Loading ...Elliott Wave Charts Point to Shocking Countertrend for Gold & Big Drop for stocks: Steven Hochberg
JT Long of The Gold Report (12/10/14)
It’s not just surfers who scrutinize wave patterns. Steven Hochberg, chief market analyst at Elliott Wave International, uses the Wave Principle to predict the movements of commodities and the stock market based on a number of factors, including sentiment. In this interview with The Gold Report, he reads the waves and sees indications that the stock market is headed for a downtrend, while commodities will move up, although not in a direct line.
We’re trying to take a more pragmatic approach, a tactical approach based on what the waves tell us. For example, sentiment, which is a big part of the gold sector, had gotten very extreme. Several days before gold hit its all-time high in September 2011, the Daily Sentiment Index, put out by trade-futures.com, moved to a record high of 96% on a five-day average. That means virtually all the traders thought gold was going higher. To us, this extreme ebullience was consistent with a high. Fast forward to today, the Daily Sentiment Index of traders had fallen to a record low of 5%. That was significant.
TGR: On Nov. 11, you issued an interim report that said for the first time in three years your charts were indicating that a significant countertrend rally was at hand. What are the Elliott Waves telling you?
SH: That was a countertrend rally specific to gold—a fascinating market that we have followed and will continue to follow closely.
Gold topped out in September 2011 at a $1,921/ounce ($1,921/oz) spot price and has declined pretty persistently until now. It went sideways in late 2013 into early 2014, but the Elliott Wave pattern that we were following suggested gold would go down again, and it has.
We’ve been forecasting these waves of optimism and pessimism as they’ve been unfolding to the downside in gold. For the first time in three years, we were able to count a complete declining Elliott Wave pattern from gold’s 2011 high. That’s why we issued a combined interim report from our two main newsletters, The Elliott Wave Theorist, written by Robert Prechter, and The Elliott Wave Financial Forecast, which I write with my partner, Peter Kendall. This was only the second combined interim report that we’ve put out in our history. We did it because we saw extremes in sentiment that suggested to us the start of an impending gold rally. I think that rally is in its very infancy right now. Ultimately, it’s going to carry gold higher. I think gold has upside potential from here.
TGR: You talk about the importance of sentiment in your analysis, but different parts of the investing market act differently. What is the role of small traders versus goldbugs and institutions in both bear and bull rallies? Who turns first?
SH: That’s a good question, and it’s interchangeable.
We here at Elliott Wave International are goldbugs because we believe that gold—as it has been for centuries—is true money.
In the context of our report, which came out two trading days after gold’s recent low, we were referencing goldbugs as investors who were never going to turn bearish on gold; people who were forecasting $5,000/oz, $10,000/oz gold. Eventually, we’ll probably get there, but nothing is straight up. ]FOR THE REST GO TO THIS LINK]