I’ve included a chart below with a few Elliott Wave interpretations identified on the chart.

Keep in mind that these are my interpretations only. To keep up to date on a more regular basis and receive expert Elliott Wave forecasting, I highly suggest to consider a premium service like the Elliott Wave Financial Forecast Service.

If instead you want to learn more on your own for now, that’s great. There’s nothing wrong with that also. In fact, I always encourage any type of learning. I have a lot of free articles and resources on my site to help you out. You can find some here: Elliott Wave Information and Resources or do a quick search on this site using my search box located in the top right of any web page on the site.

There’s also a great introductory set of free video lessons on Elliott Wave accessible in the right column.

Looking at the chart below, you can see that I added a few labels as I mentioned above.

I’ve added what looks to me to be a clear minute 5 wave decline identified by circle i, ii, iii, iv and iv and within the minute iii wave, a minuette 5 wave decline identified by (i)(ii)(iii)(iv)(v).

The appearance of five waves display the direction of the trend to one larger degree. This clear chart pattern increases the potential for a major trend reversal to be in place for Gold. For this to hold true, prices should now rise, not necessarily in a straight line of course, but should rise no further then the recent highs set last week. If the prior highs do hold, then yesterdays low should be considered a 1 of many more lows to come in the months ahead.

In the previous post I was writing about potential contrarian trades if the U.S. Dollar was possibly making major or minor lows.

For Gold trades, I had a chart of GLD and showed how prices had broken out of two pattern formations within the last several months, and that if the U.S. Dollar was over-extended to the downside, and Gold was over extended to the upside, looking at these with contrarian views were compelling.

Here’s the updated chart of GLD. I’ve added a Fibonacci retracement grid overlaid on the chart. You can see that the initial move lower Thursday and Friday from last week, declined to the first 38.2% Fibonacci price level and bounced a bit higher before ending the week.

As I mentioned in the U.S. Dollar Trade Update 12-06-2009 yesterday, a bounce higher before moving any further lower is possible. Although as I’m writing this, Gold is trading lower after rising briefly in the overnight session.

I still feel that with all of the people short the U.S. Dollar and long Gold, and continued pressure against these positions make cause a panic, or rush, to continue to reverse these same positions.

For stock traders, I included a chart of DZZ in previous posts, which can be traded easily in the typical stock traders brokerage account. Here’s the updated chart which shows the nice 10% – 15% move higher in less than two days since I posted last Wednesday evening about using this as a possible contrarian play:

Those of you that know a little bit about me, know that I am primarily a very short term trader. Having a 10% – 15% gain in two trading days would probably make me take my gains and wait for another entry point, or possibly be willing to raise a stop loss to break even here with such quick gains.

At the very least, raising a stop loss to break even after a 10% – 15% gain in two days would be wise.

While I can’t and don’t, recommend any stocks or specific trades, I do try and post my trading ideas on this website even if I don’t have any position in the trade mentioned. I usually get too tied up with other things and writing. I don’t have any position in any of the stocks mentioned in this post, nor have I over the last few days.

The previous post was here: U.S. Dollar Trade Update 12-02-2009, and worked out to be perfectly timed.

The last post showed how prices have been reacting and moving lower as well as the addition of support levels which I added to the charts.

Following up now, the first chart below is a current chart of the U.S. Dollar Index over a 3 month period, displaying daily price candles. You can see the index made a large move higher just up through the 50 day moving average line.

This was the biggest one day range in several months. From here, with so many traders short the U.S. Dollar, any continued move higher will likely cause a panic of shorts covering their positions. This should cause additional big range days ahead if the rally continues.

After the big range day Friday though, a pullback should be expected of some sort. While it’s not necessary for the rally to continue, having a pullback would be normal and not at all change the fact that a longer term trend change may indeed have begun.

The next chart is of UUP, the U.S. Dollar Bull Fund I displayed on the last update. I displayed this for any stock traders out there who wanted to trade something in correlation with a move in the U.S. Dollar as a contrarian play, but in their stock trading account.

You can see here the nice move higher since my last update as well. About a 1-1/2% move in 2 days without any draw down so far. Prices here are also at the 50 Day Moving Average line, which may coincide with a brief pullback before attempting another move higher.

In case a bottom is not in, a potential area for a stop loss would be just below the previous low set a few days ago. If that low is breached, the potential odds for another leg down would increase. Make sure you use some type of stop loss with your trading plan.

The big winner since the last update was the contrarian play against Gold. I had a chart displaying a potential trade using DZZ which worked out great. It moved up between 10% and 15% in the same 2 short days. I’ll be adding an update for that on a separate post shortly.

