July 18, 2011 | 9:00pm ET

Gold Nearing Resistance

As bullish as I am, and have been on Gold since 2003, I am still rather impressed with the latest run-up to fresh highs. To be frank, I was expecting more downside beyond the recent pivot low at 1478, and was a bit surprised at how quickly the shiny metal took out its early May high.

Embracing the most bullish of Elliott Wave subdivisions from the primary 4-wave base at 681 in October of 2008, I am reading the current advance as an intermediate (3) wave along Gold's long journey to toward completing its primary fifth. Once done, the current thrust to fresh highs may mark all-of (3).

It is also quite plausible that the 5th wave at minor degree (currently in progress) may itself subdivide into some type of ending pattern, or trace out five-waves of advance at the minute (one smaller) degree of trend prior to capping wave (3).

Despite Gold rapidly approaching short-term resistance at our noted uptrend channel, bear in mind that 5th waves in the commodities complex do exhibit a tendency to extend.

In closing, I thought it important to share an extremely short version of my philosophy and application of the Elliott Wave Theory. In brief, I use the fractal geometry of Elliott Waves in the very same way that I use trendlines and trend channels.

Relative to key terminal pivots in specific relation to trendline boundaries of varying size, the art of sequentially labeling these pivots (using the nine fractal degrees resident in the theory) provides me with a superior level of contextual framework from which to best gauge the maturity of trends.

Bear in mind however, that in stark contrast to Einstein's (empirically quantified) Relativity, the tenets of Elliott's principles remain exclusively in the subjective realm of theory, and its efficacy in the hands of the interpreter.

As such, though Elliott Wave Theory is an extraordinarily powerful tool when applied in the proper context, I am forever downplaying its role in my work as nothing more than an ancillary and dynamic method by which to observe price behavior resident within trend channels occurring amid varying timeframes.

In other words, it is not wise to bet the ranch or even trade off of wave counts, which harbor the inherent propensity for dynamic and sudden change.

Technically Speaking Video

I trust and hope that you have extracted something of actionable value from this edition of Technically Speaking.

Until next time,

Trade Better/Invest Smarter

Elliott Wave Technology's Near Term Outlook is for those who demand masterfully consistent and objective technical analysis that visually lays out actionable ideas from which to engage the broad markets over the short and near term. The publication is delivered to institutional and private clients each Monday, Wednesday, and Friday evening.

The Near Term Outlook covers 7 essential broad markets.

US DOLLAR | DOW JONES INDUSTRIALS | S&P-500
NASDAQ-100 | GOLD | CRUDE OIL | BONDS