Gold and Oil: Be Aware of the “Spike”
“Hope and fear look different on a chart”
by Bob Stokes
Updated: July 16, 2020
Recently in these pages, we noted that bull markets in stocks tend to end with "a subtly slowing ascent" rather than with a final "spike" higher, as many investors believe. We noted historical examples of this.
It was also pointed out that, by contrast, commodities do tend to end major uptrends with a price spike.
The Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter explains why (keep in mind regarding the quote from the book that fifth waves are the final wave in the main trend of a financial market):
Fifth wave advances in the stock market are propelled by hope, while fifth wave advances in commodities are propelled by a comparatively dramatic emotion, fear; fear of inflation, fear of drought, fear of war. Hope and fear look different on a chart, which is one of the reasons that commodity market tops often look like stock market bottoms.
Crude oil offers a prime historical example. This chart shows the big spike higher going into the July 2008 high. A dramatic 78% plunge in just five months followed:
Of course, precious metals are also commodities. Thus, the price history of gold offers another historical example of a price spike going into a peak.
This chart and commentary are from the Sept. 2, 2011 Elliott Wave Financial Forecast:
Commodity fifth waves in major rallies often end in a final spike higher...
Gold's wave structure is consistent with a terminating rise.
Four days after that chart published, on Sept. 6, 2011, a headline in the British newspaper, The Guardian, said:
Gold hits new high as fear stalks financial markets
There we have that word "fear" again.
On that date, the yellow metal hit a high of $1921.50 and a big decline followed. By December 2015, gold was trading at $1046.20.
Fast forward to July 13, 2020 and our U.S. Short Term Update discussed the "steep ascent" or price spike of another widely traded market that investors need to know about.
You can get the details via a 30-day, risk free trial to our flagship investor package, which includes the 3-days-a-week U.S. Short Term Update.
Follow the link below to start your no-obligation trial.
Here’s How Most Investors Cope with Stock Market Uncertainty
They do what they've always done: look to others for clues as to what to do next. In other words, they herd.
Problem is -- the crowd is almost always wrong at major stock market turns.
By stark contrast, instead of joining the crowd, our Elliott wave experts track the crowd's patterned behavior. These patterns have repeated throughout market history. This repetition of recognizable investor patterns brings predictive value.
Our flagship investor package shows what these patterns are revealing about the stock market's next big move.
You can enjoy unlimited access to our analysis and forecasts for a full 30 days without any obligation.Get started with our risk-free trial by following the link below.
Your Financial Forecast Service Team Helps Put YOU in Control of the Market’s Trends and Turns
Your Financial Forecast Service guides -- three of the best-known market analysts in the world:
- 1. Robert Prechter, Author of 16 market-related books, New York Times Best-Selling Author and Editor of Elliott Wave Theorist
- 2. Steven Hochberg, Editor of the Short Term Update and Co-editor of The Elliott Wave Financial Forecast
- 3. Peter Kendall, Author of The Mania Chronicles and Co-editor of The Elliott Wave Financial Forecast
As featured in:
Start Your Subscription Now
for 1 month of unparalleled market insights
Down more than 25%, the NASDAQ is "officially" in bear-market territory. "Big whoop" as they used to say -- some of the hi-tech darlings have already been cut in half and then some. Bet the folks down 50% or more in their so-called investments are glad to hear they're "official." And now Bitcoin, the King of Cryptos, has hit an "air pocket" of its own and fallen below $30,000. Wonder if that's officially a bear market, too? This excerpt from our new, May Financial Forecast explains how it all fits together.
Bitcoin and other cryptocurrencies are no strangers to volatile, sharp reversals. If you get caught up in one unprepared, it's not a good feeling. But watch our Crypto Trader's Classroom instructor show you how Elliott waves can help take the "surprise" out of crypto "surprises."
The euro vs. U.S. dollar is most-traded forex pair -- and lately, the euro has been losing, pushing EUR/USD lower and lower. At moments like that, many FX traders will try to catch the bottom. Watch our Currency Pro Service editor show you what Elliott wave evidence you need to do that with less risk.