Then and now;
You could easily have made $3 per barrel on this last move alone. If you like to play with a 10 lot per trade that would be $30,000 as each contract is good for 1000 barrels. Don’t forget to use stops!
Month: July 2015
CRB index update
Please see some of the earlier blogs on the CRB, they were quite accurate and today we will try to repeat that. Originally we were obsessed with the idea that there was a large B wave from the depths of the great recession lows, if for no other reason than that it showed up in so many different places. We show that scenario in beige. You can find the 3-wave structure of the B wave in the 2011/12 blogs in great detail.
If that scenario is to be correct the developing C wave down must subdivide as a 5 wave structure. It could still do that as shown in beige. However, to date this move down from about 370 has all the attributes of a 3 –wave affair and very precisely at that. This does not preclude the 4 and 5 from being added in the next year or so but it does raise the question whether or not there is a serious alternative. There is. It is possible that the original B wave becomes more complex, that is to say that the drop from 370 to 200 is not a C wave in progress but a b-wave within the larger B-wave. Initially you cannot tell as in both scenarios the direction would be up.
Typically bubbles burst and the index, commodity, whatever trades below the starting point of the preceding bull run. That suggests that we are not done yet but un till we break 270 (overlap) we will not know for sure where we are. I prefer the beige scenario, with the C wave developing as a wedge, but the black one is very compelling, see below,both legs a and c are absolutely perfectly vector equal just a fraction below where we are presently;
Note; Another alternative would be a double zig-zag, as in a-b-c X a-b-c. The second a-b-c is in the Stockchart above. The whole thing would be complete ( which conflicts with a return to levels below the start!) More importantly for this to be so wave A would have had to itself subdivide in a 3 wave structure. To me, if anything, it looks like a straight line down without a visible intermission.
Gold from Chart of the day
You can get Chart of the Day at <a href="http://www.chartoftheday.com/">Chart of the Day</a>
This is, of course, on a semi-log scale. These charts are fairly crisp, this one less so as i had to enlarge it. So here we see the 10+ year run from the lows at around 250 to the highs of 1923. In terms of inflation adjusted, or measured in purchasing power, the high is pretty well at the same level as it was in 1980/81. In other words gold essentially double topped. We have no idea whether or not the recent drop is just an intermission on the way to $5000 or more, or if this is the start of a huge correction. What we do know is that the largest correction during the ten years up was in 2008, from about $1000 to $700. This, regardless of what EW count one wishes to use, is a NORMAL retracement level. This is also at the average cash cost of $719, the level where miners actually stop producing. For an interesting take on this please go to http://www.cmegroup.com/education/featured-reports/gold-storm-on-the-horizon.html This is from the economist at the CME, Chicago Mercantile Exchange, sober and objective.
Concerning EW, if we are approaching a bottom of sorts, after 5-waves down, we should get 3 waves up for a B and then another 5 waves down, so first to $1400/1500 and then down to $700. All of this regardless of where we are precisely.
GOLD again
The triangle idea is a little off because, as we pointed out, wave b (here shown as a) is fairly clearly a five wave move which disqualifies the already awkward looking triangle. More in line with the stocks, see for instance ABX would be the diagonal or wedge concept. There each of the five waves, both up and down should be 3’s. This could be the last, or 5th wave of such a structure. Equality, not an essential feature of this type of wedge, would suggest a low at around 1065-75 . This would be very close to the 50% and would allow for one more drop that I think is required to finish this leg down. Gold is already down about $15 which might indicate that we are in a minute 4th wave triangle.