Hi Larry,

What are your views on the Elliott Wave ?

I am reading Conquer the Crash by Robert Pretcher and there is a diagram of the bull market in gold from 1968 to 1980 showing the 5 wave patterns. I'm curious to know what wave we are in now for GOLD. Does anyone know ?

Thanks
Maggie

I think Precter believes we are still in a bear market in gold and the present action he considers a bear market rally. Many others including Richard Russell believe we are in the begining stages of a multi year bull market in metals.

Gary

Maggie,

You have really been doing some reading. That’s great. I wish I could get everyone to do that. Elliott Wave like all forms of legitimate analysis – technical, fundamental, sentiment, whatever - is effective in the hands of people who know how to use it. And like other types of analysis it is much more of an art than a science.

Just like Richard Russell is today’s leading practitioner of the Dow Theory, Prechter is today’s leading practitioner of Elliott Wave. In the 80’s I studied Elliott Wave and I just couldn’t figure out a way to use it. So I finally threw up my hands and decided that I’ll just keep up with what Prechter is saying about it. None of us can be proficient in everything.

I don’t know exactly what wave Prechter thinks gold is in. My guess is that he thinks we’re ending phase 1 and will enter a bearish phase 2 before we enter into the powerful bull phase 3. But I know he thinks that we are going to go through a severe deflationary cycle. And he thinks that the price of gold will come down along with everything else. I think he’s looking for a low price in the $200 to $250 area. After that he becomes very bullish and thinks that gold will move into a tremendous bull market. I’ve also read where he’s said in the past that if gold reached a certain price – it seems like previously it was $400 – he would alter his view that gold has to go down before it starts its bull move. Gold is above $400 but I don’t think he’s changed his mind yet. I also know that he has repeatedly said that he doesn’t feel nearly as confident in his bearish outlook for gold as he does his bearish outlook for the stock market.

I don’t think Prechter is going to be right on gold, but obviously he could be. I just try to allocate my assets in such a way that if he is right I’ll still be okay.

Larry