Prior to the last update I had written about a potential bullish move the dollar, with trading possibilities such as in DZZ and UUP. This was short lived.

Afterward, I posted the 08-23-2009 update with new levels to watch for a potential move either way.

I’ll post the updated charts in the same order in this post, along with the previous support and resistance lines I had drawn on them to watch for potential breakouts.

The first chart below is of the U.S. Dollar Index itself. The previous support level I had drawn was near $77.50. I mentioned to watch this level for any significant breach for a move lower.

You can see that the $77.50 level was in fact breached and also became resistance later in early October. Also notice how the price action has been contained by the 50 Day Moving Average (or at least it appears that way on the chart. In reality, the moving average itself cannot contain prices as it is a calculation based on past prices). The 50 Day Moving Average line can be a psychological level though. Causing reversals or breakthroughs to occur more violently in many cases.

The current level is a major support level going back to late 2007/early 2008. If this level is breached, the next lower support level is around $71.50. A contrarian view would be to be on alert NOW, not waiting to see if lower prices are ahead.

The next chart shows GLD. In the previous chart from 08-23-2009 I had a Symmetrical Triangle drawn on the chart and mentioned to watch for a potential breakout, either to the upside, or downside out of this pattern. I’ve drawn the same Symmetrical Triangle on the current chart below to show what happened.

You’ll notice at point 1), that prices broke out up out of the Symmetrical Triangle for a good momentum trade entry signal, at the beginning of September, 2009. Also, in early October, 2009 at point 2), you can see that prices broke out up thru previous highs, another momentum trade entry signal.

Now. For any contrarian traders out there:

The next chart is of DZZ- a double short Gold ETN. I’m not advocating the use of ETN’s of ETF’s, or any of these trades for that matter, only providing some idea’s. Leveraged ETF’s and ETN’s have been in the news over the last several months, in a negative way, so be sure to do your own research and keep an eye on them if you decide to use any of them.

Previously I had drawn a similar Symmetrical triangle pattern on the chart and I have included the same pattern drawn on this chart to show what has happened here also.

You can see once again, only the inverse of the GLD chart, that prices broke out of the Symmetrical Triangle pattern. This time to the downside as this is an inverse fund. This breakout point, along with the breakout point below previous support (the dotted line) both allowed for potential tradeable short entries.

With prices at new lows, corresponding with new highs in Gold, any reversal would provide an excellent entry point. Possibly for a long term contrarian trade.

Moving on, the next chart is of UUP, a U.S. Dollar Bullish Fund.

You can see that I added the support level at $23.00 my previous chart. Prices gapped down through this level in early September and it has pretty much been a significant resistance level so far.

You can see that prices broke up through the 50 Day Moving Average briefly in early November, but have since reversed and are near new lows. The next lower major support level is $21.50-$21.75 so we are very close to this at the current price level.

Using previous support and resistance levels for potential area’s for stop loss positions, the Risk:Reward ratio for some contrarian trades here, look pretty compelling.

After reaching a new high yesterday of $1153.90, the precious metal has pulled back some, albeit slightly so far.

The last few days have basically been in a sideways trading channel but prior to this, has been on such an optimistic rise that sooner or later a decline will ensue. Right?

If you took a look at a gold chart without knowing it was gold, it would look similar to previous market tops that were followed by a crash. Take a look at a housing price index chart, the 1999-200 Tech Bubble, the recent financial bubble or even an Oil chart when it was at $140.00 not too long ago.

I know what others are saying, that as long as the U.S. Fed keeps printing money, the value of the U.S. dollar will keep going down and people will continue to buy Gold. That may be, but I’m adding this post for those of you thinking things may just be getting to overly optimistic right now in Gold.

Just imagine looking at charts in a few months only to see that the U.S Dollar made a major bottom which just happened to coincide with a major S&P 500, DJIA and NASDAQ top, and Gold and other commodities made major tops as well.

I wonder what all those Meredith Whitney bashers would say then? Probably nothing at all. You wouldn’t hear a word from them then. Read more about what Meredith Whitney thinks here: Meredith Whitney Turns Bearish Again

For those who think a pullback of a considerable degree may be coming, or underway, here’s a way to try and take advantage of this using DZZ for a trading vehicle in a stock trading account. Here’s a chart to look over:

Looking at the chart of DZZ above, you can see several observations I noted: 1) the RSI above the main cahrt area has been oversold for about a week now and appears to be turning up. 2) The MACD on the bottom of the chart is in the perfect position to begin a reversal move higher. 3) The share price itself has dropped below the recent confining channel and has the potential to move back into this channel up towards the 50 day MA as it has on prior moves off the lower channel trend line.

