Be very skeptical when speaking to an Elliotician. Their "alternative wave counts" mean that they can go back to any prognostication and say they just misread the waves. Sometimes I think I should just stick with my yummy chicken entrails and tea leaves recipe, but then the wavers go and get one right. Who knows?*
That said, we try to keep an open mind and look at things that may not fit the weltanschauung we've gotten comfy with.
One more proviso: We are looking for one heck of a reaction rally when the upcoming debt ceiling drama is resolved and would hate to miss it by heading into the bunker too early.
From Kitco:
Many if not most gold bugs and especially those who believe a hyperinflationary outcome is inevitable, dismiss Robert Prechter’s predictions. True, he has been a mile off on his predictions about gold, but he has been quite good on picking major turns in stocks and bonds. Moreover, when it comes to the “real” price of gold, Prechter himself agreed with my view that it would rise vis-à-vis everything other than the dollar. So even if Prechter is right and gold falls temporarily below recent lows in nominal terms, he expects a basket of commodities, stocks and bonds to fall further than gold. In Prechter’s view, the dollar is the safest place to park wealth because he thinks it will gain value. But he also agrees that gold is money. Because of that fact plus the fact that gold has not risen as much as all those other markets, he thinks its decline will be less than everything else. In other words, with the next major deflationary credit implosion about to begin, we can expect the real value of gold to rise. And as an investor in gold mining stocks, that is a very agreeable view for me because it means gold mining companies should do well as their margins improve.
We saw this dynamic in play following the Lehman Brothers failure in 2008-09.
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The chart directly above shows how the “real” price of gold exploded to much higher levels when the Lehman Brothers deflationary event led to plunging commodity and stock prices. As you can see the trend in the real price of gold was increasing until it broke down around August 2012. The two charts on the right show the aggregate effect of changes in the real price of gold and the earnings of seven major gold producers that I track on a regular basis. As the real price of gold has broken down, so have earnings of major gold mining companies.
Of course, not all of the decline can be blamed on the real price of gold. Many of the majors are now seeing earnings plummet because they took on very large, low-grade project that required huge capital costs. One of the reasons their earnings have declined so much is because some of those major projects are now being written down given lower real gold prices. A more cautious management posture may have kept the decline from being as great as it has been for the earnings of these companies. But there is no denying that the “real” price of gold plays a major role in the profitability of the gold mining sector.
But let’s get back to Prechter’s view that we are poised for the next major leg down in the equity, bond and commodity markets. Following is a chart he displayed in the September issue of “The Elliott Wave Theorist.”
Regarding the charts above, here is what Robert Prechter said in his latest monthly issue:...MORE
“Here late in the summer of 2013, stocks, bonds and commodities are poised in the same manner they were late in the summer of 1929. At that time, stocks were rising to a new all-time high, bonds had peaked a year earlier, and commodities were trading at lower prices after having topped out several years before. The aftermath was a crash in all three markets: stocks, bonds and commodities. In 1929, the DJIA topped on September 3, and the Dow Utilities peaked on September 20. This year, the DJIA has topped so far on August 5, while the NASDAQ just made a new high on September 10. It’s a similar development the same time of year.”
*Another technique that may have something to it but often sends its practitioners into fits of rationalization:
"Fibonacci Flim Flam"
You have to be careful with this stuff. If someone presents a complicated explanation for their technical analysis my B.S. detectors start flashing, it doesn't mater it it's Elliot Wave alternate wave counts or flipping between point-and-figure and candlestick charts to show the chart "predicted" a move. There is a fine line between genius and madness.
[don't I know it. -ed]
From Lock Haven University:
...Footnote on dubious investment schemes.
I remarked that stock traders and investment counsellors these days often use Fibonacci ratios as a guide to guessing their predictions. There is even computer software for making market predictions that claims to use "Fibonacci methods". This is one of the methods used in "technical trading"...
