Long Term Gold Price - A Top at hand?

A Top in Gold?

All eyes on Gold - but for the opposite reason.

The gold price has reached unprecedented levels with what looks to be a significant 5 wave upwards thrust near or at completion. This has significant implications for the Gold market over the medium term and may see a several hundred dollar sell-off over the next few years.My last major update on Gold was back here and the wave count has remained the same - with wave (5) yet to complete.

Under this count, the gold price would need to decline to the bounds of the previous wave (4) at around $1000 or lower to the previous wave '4' of a lesser degree at $600.

Looking at the shorter term wave structure there does remain the possibility that another small push upwards would complete the small degree wave count. More on this later...Be very cautious.

XAO Multi-Year Outlook

The overall outlook on the XAO is extremely bearish based on Elliott Wave analysis (in addition to the massive problems globally with debt that ain't going away anytime soon).

The view below builds on a much larger outlook here that simply implies that XAO needs to return to the long term trendline  - some would call this GFC II or a double dip recession. Obviously there are other possible scenarios that may play out - but at the moment there is enough evidence in the elliott wave count to suggest a large correction of some form is occurring (I'm assuming a simple zig-zag correction based on an initial 5 wave decline).

A suggested target for the upwards 'B' wave circle at 5325 based on a Fibonacci ratio to keep the index under 61.8% retrace (5416). Driving above 5416 would have me reconsider the count as a 'B' wave in a zig-zag should not typically retrace more than 61.8% of the 'A' wave.

This top would complete around the start of August, hmmm, I wonder if that's when the 787 dreamliner will be released?

Ready for a turn on the XAO?

A short update on the XAO now that the level is the last post was hit today. A turn is certainly a strong contender but must satisfy the rules as described below...

XAO Short term Update

In the last XAO post it was described that the 'X' wave could drop to lower levels meaning that it was not complete. This has occurred and there is a good chance that some further downside needs to unfold based on the wave structure. A 50% retracement would tie in well as a bottom for decline before the next leg upwards commences. Levels to watch are 4815 for a bottom for the current 'X' wave correction, breaking above 4950 would most likely indicate the next leg up is underway.

Interest Rates Again

No surprise today - RBA has left the cash rate target unchanged. As per last post, the RBA cash rate target lags the 90 bill rate (only just).

Interest Rates - Appropriate, Stable, Surging, Consistent and Floods

You can't make this stuff up. Adjective 2.0 is close as I can summarise when reading the news from the Reserve Bank on interest rate decisions. It's the same old story - use complicated adjectives to justify interest rate decisions.

A 5 second glimpse is all it takes to see that the RBA rate will be adjusted (if needed) to slighlty lag the 90 day bill rate.

When will the financial media report the 90 day bill rate prior to the RBA monthly meeting on interest rates and make a best guess to the target cash rate? Too easy? Or perhaps too hard to compare charts? Probably the latter.

Interest Rates (Daily)

Orange Line = 90 day rate
Black Line = RBA Cash Rate Target

XAO at a new intermediate term high, well for a few days

The XAO has taken almost exactly 12 months to break (only just) the intermediate term high set in April 2010. This is good news and casts some positive light on the index for the short/medium term even though the high was short lived.

In the last post, there was a view that the index would be correcting in the short term down to support - at around the 4900 level. This has taken place and now remains to be seen if the 3 wave declined finishes the 'X' wave or will a more complex correction unfold - perhaps a triangle?

With the break of the intermediate high, a wave '2' alternate count is now invalidated - this now helps us focus on the primary count as described here.

XAO Update

An update now that the XAO has reached the 5000 level with some weakness at hand.

The longer term view is still here

Small Correction on the XAO

An updated view of the XAO. As described in the last post a small correction appeared imminent and is now underway and may have further downside as described below.

The MACD price oscillator is very useful of establishing the approximate end of wave 3. On the 15min chart, evidence of x2 divergences at the end of wave 3's highlights one more push is required for the wave 5 to complete.

XAO Update

The last post imposed a set of specific rules that were used as a guideline for short term market action. Today, these rules have been broken and the chart below provides a slightly updated view of wave 'C' down. The expectation is to see the XAO climb higher from here (with the obvious corrections along the way, and one is expected in the very near term).

Once a small correction downwards has occurred, this should be wave '2', and we can establish the usual parallel channel and associated rules to manage the index. The market should now move as described in this post back in mid-feb

I have decided to drop MS Office and try the free Lotus Symphony for building the charts - can you spot the difference? Seems to run well (Intel Core duo 3Ghz, 4Gb RAM) with a decent interface and is compatible with MS Office files.

Short term XAO update

A short update on the XAO action today.

Not shown, but worth mentioning, the MACD price oscillator has hit a lower extreme on the 60min chart, this can usually indicate wave 3's have completed. In the chart below, once wave 'iv' has completed and wave 'v' down finishes, the MACD should be divergent to the XAO and thus warning of an impending change in trend.

Crisis Averted

Under the Alternative Count 1
The All Ordinaries has declined and passed the first retracement level described in the previous post at 4565 before climbing back above the 61.8% retracement.

Since many will correlate the recent XAO decline on the 11th March Japanese earthquake, the occurrence of the earthquake has had little impact on the sharemarket: In total, a 92 point decline since the earthquake,  but prior to the 11th there had been a 297 point decline. Hence, the relevance of the earthquake is negligible on the All Ords,  but the mainstream will talk up the slightest of correlations:
  
Sharemarket hits new three-month low

Our market stumbles as Japan falls

only to find today:

Asian, local share markets rebound despite Japan earthquake

Where to?
Fives waves down appears complete and has reached the 61.8% retracement level. The XAO should commence a corrective climb (with an intervening 'X' wave) to new intermediate highs. The short term risk in this assessment is that a drop to 4350 level may still be a possibility until a upwards breakout of the trendline (not shown) is evident in waves of 5.


Alternative count 2 is also still valid and would see the XAO aggressively drive downwards through the 4350 level.

XAO Short Term Update

Alternate count 1 with a Flat for Wave (B) is still in a good position since wave 'B' has almost met the start of wave 'A' before retracing downwards. Wave 'C' needs to fall to 4620 which is 61.8% of 'A' or retrace 'B' completely to 4350. Once complete, the next leg up need to occur and move to a new intermediate term high.

This count is still based on Alternate count 1 here, but with  much longer drawn out flat.

Wave 'C' needs to unfold downwards in a 5 wave move (or possibly as an ending diagonal). Time to complete wave 'C' could be very quick or drawn out if it's an ending diagonal pattern.

Alternative count 2. This count is still valid (as shown here) but I'm not convinced that this is a wave '2' since the proportions of time are exaggerated for wave '2' development v's wave '1'. If the XAO drives down thru the 4350 level with ease, then it may be time to re-evaluate this particular count.

Fibonacci time relationships are apparent between wave 'A' and wave 'B', with wave 'A' taking just a little over 76.8% of wave 'B'. Wave 'C' will probably complete more quickly than 'A'

XAO Alternate count 1

The XAO has clawed it's way close to the high seen in April 2010 and an area of high resistance - 5000. What is apparent is the wave structure since April 2010 seems to represent a flat correction with wave (C) yet to complete. This would also overcome the very slight wave overlap issue discussed sometime back. The triangle that ends wave 'A' of the flat also ties in well with the overall interpretation for a 3-3-5 flat.

A push down to 4350 for wave 'C' is the next move under this wave count before heading to new medium term highs. Wave 'C' will need to be a 5 wave decline.

Obviously the Head and Shoulders pattern discussed sometime back also appears to be invalid.