you for pointing out the spectacular recovery in Greek stoks. (Here is the link for those who missed out: Ramki’s Forbes Article on Greek STocks ) No question about selling what you picked up down there. Buy more on dips in the index to around 700 level. Have you told your other Greek freinds of what is possible with Elliott Waves? Regards

      • Dear Ramki,
        Thank you very much for your quick response regarding Greek stock index. I really appreciate your position. You see, there are some Greek Elliott Wave analysts who still insist that the current move is a complex bullish retracement and the index will go back to previous low (471) or even lower (350). What I see is what you see and moreover step by step moving higher up to 1.350 level. What do you think? My friends believe in EW analysis and I have already recommended your site.
        Regards
        Vasilios

  16. Hi Ramki,
    Jan2008-Oct 2008 = Wave A
    Oct 2008-Nov2010=small wave a
    and rest of the development from there on is wave b,c,d,e of bigger wave B.
    My question is whether it is possible that smaller wave of a triangle can retraced to 100% (retracement of wave bigger A)

  17. Hi Mr R

    He probably means out of the money instruments.
    I notice that you use the Fib sometimes from wave nought to top of wave 3 to find out the end target for wave 4 and then sometimes from the bottom of wave 2 to the top of wave 3. Is it a best-of-fit scenario? Can u clarify?

    • Hi Trevor, as explained in my book FWTFF, corrective waves are related to the impulse waves that they correct. So wave 4 is a measure of wave 3.

      • Hi Mr R

        I am talking about the point zero of wave 1 of the same degree as wave 3 and not the zero of sub wave 1 of wave 3.
        Re: Fig 13c of page 698

        • Hi Trevor, I looked up fig 13c of FWTFF but am unable to connect what you are trying to ask me. Could you look up that chart using iPad or kindle for PC which shows it in color and maybe it will be clear to you? Best.

        • hi mr. trevor, i looked at fig 13c page numbers are relative! in that example, mr. ramki places the fib extension tool on point 0, point 3 and finally at the wave 4 level to project targets for wave 5.

          nadir

  18. @All,

    I think we go to long in gold and also wait for@1700 $ ,than go to long with a stoploss 1690 which is last week close.

  19. Dear Ramki,

    I am practicing EWT. I thank you for your time on this blog to reach out students like us. Only thing I feel I am missing on EWT is the timimg part of it. Even Petchner’s work do not sterss too much on timing. Can we expect something on estimating time along with price in your up coming books?

  20. Sir,

    Indian Stock market has given some sharp rise in last week. So, still bearish count is valid or Sensex/Nifty has done major bottom and now in a new uptrend which will cross previous high and will enter in new bull run?
    If time permits please post fresh counting. I was expecting ending diagonal started from the low of 4771, which has given break out now.
    If still there is a chance of downside, at what level or below what level one can take attempt to go short?

  21. Hi, regarding the triangle being rare in wave two, here is an alternative way to look at it: According to Bob Prechter’s book, sometimes wave e of a triangle can extend into even smaller waves f, g, h and i, making it a nine wave triangle.

  22. hello mr. ramki. here is my latest ew analysis of gold. any comments welcome. thanks, nadir

    • Nadir, I have replied another comment on gold today.

      • Ramki Sir,

        Huge gyrations being seen lately in GOLD. Now that the fiscal cliff drama is over and gold slightly reaching near 1700 resistance levels on the new year, it came down swiftly and is down over 2+% today. I guess this volatility definitely caught your attention. I am wondering are we in an extended 5th wave down ? We are eagerly waiting for your analysis and I have brought my popcorn :).

        Best wishes,
        Sunny

  23. Is above waves count gone wrong as currently gold @1556=1570?

    • Hello Satish, I think the idea worked well in the given time frame. But remember that wavecounts are our aids to trade, not something to showcase whether we were right or wrong. This is how WaveTimes is different from others. Here you learn how to trade as much as how to apply ELliott Waves.

      • Dear Sir,

        Your post on GOLD is almost 6 months old now. And meanwhile GOLD has gone through serious correction in last 20 sessions. Could you please update the post with your latest analysis.

        thanks

      • Sir,

        Would appreciate atleast a short and crisp update on the Gold situation as the recent turbulance(we can call it” Storm on steriods” as it fell 5+%) on GOLD has started to freak even the long term Gold Bulls. Do you think this is a rare opportunity to load up or the carnage will still continue, if so what levels to watch for as the long term support levels between 1550-1500 have been broken with full force?

        Thanks in advance and eagerly waiting.
        Sunny

  24. Hi sir,

    I’ve already bought your book and all that I can say is that so far it’s the best book on EW analysis out there and I want to thank you for writing such great book. Everything about EW is explained in an easy-to-understand manner. However, there’s this one topic in the book wherein I got lost and I would really appreciate it sir if you would be so kind to enlighten me regarding that particular topic, i.e., computing the end of wave C using the rules in determining the end point of wave 5.

    Hope to hear from you soon sir. Thank you for helping us aspirant traders become good in analyzing the behavior of the market via EW analysis.

    Regards,
    Kyle

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