Practitioners of Elliott wave analysis will almost always tell you that a picture can indeed be worth a thousand words.
And Bob Prechter’s March 14 Elliott Wave Theorist again proves this adage.
And by way of introduction to two of Bob’s “pictures” (you’ll find 11 charts and tables in his most recent Theorist), let me share with you the rhetorical question Bob asks – then answers – on page 2 of his latest issue.
“I have often read, ‘Gold always goes up in recessions and depressions.’ Is it true? Should you own gold because you think the economy is tanking? Whenever we hear some claim like this, we always do the same thing: We look at the data.”
– Bob Prechter’s Theorist, March 14
I encourage you to read more about Bob Prechter’s March 14 Elliott Wave Theorist right here, right now: Read More about Bob Prechter’s Latest Theorist.
With Bob’s March 14 publication date in mind, let’s move on to the charts …
This chart shows gold’s March 2008 price action. Please note that I’ve again pointed out when Bob’s Theorist was published.
Here’s what Bob said about gold in that issue.
“Today the economic expansion is hanging on by a thread. Some data suggest that the economy is already in recession, but they have yet to meet requirements for an official pronouncement. If the relationship shown here holds true, and if gold behaves as it did in 1980, it should peak concurrently with the economy.”
– Bob Prechter’s Theorist, March 14
Just one trading day later, on March 17, you can clearly see in the chart above that gold formed – at very least – a short-term top.
Now, let’s move on to silver …
Bob’s March 14 forecast for an imminent top in silver was even more striking, as – like gold – silver also reached and then reversed from a significant high after March 17. See the chart below.
Here’s what Bob said on March 14 about silver.
“The wave count is nearly satisfied, although ideally it should end after one more new high.”
– Bob Prechter’s Theorist, March 14
As with gold, silver kissed one more new high, and the top was in.
So, silver and gold appear to have begun a longer-term move to the downside. That’s also what Bob said on – you guessed it –March 14.
“If this analysis of silver is accurate and silver does peak this year and begin a bear market, gold is likely to go down with it. As we have already seen, gold tends to perform less well during economic contractions, so the economy is likely to peak along with gold. This conclusion fits our long-standing observation that silver is an excellent predictor of recessions: When it goes down substantially, recession follows.”
– Bob Prechter’s Theorist, March 14
But with more Fed action likely to come, rumor mills about heavy-handed government regulation churning and the first day of the second quarter of 2008 off to a screaming start for stocks, you might be wondering how it all fits into our short-term outlook for gold and silver.
Just so happens, one of Bob’s co-editors for EWI’s Financial Forecast Service, Steve Hochberg, has you covered in that regard, as well. Subscribers to Steve’s Short Term Update read the following bit of text and saw an accompanying picture for gold just yesterday, Monday, March 31:
“The best near-term interpretation is that [Gold] ended its wave 2 bounce at the recent $962.20 high (Mar. 26), basis the June contract (e-CBOT), which is now the active month. Wave 3 should be a forceful decline that draws prices toward the next potential support surrounding the $____ level, the apex of a previous fourth-wave triangle. Any rise above $____, while not expected, would suggest that wave 2 was still unfolding, tracing out a slightly more complex upward correction (Emphasis added. Some price targets were removed for this publication).”
– Steve Hochberg’s Short Term Update, March 31
So when it comes to the old adage that a picture is worth a thousand words, here’s a question worth asking yourself:
“When I look at Bob Prechter’s March 14 Elliott Wave Theorist and see that it includes 11 pictures, 5,532 words and valuable forecasts for gold and silver, how much is Prechter’s forecast worth to my portfolio?”
Well, there’s only one way to find out.