Progression Since the Original Analysis

Progression Since the Original Analysis

As with the analysis I originally provided for the Dow Jones Industrial Average, over the time I have been writing this book the structural development of this rally has been developing in line with the analysis. Again, at the time of the original analysis I was working only with daily data, but since then I have sourced the intraday data and I shall present this later in this update. For now Figure 7.11 shows the progression since the Wave iv low.

  Figure 7.11 Daily Gold Displaying the Development of Wave a and Wave b of Wave v

I recall the Wave iv low shown in Figure 7.11 as a time when many analysts were exceptionally bearish, with a common target being around 860. I had one trader to whom I revealed my counting method angrily berate me, declaring that I could not change Elliott's impulsive wave structure. It seems I lost a potential subscriber as I never heard from him again!

However, price rallied well from that Wave iv low, initially in five waves to complete Wave a of Wave v and then a correction in Wave b. I also noted that my RSI was quite consistent in identifying market turns through bullish and bearish divergences. In Figure 7.12 I expanded the daily chart to show the rally in Wave a and correction in Wave b more clearly.

  Figure 7.12 Daily Rally in Wave a and Wave b of Wave v

In Figure 7.12 the rally in Wave a of Wave v can be seen with more clarity. Wave (ii) developed as an Expanded Flat, following which the normal development of Wave (iii), Wave (iv), and Wave (v) was seen. The correction in Wave b developed in three waves, and from there price has pushed back to the 1,265 high but with a bearish divergence having developed in my RSI. From this perspective, due to the tendency for divergences to provoke a reversal I must allow for a (possible) Flat Wave b or even an Expanded Flat that would imply a recycling from either the old 1,265 high or from a limited overshoot in a Wave efb to generate a decline back to the same area around marked Wave b or Wave Fa.

Table 7.12 provides the wave relationships in Wave a and Wave b.

 Table 7.12 Wave Relationships for Figure 7.12

There were some very accurate retracements and projections throughout this move, with the maximum deviation from normal projections being around $8.00. However, the projections that certainly caught me by surprise were the 58.6% projection in Wave c of Wave (v) and the 50% projection in Wave (v) itself. The correction in the larger Wave b was very close to the exact 50% retracement, and if this turns into a Flat correction, it may well move down to test the full 50% level and perhaps a small overshoot.

In terms of the 1,390-1,395 Wave [iii] target I highlighted in the original analysis, and using the levels of the current Wave a and Wave b of Wave v, it is possible to see the potential projection in Wave c:

105.6% = 1; 389.81

 109.2% = 1; 397.76

Therefore, even if Wave b develops as a Flat (or Expanded Flat) correction that could test the 50% retracement at 1,154.62, the 109.2% projection will imply a target at around the 1,395 area and therefore I feel we are on the right course to see this target achieved.