Special Weekend Midnite Ewave RidersUpdate!


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As we promised in yesterday's End of Day we have taken a closer look at our current rally in gold, to see where we are in wave .iii. From the 1167.30, wave .ii. we appear to have the following incomplete wave pattern, within wave .iii.:


*i* = 1194.70;

*ii* = 1178.00. Note that 61.8{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} retracement = 1177.80;

*iii* = 1222.80. Note that *iii* = 1.618*i* = 1222.30;

*iv* = 1204.90. Note that 38.2{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} retracement = 1205.70 ;

*v* = 1244.30, to complete all of wave ^i^:

^ii^ = 1226.20;


*i* = 1267.00;

*ii* = 1255.40

*iii* is now.

Now for some projections:

^iii^ = ^i^ = 1303.20;

^iii^ = 1.618^i^ = 1350.79. This is our preferred projection.

Note that the values above are little different than is shown on the attached daily gold chart, since the daily gold chart is based on the nearest continuous futures contract, while the values above are based on the February futures contract.

We expect gold to continue higher next week.









We are working on the assumption that wave iii of C ended at 44.20 as shown on the attached crude charts. The task at hand is to determine what the internal wave structure of wave iv is going to look like. As a minimum we would expect wave iv to rally between

23.6 and 38.2{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} of the wave iii decline. These numbers are 56.23 and 63.30, as shown on the wave C EWave chart. We also need to watch the red down trend line.

In terms of the shorter picture, from the wave iii low of 44.20, we appear to have the following:


-i- = 46.77;

-ii- = 45.03. Note that 61.8{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} retracement = 45.18;

-iii- = 49.55. Note that -iii-=1.618-i-=49.19;

-iv- = 47.18. Note that 50{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} retracement = 47.29;

-v- = 51.21. Note that .v.=1.618.i.=51.34, to complete all of wave (a).

The above analysis we did provide in our last End of Day Post. The question is what is happening next. It appears now that based on Friday's rally, we are likely now in a wave (b) triangle. On the intraday chart we have lots of overlapping waves in the setback from 51.21 to 45.96 and

In the rally from 45.96 to Friday high of 48.84. So it now appears that either all of wave iv will be an (a), (b) triangle, (c) formation, or something more complex that will include that formation. Within the wave (b) triangle we have at least completed wave -a- at 45.96 and likely most of wave -b- at 48.84.

We are long this market with 4 positions and our strategy now will be the ride out the developing triangle and wait for the wave (c) thrust. Note that wave (a) was $7.01 in length so the ensuing wave (c ) thrust should have a length of either 61.8{6662cb326f536db879050e93fbe8de36d93608a2a48b01f600643f4328fc39a1} x (a), equal to (a) or 1.618(a). If our analysis is correct we will try to add to our long positions at the end of the wave (b) triangle. Only a break now of 51.21 or 45.96 will eliminate the triangle (b) pattern.




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From a trading perspective the S&P has rewarded us handsomely, as we took over $100k in profits on 4 short S&P positions that we had held almost since the top occurred at 2093.55. We believe now that we are rallying in wave -ii- of (iii), with wave -i- of (iii) ending at 1988.12. As you can see on the attached chart it appears that the wave -ii- rally is well underway, with our projected end of this wave being between 2026 and 2035. So far it looks like the internal wave structure of wave -ii- is an .a., triangle .b., .c. pattern, with waves .a. and .b. complete at the values shown on the 10 Min chart. We also have a projected value for the end of wave .c. at 2034.43, which is right within our projected target zone. Our plan is to short this market as we enter our retracement zone. The challenge that we have is whether wave -ii- will consist of one single .a., .b., .c. pattern or several. We can have up to three. Unless this market is very weak we doubt whether all of wave -ii- will consist of a single .a., .b. ,.c. pattern. This thinking is based on the amount of time it took wave -i- of (ii) to develop.

What we may do in this case is to split our sell order. If we plan to short 4, we might short 2 at say 2034.00 and then short an additional 2 if we revisit the 2034 level again, if a more complex wave -ii- pattern develops. We will be able to tell rather quickly after this first .a., .b., .c. pattern ends whether all of wave -ii- has ended or whether it will become more complex.

We will provide our trading recommendation for this market in the Monday Morning Post!

Captain out!