Wednesday, July 23, 2008

Elliott Wave Count on Gold - Update

Gold prices declined from the expected levels yesterday and this could well mark an important top in the gold market for this year. If prices go below the $910 mark in the next two weeks or so, we would be looking at levels of $850 and lower. As I wrote in my earlier posts -

A price channel has been in progress from $880 to $990. A daily close below $950 will break this channel and lead to a minimum price fall of $15 to $935 . . . . . . . . . .

. . . . . . . . . . .Now we have entered the 'C' wave of a larger degree according to this count. If gold prices rebound to $970 to $980 we should be sellers with a risk potential of $989. If prices do breach this point, there would be a threat to the count and a re-examination of the prices . . . . . . .

Yesterday's price move does signify the inherent weakness of the gold prices. In the last one month most of the official world newsletters and precious metals traders have given a host of bullish arguments. Though these arguments stand well in the current economic landscape, but markets do not move of what is happening. Markets move on expectation of the future. Gold prices have failed to move to new highs inspite of all the factors which support it being at the extremes. The fresh price moves have also not been very supportive which means markets are expecting the current turbulence to abate and give way to economic recovery.

Gold prices are still in a short term uptrend. Yesterday's closing below $950 has shown the first sign of weakness and a close below $935 will further add to the weakness. Now the $910 is the most crucial support level. Have a look at the graph -

From an Elliott wave structure point of view the markets are now in the larger degree 'C' wave of the ABC correction which is represented by WXY in the graph above. The 'C' wave has 5 wave downward impulse in the direction of the trend. We might have entered the 3rd wave of this downward 5 wave sequence within the 'C' wave. First support level from current price stands at $940 and then a pivot at $935. A daily close below $935 will take us to $910 which is the pivot point of this corrective wave.

The MACD would also give a sell signal if we close below $935 this week.

Crude oil has nearly touched the expected target of $126 as it made a low of $126.37 in the August contract. Look for a counter trend rally to sell. The weekly DOE report might give some better selling levels.

This is just an update I will put up a detailed count on gold and crude as the new price data comes in.

Sahil Kapoor

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