The Elliott Wave Count in Gold and Silver

By: Robert McHugh | Sun, May 28, 2006
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Gold finished the Micro degree wave 1 up within an extending Minuette v up on May 12th at $730.40. The correction since is a Submicro degree zigzag {a}-down, {b}-up, {c}-down, with wave {c} down in process. Once Micro 2 down completes, Gold should rally into Micro 3 up of v. Unless Gold drops below $450, this wave count labeling holds up. Where it breaks down is if the correction underway Drops below the Minor degree wave 3 top from December 2004. In that case, the labeling would change to consider the May 12th top as the top of Intermediate degree wave 1 that started back in August of 1999, and the correction as Intermediate 2 down, a large degree correction. We do not see that happening in this monetary inflating environment.

Should the alternate labeling be occurring, a Fibonacci .382 retrace target for Intermediate 2 down would be $550ish, and a deeper .618 retrace would take Gold down to 435ish. Any way you cut it, we remain in a major long term Bull market in Gold.

Silver finished its Minor degree wave 1 up, and the first leg of 2 down, wave "a" down. Wave b up is underway, and the first two sub-waves of that, Micro a-up and b-down look complete. Next should be c-up of b-up, then a final decline into a wave 2 bottom, wave c-down. A Fibonacci .382 retrace would take Silver back down to $11.93, and down to $9.91 if a .618 retrace of 1 up occurs.

An alternate to consider for Silver is shown at the top of the next page, where all waves since last July are a degree higher than labeled, suggesting primary degree wave (1) up has just completed and a powerful correction, primary wave (2) has started. We find this scenario implausible as there is just too much monetary inflation going on right now.

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Here's the color coded, legend we use for our Elliott Wave count symbols, starting from the largest degree waves to the smallest:

 


 

Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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