The 2011 peak in XGD is my Cycle degree top which ended not with a five-wave count but a “C” wave in Primary degree. That 2011 peak also matched the first peak in solar cycle 24 which is not some coincidental event as 1980 was the peak in solar cycle 21.
In late 2015 XGD started to bunch up and then exploded in a near vertical move after which XGD imploded again but has now had another bottom in 2018.
A couple of trend lines will give us an early possible target if this 5 wave run has any legs to it at all.
Either way, it’s impossible to pinpoint any exact top as we could get another huge double top pushing this wave count to the limit.
The question that every bullish investor eventually has to answer is if gold stocks are in a real bull market, and not just another bear market rally?
My “A” wave bottom in Primary degree gives readers a clue
I don’t have a good Gold/Xgd ratio started but I will try and do some more back checking at major turning points to get a few more max and minimum readings. We are at a Gold/Xgd ratio of 100:1 and we want to see that ratio compress as this bullish phase of the market progresses.
This is just an index related to the gold mining industries. What was always odd was that this index never really created the “C” wave as deep as I would expect. Even a running pattern would have a longer “C” than what XGD shows. All the other ETFs sure don’t look like this, as they were all much, much lower. Back down in late 2013, news that insiders were buying was everywhere, that I was convinced that 2013 was a major bottom. What followed was a rally and then another 3 wave decline to a new record low, which I have as a “B” wave in Minor degree.
After the “B” wave bottom XGD soared and pushed up right into my wave 2 in Intermediate degree. This insane rally was a 4th wave rally, that pointed or confirmed my wave 2 top in 2012. Of course, that would break every impulse rule in the book, but it sure doesn’t break any diagonal rules that I know of.
One expanded pattern at the bottom gives us the big clue that this entire bullish phase is nothing but a big bear market rally! “ALL” bear market rallies completely retrace themselves back down to and below their point of origin. When it crosses to new lows, even just by pennies, then the bear market rally will get confirmed.
When we get close we, then we can see a huge H&S pattern being formed, and that would be extremely bullish from my perspective.
I have to do more back-checking to establish a few more Gold/XGD ratio extremes. Today the Gold/XGD ratio is sitting at 3.97:1, which means I need 3.97 gold ounces to buy one unit of the XGD index.
Don’t think that this is some freakish anomaly, because they do happen, especially in commodities.
I haven’t looked at this index much before, but it sure has some interesting features not present on all the other gold related ETFs and indices that I cover. One notable pattern is how high XGD soared compared to all others, and even hit the middle of my wave 1-2 counter rally. This is as far as I can push any 4th wave rally, which I have run into many times. Elliott wave rules from the book do not work in commodaties, as it is all about connecting zigzags at all the big degree levels as well.
When we look at the late 2013 and 2014 bottom wave, it contains a 3 wave decline, which I think is part of an expanded 4th wave. XGD should still crash well below the late 2016 bottom as any zigzag in progress is not finished just yet. We need the “C” wave to show itself, and travel to new record lows, to confirm that the 3 year+ bullish phase was just a fake.
Just in case XGD never completley retraces itself, then I already have an alternate ready to go. Once this wave position does fail I think the “A” wave in Primary degree will get moved to the 2013 bottom. 2013 was a very special year and it still is, as we also produced a double bottom in 2015.
I have no real track record on the Gold/XGD ratio but I started one, which worked out to 3.78. It takes 3.78 gold ounces to buy one unit of XGD. That number should get smaller as the cheaper it gets, we need less ounces to buy XGD units.