Daily Wrap Up: S&P and Gold

Insight:

What a snoozer of a day. The ES_F traded in a 5.5 point range and closed within the previous day's range making it an inside day. For tomorrow... be on your toes looking for a possible trend day.

I would like to spend some time speaking about gold since I was preoccupied with it for most of the day and many readers have shown an interest in my updates on the subject matter. Gold initially looked like it had topped. A potential trade presented itself with a very small amount of capital exposure and the potential for large returns. I was hoping to go short and take advantage of the opportunity but the trade never materialized. Lucky for me ... as a new recovery high was reached. But it really wasn't dumb luck that keep me out of the trade. It was the knowledge of the wave principal and the fact that IF my wave count was correct, (which it wasn't) then the personality of the trade would have developed in a 5 wave decline of greater magnitude. That's not what a saw developing. Those of you who follow my Tweets were aware that I grew cautious and decided to look for further confirmation that indeed a top was in place.

Elliott Wave Analysis:

Given the inside day in the ES_F an the high wave consolidation that transpired today, I'm still looking higher. Nothing else has changed in my forecast and price targets as indicated in my "week in review".

With regards to gold, the new recovery high is a game changer. My previous interpretation was that XK_F was working a w.2 corrective pattern. According to EW rules, w.2 can't exceed the origin of w.1 so that interpretation is null and void. So it's time to embrace an alternate count and be nimble. Looking at the weekly chart, it appears that further upside potential exists targeting the upper channel line. An interim target is 1459.8... a common wave relationship within w.(5). I've also place other upside Fibonacci extensions on the chart but reaching those levels would involve interpreting w. (5) as an extended wave. Currently w(5) is approx. equal to w.(3). So any further advance makes w.(5) an extended wave. Keep in mind that in commodities, fifth wave extensions are common so I'm not surprised that the train kept on going.

I will continue to monitor the wave count in gold and add commentary as warranted.


Best of Trading