What made me take a look at a potential trade to profit from a decline in Gold was that earlier this week Bob Pisani was shown on CNBC with a single Gold Bar that I believe was mentioned to be worth about $450,000. When something like this appears on mainstream television my friends, the end is quite possibly in sight.

This is not always the case though. The last time I mentioned I was concerned about any further upside in Gold was when I read that Gold was appearing in Vending Machines in Europe. That was back in June and we had a trade-able decline following that, but then Gold resumed its ascent. At the least, some sort of pullback may be in the cards near term.

Post your comments below to share what you think may be in store over the coming days and weeks ahead:

But is this really the case?

For many years I have seen people, and done so myself, “follow the herd mentality”. When it comes to Gold, that would be when people panic, Gold should soar.

The free ebook below will help you see things in a different way. Instead of being sucked up in the momentum and draft of the herd, you may just be able to take a step back next time and see what’s causing the move first.

The following article is provided courtesy of Elliott Wave International (EWI). For more insights that challenge conventional financial wisdom, download EWI’s free 118-page Independent Investor eBook.

Large banks and more recently pension funds have suddenly become infatuated with gold.  They chant the mantras that gold bugs have known for years: gold is a store of value; owning gold is financial insurance; an ounce of gold will always buy a good suit.  The idea is that if the economy continues to weaken and share prices decline, a strategic allocation of the precious metal will hedge and offset some of the losses in the financial sector.

On the surface it seems to make sense and it’s hard to argue with the logic.  Even so, logic can sometimes get twisted, whereas facts cannot.  The evidence is found in the chart we describe as “All the Same Market.” Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all decline in a deflationary environment.  As liquidity dries up and credit contracts, people, businesses, and institutions sell everything to get dollars.  Cash is once again king.  This is bearish for gold.

Looked at another way:  as the dollar advances from its lows, things denominated in dollars lose value against the dollar.  As long as the dollar remains the global senior currency, assets will depreciate:  not just stocks and commodities but residential and commercial property, works of art, collectible cars, pretty much everything.  Of course, this outlook presumes a deflationary environment and that’s been our view for quite some time.  But that’s another conversation.  The topic here is stocks down/gold up – or not.

The long-time editor of the Elliott Wave Financial Forecast Short Term Update, Steven Hochberg summed it up succinctly in a recent issue:

“The other important aspect to a dollar bottom is the implication to all the other markets that have been moving opposite to this senior currency. The start of a major dollar rally should roughly coincide with a turn down in stocks, commodities, oil and the precious metals. So there are likely to be important trend reversals across nearly all major markets.”

Don’t fall into the trap of group-think.  If investing was that easy we’d all have (insert your own private fantasy).

————-

For more information, download Robert Prechter’s free Independent Investor eBook. The 118-page resource teaches investors to think independently by challenging conventional financial market assumptions.

Market Club follows Gold very closely throughout the year and releases periodic videos with helpful chart analysis of not only Gold, but other market as well.

Since Gold has shown slight signs of weakness this week, this timely video provides some observations and analysis of what might be going on as well as where Gold may go from here.

Today, 11/12/09, the gold market took its first corrective action on the downside. The question many traders will have now is, have we hit the high end for gold this year?

In my latest video I examine that question in some of the internals that I see and feel are important in this market.

As always the videos are free to watch and there is no need to register. I would love to hear your views on gold in our Trader’s Blog comment section.
All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

I am always interested in hearing my site visitors thoughts on all particular markets and posts that I include on Online Stock Trading Guide. Let me know what’s on your mind using the comment section below:

As you can tell by the headline, it’s about Gold, which they like to follow closely throughout the year.

For quite some time now they’ve been calling for Gold to move higher and have been right on.

Go ahead and watch the free video below to see what they’re looking at now. While you’re here, let me know what your thoughts are on where Gold may be headed by adding your comment to this post.

After hitting our first upside target of $1,110 two days ago, gold prices backed off but still managed to close at their best levels today for a new record high close in New York basis the spot gold.

The question now is, what’s going to happen to gold after it hit our first target level? Watch the video on What’s Gold’s Next Stop? here:

The main trend continues to be positive and I believe that any pullback in this market should be met with good support. It is possible that we could see a pullback of $20-$25 which would not change the overall positive trend of the market which we see continuing until the end of the year.

As readers of this blog know, we have an upside target zone of $1,250-$1,300 an ounce for gold. While that target zone is still in place, we believe that the huge “energy field” that we’ve discussed in our earlier gold videos is capable of pushing this market higher.

In this new video I explain some of the areas that I’m looking at and also some of the places where you can place tight stops to lock in profits.

As always the videos are free to watch and there is no need to register. I would love to hear your views on gold in our Trader’s Blog comment section.
All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub