We may have peaked about a week or so ago on the Dow, see my previous blog.

This is all predicated on the idea of a diagonal triangle 5th wave, all the way from the lows of the 1929 depression (or, if a triangle in the post WW2 lows of 1947 or so). Each leg does not need to be a 5-wave affaire in this scenario. Note that both the RSI and MACD have been dropping for quite some time. Also, the ten year US bond yield doubled in the past few months and that may well be the Achilles heel of this financial Alice in Wonderland that we are living in.

This chart is from yesterday, December 10, 2020.

This chart is pretty clear to me, particularly the very distinct b-wave in 2019. It is part of a larger corrective structure which makes the covid related drop a 4th wave. Sometimes it is hard to embrace the logic but obviously all the stimulus that was put in place immediately, in amounts unheard of ever before, including arm twisting at the fed as well as all kinds of regulatory and fiscal policy changes etc. etc led to a very positive climate for some, mostly large, corporate assets. As 10 people own 1/2 of all stocks there never really was that much pressure to sell, so against expectations we actually got a very sharp V-shaped recovery. Just as counter-intuitive all that was, the coming years may prove equally counter intuitive. Vaccine or not, it is time to pay the piper. Expect the market to drop precipitously.

We have to consider the possibility that we are looking at a two year triangle 4th wave. If correct we could be going sideways for a few weeks in a little triangle and then have a thrust up to 30000/31000. It is possible that this minor degree 4th wave will not become a triangle and that we go straight up from here. We would hit the upper trend line a little earlier so more at the lower end of this range.

Whatever happens, the drop from there should take us down to at least the 19000 level of May this year, but more likely a lot lower.

For the big picture, see also previous blog repeated below;

This is a wedge right from the lows after the depression.

So roughly two years ago we anticipated that ABX would trade  down to about $16 and then back up to slightly over $40. Had you bought at that level you would have paid a few dollars more than absolutely necessary but in any even you would still be looking at a solid double + in 2 years. The two counts that we had at the time are still valid so the matter has not yet been resolved. My guess is that this is the green scenario, that is the B wave up in an otherwise ongoing downward trend so I would be inclined to sell. Fundamentals that might support this view are that whereas gold itself has made new highs this stock has not. This despite the fact that production costs, mainly diesel fuel, are substantially lower now than at the previous peak. Also there is a dividend increase and talk about getting listed on the S&P. Given all that the stock should be much higher but it isn’t. Early this morning gold dropped by , give or take, $80 right on the open so perhaps the stuff itself is also turning.

We have no idea where gold might be going at this time but looking at the chart below (Macro Charts) it certainly looks like it is long overdue that the spread between gold and stocks should narrow.The blue line represents stocks, the other gold.