During the 01-08 stage of the commodity bull platinum was the strong brother of the precious metal complex. Where he led the rest of the complex followed.
Well platinum is at it again, only this time he's got help. Palladium is also leading the charge higher. Both metals have eclipsed their December highs. As a matter of fact both metals have been so strong that the 50 day moving average never even turned down during the recent correction.
We still need to see gold rally above $1161 to break the pattern of lower lows and lower highs but the action in platinum and palladium is suggesting this C-wave still has further to go.
I suspect how the dollar reacts to the employment figures tomorrow will probably give us a big clue as to the next move in gold. Ironically I suspect a poor jobs number is going to be more bullish for the markets as it will probably depress the dollar.Perhaps even completing a weekly swing high which is one of our requirements for a continuation of the C-wave.
I'm still sitting on the fence as to whether gold is stuck in a D-wave decline or whether this has been a very tricky midpoint consolidation. I will say the recent strength despite a strong dollar is very encouraging.
There are four important requirements that have to happen before we can say with a high degree of confidence that the C-wave is still in play.
The single most important is the dollar. We simply must see the intermediate dollar cycle top. No C-wave has been able to fight a rising dollar. The dollar is getting late enough in the intermediate cycle that it could put in a top at any time.
The next requirement is for gold to put in a right translated daily cycle. If this remains a D-wave then all daily cycles should be left translated. If gold can eclipse $1131 this week then we will have a right translated cycle and that shouldn't happen in a D-wave decline.
The next hurdle is the $1161 level has to be surpassed. Gold has to break the pattern of lower highs and lower lows. It will do that if gold can top $1161. That will also eliminate the December trough as the intermediate cycle low and move the phasing to February. That is very important as it will mean gold is on week 4 of the cycle instead of week 10. That would give gold 6 more weeks for the second leg to progress.
And finally we need the miners to start participating. If the HUI can cut through the 420 resistance level that will be a big step in the right direction. If miners can break out to new highs along with gold all resistance in the gold market will be out of the way and the path will be clear for the second leg of the C-wave to rack up another monster move.
In the next chart you can see that just as soon as the dollar bottomed gold's C-wave ended. The stock market managed to drift a bit higher due to seasonality and momentum, although I will add that the last little spurt higher in December and January occurred as the dollar was correcting into a daily cycle low.
The fate of the markets now rests with the dollar. If Ben can get the dollar headed back down assets will head back up. If not we are going to continue to flounder around until the full forces of the secular bear grab hold of the market again and suck it back down.
The problem is that public opinion has turned against stimulus and printing at the moment. So it's going to be hard to rationalize more printing. (I will add that the government has figured out they can still sneak in more stimulus as long as they don't call it stimulus. Now it's a jobs bill.) If however things start to weaken appreciably public opinion will quickly shift back to "do whatever it takes to fix the problem".
Sooner or later that is going to happen. Of course if we want to see another leg up in the C-wave we need it to happen quickly. Actually because we are running out of positive seasonality (no C-wave has topped later than early May) we probably need to see the dollar top next week.
I'm going to say if we don't put in a weekly swing high on the dollar chart next week then we can probably kiss any more thoughts of a C-wave continuation good bye.
At that point we will just have to twiddle our thumbs for another month or two as we wait for the A-wave to begin.
Maybe this will help understand why I did what I did.
If you understand how the 4 wave structure in gold works you will understand why I want to take some profits out of the C-wave. If I hold on to a winner it will just get dragged down by the extended corrective process after the C-wave tops and will turn into a loser and then it will be dead money for many months as the next C-wave builds a base.
If I have some dry powder then I can put that powder to work in the A-wave advance, which while it won't make new highs could still be good for a 40-50% gain in a stock like SLW as long as I get in close to the bottom of the A-wave, which isn't too hard to do if one watches the COT report. That's a much better use of my capital than just watching one of my winners bump around for months.
If gold is now stuck in a D-wave decline all daily cycles should be left translated. By that I mean if a cycle averages 20-25 days trough to trough any cycle that tops in 10-12 days or less would be a left translated cycle.
Gold is now sitting on the fense. At the moment the cycle appears to be left translated with the top occuring on day 10.
It that top holds we should expect gold to drop below $1044 at the next cycle low.
If however gold can move above $1131 in the next few days we will have a right translated cycle in play. That should not happen in a D-wave decline. The play then would be to get aggressively long at the bottom of the next daily cycle low.
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T1. A move followed by a sideways range often precedes another move of almost equal extent in the same direction as the original move. Generally, when the second move from the sideways range has run its course, a counter move approaching the sideways range may be expected. T2. Reversal or resistance to a move is likely to be encountered: - 0n reaching levels at which in the past, the commodity has fluctuated for a considerable length of time within a narrow range - On approaching highs or lows T3. Watch for good buying or selling opportunities when trend lines are approached, especially on medium or dull volume. Be sure such a line has not been hugged or hit too frequently. T4. Watch for "crawling along" or repeated bumping of minor or major trend lines and prepare to see such trend lines broken. T5. Breaking of minor trend lines counter to the major trend gives most other important position taking signals. Positions can be taken or reversed on stop at such places. T6. Triangles of ether slope may mean either accumulation or distribution depending on other considerations although triangles are usually broken on the flat side. T7. Watch for volume climax, especially after a long move. T8. Don't count on gaps being closed unless you can distinguish between breakaway gaps, normal gaps and exhaustion gaps. T9. During a move, take or increase positions in the direction of the move at the market the morning following any one-day reversal, however slight the reversal may be, especially if volume declines on the reversal.
General Trading rules
G1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move. G2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases. G3. Limit losses and ride profits, irrespective of all other rules. G4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. G5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal. G6. Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses, and from certain formations such as triangular foci to take positions. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation. G7. In a market in which upswings are likely to equal or exceed downswings, heavier position should be taken for the upswings for percentage reasons - a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100% G8. In taking a position, price orders are allowable. In closing a position, use market orders." G9. Buy strong-acting, strong-background commodities and sell weak ones, subject to all other rules. G10. Moves in which rails lead or participate strongly are usually more worth following than moves in which rails lag. G11. A study of the capitalization of a company, the degree of activity of an issue, and whether an issue is a lethargic truck horse or a spirited race horse is fully as important as a study of statistical reports.
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