The CAC briefly reached a level where it had last traded in November of 2013, some 8 months ago. The loss, from the peak, is now about 5% and this index is sitting on the 200 day moving average. From an EW perspective the interesting thing is that this initial drop can be viewed as a 5-wave affair which itself may be an initial first wave down. Time will tell.
Here is that triangle again in the XAU. All the legs within the triangle should be three-wave structures and there should be 5 of them. With one exception, wave e, they all definitely are. e may not be over yet as it can still go higher provided it does not exceed the height of the c leg. The “mouth”of this triangle suggests a target at about 60 (or even lower). EWavers, the purists that is, take umbrage with using other technical indicators, it pollutes and distracts the thinking. I do not see why one would not use additional indicators if they simple corroborate the EW analysis. In this case the MACD has been dropping for nearly a year and the RSI is clearly overbought having been above the 70% line only once before in the previous 3 years (all I can get on ScharpCharts). By the time we get to 60, if indeed we do, gold stocks will have lost about 75% of their peak values and should then be a screaming buy at least for a very solid bounce. The XAU contains 13 gold stocks, mostly the big ones like ABX, Goldcorp Kinross etc. so what applies to this group of stocks does not necessarily apply to all gold stocks. For examples, DGC, Detour Gold, no doubt, already made its low as we pointed out months ago.
Another potential c wave that is near completion. It has all the necessary attributes of a wedge, so perhaps it is one! Similar wedges are found in the IBEX and the banks within it of which we show only SAN, Santander below;
It is particularly interesting in that it has a perfect 2.618x advance from the low (where we recommended buying it!). This one probable already has a throw-over .
Speaking of wedges, the DOW itself is displaying one that is almost as beautiful as the one on the CAC40. If there is a small triangle in the 4th wave position in this wedge, then it could be argued that one more minor leg would be required to complete the pattern, either with or without a slight throw-over. Again, as with the CAC the initial target would be the base of this structure, about 600 points lower. The charts below show how this wedge, always a 5th wave, fits in the big picture.
It would be the 5th wave of c of an a-b-c that is itself the larger B-wave. Interestingly, the low was at 6547 so the Dow has risen 10521 points so far or 160.7%. This is very close to an ideal Fibo number, which would suggest a top might occur at about 6547×2.618= 17140. That is only 66 points higher than yesterday’s high so this could be accomplished in less than a day. To read why this market might just be a little overvalued I recommend reading http://www.hussmanfunds.com/ ‘s latest article about delusions of the perpetual motion machine. Here is one person who does not quite agree with Janet Yellen’s view that this market is not overvalued!