Wednesday, June 10, 2009

Does Gold follow Elliot Wave mechanics?

GLD. I honestly have no idea about this Elliot wave stuff... I'll defer to Eric.

Teresa Lo has been pointing out that various technicians have been talking about the "inverse" or "reverse" head and shoulders pattern that would signal a breakout to the upside. The problem, as she points out, is that there is no such animal as an "inverse" or "reverse" h/s.

So, my question is whether Elliot wave theory can be applied to the usually enigmatic gold complex? The argument is that Elliot wave theory is predicated on a functioning cerebral cortex, with sentiment based on gaussian distributions, etc... and most gold bugs are operating at the midbrain level.

Disclosure: I recently sold a mutual fund of gold miners (FSAGX) that I have had for years. I still own GLD, but I am looking to reduce my stake.


  1. what she points out is that an Inverse H&S... happens after a sell off, not after a run up...

  2. Specifically, T.Lo says there is no such thing as a "reverse" or "inverse" head and shoulders found in Magee or any other technical analysis book.

    She says*: "Someone needs to revisit his Technical Analysis of Stock Trends. I do not recall seeing any “reverse head and shoulders” patterns in the book. There are head and shoulders bottoms, but those only form after a long downtrend."

    It's a terminology thing. Her point is well-made, although I do not have a copy of Magee or Murphy texts available, that when one encounters a practitioner who is not accurate in their terminology it usually portends other deficiencies as well.