"Time is more important than price; when time is up price will reverse."
W.D.Gann
We are in an exciting and potentially profitable time for the precious metals complex. It appears that a final wash out or [C] leg down is under way for gold and silver bullion but not the HUI. I am aware that a number of folks have difficulty thinking that the shares won't go down with the metals. I believe the shares completed their Major Wave One in December 2003. They spent 18 months in an A, B, C correction. They then started up in their minor wave one of their Major Wave Three. Minor wave one of Major Wave Three rose from 165 to 401. The HUI topped in May of 2006 and entered its minor wave two correction. That brings us up to date. However, it appears that the HUI made a low In June 2006 that will not be violated. The HUI has been coiling like a compressed spring ever since May 2006.
The Daily gold chart shows an overhead gap between $664.50 and $656.30. The price will most likely close that gap before it starts to decline once again. Delta intermediate # 6 high is due March 15, plus or minus 4 days. If the gap is not closed soon, it will be closed after this Major Wave Two has bottomed and gold has started up in Major Wave Three. If gold bottoms in the area I suggest, the gap will be a good first target for the ensuing rise.
GOLD DAILY
It seems more and more apparent that gold completed its Major Wave One at $728 in May 2006. This means that the entire rise from $258.60 to $728 is being corrected in order to remove excess optimism that was built into the market. Gold needs one more leg down in order to complete this correction. A 50% correction of the entire move up would bottom at $492.00.However, if the [C] leg equals the [A] leg, which is not unusual, the bottom may be $526. The [A] leg down was $166.50. The [B] leg high was $692.50. $692.50 minus $166.50 equals $526.00. The [A] leg down bottomed at $563.50. The bottom should appear somewhere between $492 and $526. When the bottom is reached, that will complete Major Wave Two. Major Wave Three will then begin.
GOLD MONTHLY
EXTENSIONS
"Most impulses contain what Elliott called an extension. An extension is an elongated impulse with exaggerated subdivisions. At times, the subdivisions of an extended wave are nearly the same amplitude and duration as the other four waves of the larger impulse, giving a total count of nine waves of similar size rather than the normal count of "five" for the sequence."
"A triangle always occurs in a position prior to the final wave in the pattern of one larger degree, i.e., as wave four in an impulse."
"Post-triangle advancing impulses in commodities at degrees above Intermediate are usually the longest wave in the sequence." …….Elliott Wave Principle
The weekly chart posted below shows the triangle, the extension with 9 waves, and the longest wave of the entire bull market. A correction after an extension often bottoms between wave ii and iv of the extension. That would be between $492 and $535 for Gold's Wave Two correction.
GOLD WEEKLY
Silver is in a position similar to gold. This includes a triangle, a 9 wave extension, the biggest wave of the entire bull market so far, and a missing [C] leg down. The [A] leg gave back 50% of the entire bull move. The [C] leg will most likely bottom lower than the [A] leg. The technical indicators beneath the chart are giving the same message that they are giving to gold. The message is that there will be more downside movement before a bottom is made.
SILVER MONTHLY
There is a good probability that silver will bottom in the vicinity of wave ii of the extension. This would be $9.11. If wave [C] equals wave [A], $9.11 will be the target for the bottom of wave [C]. The high was $15.20. The wave [A] low was $9.60. That represents a $5.60 decline. The wave [B] high was $14.71. $14.71 minus $5.60 equals the bottom of $9.11. This is the same level as wave ii of the extension. Wave ii of an extension is the normal destination for a corrective bottom following an extension.
SILVER WEEKLY
The HUI has completed its Major Wave One and its Major Wave Two, a corrective wave. The HUI has also completed its minor wave (1) of its Major Wave Three. Its minor wave (2), a corrective wave, is apparently still underway. I believe minor wave (2) has already bottomed and will not go lower than the 270 low.
HUI MONTHLY
The HUI continues to coil like a compressed spring. It is very possible that the HUI will start moving up with an explosive move before the metals have completed their correction. The technicals once again are pointing down, indicating more corrective action to take place. The corrective action may be more sideways coiling rather than more downside movement.
HUI WEEKLY
The Dollar is beginning to turn up.
DOLLAR WEEKLY
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.
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