I have never been a big fan of Elliot Wave Theory, but I do respect the self-reinforcing role that Technical Analysis plays in trading markets and I’m aware that Elliot Wave Theory has become an important tool that many traders use. So when I was looking at the 6 Month Spot Gold Chart today it did strike me that there could be a fairly clear pattern at play.
If you aren’t aware of Elliot Wave Theory one of the basic principles is that there are Impulsive Waves and Corrective Waves. The Impulsive Waves are labelled 1, 2, 3, 4 and 5 and they make up the major trend movement of a market, while the Corrective Waves are labelled A, B and C and are the counter-trend moves where the market will revert to it’s mean or a supporting trend line.
The theory is that you can zoom in, or out on a market and see these waves on all sorts of different timescales but I like to look at the longer ones because I am a longer term investor. Having a look at the Gold Chart above they stand out to me quite clearly. The Impulse Wave is fairly distinctive while the Corrective Wave has a little bit of noise but still can be seen fairly clearly.
If I’ve labelled this right and the Elliot Wave Theory holds up on this 6 month Gold Chart then we might be at the start of a new Impulse Wave. That means – Number Go Up. Keep an eye on this chart because if Gold can crack about $2,060 USD in the next month then that would be a potential confirmation that the Corrective Wave has finished and we’re into the first leg of a new Impulse Wave.
DISCLAIMER – This is not financial advice
