"Time is more important than price; when time is up price will reverse."
W.D.Gann
TIME AND PRICE
In our universe, without time passing there will be no movement in price. This is obvious. However, price appears to be the main consideration for many people active in the markets. For example, if a stock has risen $50 from an apparent bear market bottom and starts to correct, it is generally accepted that a retreat of one third to one half would be expected and is normal. If the $50 rise in price occurred over a three year period, it appears to be generally accepted that if the one third to one half price correction occurs in only a month or two, the correction is over. This can be very misleading. Without taking the time factor into consideration, an analyst is ignoring one half of the ingredients that make up corrections.
If the stock or commodity being studied has a clear 5 wave bull movement, based on the Elliott Wave Theory, the time for a correction often has arrived. It is important to examine how much time the 5 wave move has consumed. If the 5 wave move has consumed an amount of time that is close to equaling a number from the Fibonacci series, there is a good probability that the correction will also consume an amount of time equal to a number from the Fibonacci series. The range for corrections in time and price are often 38.2 % to 61.8 %. Let's take a look at the charts for silver, gold, and the HUI in order to determine if there are any factors that may influence the length of time spent correcting. I will start with the monthly chart of silver. I am starting with silver because the amount of time spent correcting after a 5 wave move that consumed 54 months seems minute to me. After a 54 month, 5 wave bull move silver gave back 50 % of its entire rise in 5 weeks.
Fibonacci Numbers, the Golden section and the Golden String ,
"After a 54 month, 5 wave bull move silver gave back 50 % of its entire rise in 5 weeks." Is a 5 week correction giving back 50 % of a 54 month rise sufficient time to say the correction is over? The answer is I don't know for certain, but I have my doubts. If we believe that a bottom for this correction was made at what I have labeled as wave (a), then we believe the correction is over. We would believe this in spite of the fact that Delta Long Term # 5 Low would have to be called a low 5 months earlier than it has ever been known to arrive. We can do that because maybe this time it's different. However, I prefer that the silver market prove it to me by closing over the high at wave (b) on this chart. If that occurs without a new low below the $9.60 level at wave (a) I will believe that the correction bottomed at wave (a). In the mean time I would prefer to be out of silver and on the sidelines waiting for a resolution of this time problem. If silver moves up from the current level we will be paying higher price to get back in. I consider that additional cost an insurance premium. It is an insurance premium against holding and having a huge loss if silver drops below $9.60 in the months ahead while it completes a missing (c) leg down. A 38.2 % time correction of the 54 month 5 wave bull move would bottom approximately 21 months from the top at $15.20. That would be at Delta Long Term # 2 Low. I am not saying that this is what will happen. I am saying that I want to avoid that probability. I am saying that in order to avoid that probability, stay on the sidelines, pay the extra insurance premium if silver moves up right away, and play it conservatively.
SILVER MONTHLY CHART # 1
The silver monthly chart # 2 shows the correction that gave back 50 % of the entire bull market rise in 5 weeks. Corrections of 5 wave moves often return to the area between the previous wave (3) and wave (4). A 61.8 % correction of the entire bull move for silver would bring the price down to a level just below wave (3).
If Delta Long Term # 1 High inverts to a low, silver may bottom at that point. Delta Long Term # 1 is due June 20, 2007. That is 13 months from the May high in silver. The 100 % range for arrival of Delta Long Term # 1 is February 14 to October 17.
SILVER MONTHLY CHART # 2
I have continually found it difficult to see a clear 5 wave count in gold bullion. Whether this means there are attempts being made to manipulate the price is something I cannot verify. I won't bother spending any time trying to prove this one way or the other. The fact is that gold is trending up in price. Silver has a reasonably clear wave count. The HUI, as I have said a number of times, has a nearly perfect wave pattern. Gold topped at the same time that silver appears to have completed a 5 wave move. In determining a wave count for gold I have no choice but to use the HUI and silver to measure the probable time involved in gold's correction. The wave count I have used on this gold chart is not perfect but it may be satisfactory. It is possible that gold has a number of months left in its MAJOR WAVE TWO correction. The hypothetical investment and trading accounts in the Precious Metals Market Timing letter do not have gold or silver bullion in their accounts. These accounts hold only the shares from the HUI and shares of the GDX. I would rather pay higher prices for gold and silver bullion than chance sitting with them for a number of additional months while they continue to correct. If they take off right away and confirm their next move up, I will suggest that we buy right away.
GOLD MONTHLY CHART # 1
Gold has corrected a small portion of its entire move up.
GOLD MONTHLY CHART # 2
The HUI had a 5 wave move from 35.31 to 258.60 over a 37 month time span. The HUI then spent 17 months correcting that move up. It required 24 months before a new high was made. When the 17 month correction bottomed at 165.71, the HUI then embarked on its MAJOR WAVE THREE. Wave (1) of Major Wave Three topped at 401.69. The move up for minor wave (1) consumed 12 months. A 38.2 % time correction of that 12 month move would be 4.58 months. The HUI corrected for 5 months. I feel confident that the correction of wave (1) of MAJOR WAVE THREE is over. I believe the HUI has started its third of a third wave move. As it approaches the previous high of 401.69, the action and volume should begin to increase. Once a new high is made over 401.69, the HUI will have entered that part of its third of a third wave that should prove dramatic and exciting.
HUI MONTHLY CHART # 1
This chart shows that the HUI corrected slightly more than 38.2 % of its entire MAJOR WAVE ONE rise. The HUI rose 223.29 points. 38.2 % of 223.29 equals 85.20 points. The HUI corrected 94.79 points. The HUI is off and running in the third of a third. It sounds like I am calling a race at the local race track. This should be a lot more profitable!
Since the bull market started in November 2000 there have been 4 multi-month rising waves.
Wave # 1 = 44.33 points
Wave # 2 = 95.13 points
Wave # 3 = 165.78 points
Wave # 4 = 237.88 points
Wave # 5, which is the third of a third, should be the biggest so far.
HUI CHART # 2
SUMMARY
It may be very difficult to accept the probability that the HUI can continue to move up in a third of a third wave move while gold and silver bullion are finishing their correction. However, this won't be the first time this has happened. It has also happened in reverse. When a time and price correction is over, the next move will start. In the case of gold, silver, and the HUI, they do not have to be on the same time schedule. They may appear to be for awhile but that can be misleading. We may soon experience the opposite.
I believe the evidence is telling us that the HUI completed its MAJOR WAVE ONE rise and its MAJOR WAVE TWO CORRECTION. It has also completed the first minor wave of its MAJOR THIRD WAVE. It also appears that the minor wave two correction is complete. This means it is in the very early part of its third of a third wave. It should become more apparent when the next move up starts. This should begin fairly soon. I can not be certain that gold and silver will continue to correct while the HUI rises. However, my reading of their wave movements and time and price factors lead me to be very cautious about recommending their futures or ETF's at this point in time. If they prove that their needed time for correcting is being waived we will know soon enough. That will be the time to jump aboard. Not now.
Stay well,
Ron Rosen
Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen is not a registered investment advisor Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.
Email this Article to a Friend 
Printer Friendly Version
