Thursday 10/28/10 wrapup

On the ES the moves so far this week count best as 3 wave structures.  That would include the sharp selling of today, three legs show up clearly on a 5 minute chart.  Thus it's quite possible that minor wave 4 was not done as of yesterday's lows and is instead developing into a triangle.  If so the a-b-c legs of that triangle are done with today's intraday low and the d leg is in progress with a final bit of selling due in the e wave.   Chart of that idea looks like this:

THAR'S GOLD IN THEM THAR HILLS

Some long term perspective on gold.  Charts are of the GC gold futures contract.
Gold has been in a powerful bull market dating back to 2001.  From an Elliott standpoint Cycle Waves I through IV are complete, with Wave IV done at the lows of 2008 (@ $681/oz.)  That puts us in Cycle wave V since that time.  Although 5 waves completes a move in Elliott, gold behaves like a commodity where the 5th wave is often the most powerful.  This 5th wave is developing in that manner, with an apparent series of waves 1 and 2's of decreasing degree since Cycle Wave IV.  There is thus plenty of upside potential remaining.  This only makes sense in light of the flood of US dollar liquidity being pumped out by the Federal Reserve.  It's a simple equation : more dollars = less intrinsic dollar value = higher gold prices.

Long Term Gold Elliott Count

As can be seen we are currently in the 3rd (minute) of a 3rd (minor) of a 3rd (intermediate) of a 3rd (major) of a 3rd wave (primary).
Shorter term it looks like we're in micro wave 4 (black) of minute wave 3.  Micro W2 was a flat, so a zig zag or triangle for micro W4 would satisfy the rule of alternation.  So far a zig zag is apparent in the move down from the highs of Oct 14, so W4 is potentially complete.