Microsoft Word io elliott Wave Theory doc

Figure 6-9 
Figure 6-10 is a weekly high-low chart of Chicago wheat futures. During the four years after the peak 

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at $6.45, prices trace out an Elliott A-B-C bear market with excellent internal interrelationships. Wave 
B is a contracting triangle. The five touch points conform perfectly to the boundaries of the trendlines. 
Though in an unusual manner, the triangle's subwaves develop as a reflection of the Golden Spiral, 
with each leg related to another by the Fibonacci ratio (c = .618b; d = .618a; e = .618d). A typical 
"false breakout" occurs near the end of the progression, although this time it is accomplished not by 
wave e, but by wave 2 of C. In addition, the wave A decline is approximately 1.618 times the length of 
wave a of B, and of wave C. 
Figure 6-10 
Thus, we can demonstrate that commodities have properties that reflect the universal order that Elliott 
discovered. It seems reasonable to expect, though, that the more individual the personality of a 
commodity, which is to say, the less it is a necessary part of human existence, the less it will reliably 
reflect an Elliott pattern. One commodity that is unalterably tied to the psyche of mass humanity is 
gold. 
Gold 
Gold often moves "contra-cyclically" to the stock market. When the price of gold reverses to the upside 
after a downtrend, it can often occur concurrently with a turn for the worse in stocks, and vice versa. 
Therefore, an Elliott reading of the gold price has in the recent past provided confirming evidence for 
an expected turn in the Dow. 
In April of 1972, the long-standing "official" price of gold was increased from $35 an ounce to $38 an 
ounce, and in February of 1973 was again increased to $42.22. This fixed "official" price established 
by central banks for convertibility purposes and the rising trend in the unofficial price in the early 
seventies led to what was called the "two-tier" system. In November 1973, the official price and the 
two-tier system were abolished by the inevitable workings of supply and demand in the free market. 
The free market price of gold rose from $35 per ounce in January 1970 and reached a closing 
"London fix" price peak of $197 an ounce on December 30, 1974. The price then started to slide, and 
on August 31, 1976 reached a low of $103.50. The fundamental "reasons" given for this decline have 
always been U.S.S.R. gold sales, U.S. Treasury gold sales and I.M.F. auctions. Since then, the price 
of gold has recovered substantially and is trending upward again [as of 1978]. 
Despite both the efforts of the U.S. Treasury to diminish gold's monetary role, the highly charged 
emotional factors affecting gold as a store of value and a medium of exchange have produced an 
inescapably clear Elliott pattern. Figure 6-11 is a price chart of London gold, and on it we have 
indicated the correct wave count, in which the rise from the freemarket liftoff to the peak at $179.50 an 
ounce on April 3rd, 1974 is a completed five-wave sequence. The officially maintained price of $35 an 
ounce before 1970 prevented any wave formation prior to that time and thus helped create the 
necessary long term base. The dynamic breakout from that base fits well the criterion for the clearest 
Elliott count for a commodity, and clear it is. 

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Figure 6-11 
The rocketing five-wave advance forms a nearly perfect wave, with the fifth terminating well against 
the upper boundary of the trend channel. The Fibonacci target projection method typical of 
commodities is fulfilled, in that the $90 rise to the peak of wave [3] provides the basis for measuring 
the distance to the orthodox top. $90 x .618 = $55.62, which when added to the peak of wave III at 
$125, gives $180.62. The actual price at wave V's peak was $179.50, quite close indeed. Also 
noteworthy is that at $179.50, the price of gold had multiplied by just over five (a Fibonacci number) 
times its price at $35. 
Then in December 1974, after the initial wave [A] decline, the price of gold rose to an all-time high of 
nearly $200 an ounce. This wave was wave [B] of an expanded flat correction, which crawled upward 
along the lower channel line, as corrective wave advances often do. As befits the personality of a "B" 
wave, the phoniness of the advance was unmistakable. First, the news background, as everyone 
knew, appeared to be bullish for gold, with American legalization of ownership due on January 1, 
1975. Wave [B], in a seemingly perverse but market-logical manner, peaked precisely on the last day 
of 1974. Secondly, gold mining stocks, both North American and South African, were noticeably 
under-performing on the advance, forewarning of trouble by refusing to confirm the assumed bullish 
picture. 
Wave
[C], a devastating collapse, accompanied a severe decline in the valuation of gold stocks, 
carrying some back to where they had begun their advances in 1970. In terms of the bullion price, the 
authors computed in early 1976 by the usual relationship that the low should occur at about $98, since 
the length of wave [A] at $51, times 1.618, equals $82, which when subtracted from the orthodox high 
at $180, gives a target at $98. The low for the correction was well within the zone of the previous 
fourth wave of lesser degree and quite near the target, hitting a closing London price of $103.50 on 
August 25, 1976, the month just between the Dow Theory stock market peak in July and the nominal 
DJIA peak in September. The [A]-[B]-[C] expanded flat correction implies great thrust in the next wave 
into new high ground. 
Gold, historically speaking, is one of the disciplines of economic life, with a sound record of 
achievement. It has nothing more to offer the world than discipline. Perhaps that is the reason 
politicians work tirelessly to ignore it, denounce it, and attempt to demonetize it. Somehow, though, 

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governments always seem to manage to have a supply on hand "just in case." Today, gold stands in 
the wings of international finance as a relic of the old days, but nevertheless also as a harbinger of the 
future. The disciplined life is the productive life, and that concept applies to all levels of endeavor, from 
dirt farming to international finance. 
Gold is the time honored store of value, and although the price of gold may flatten for a long period, it 
is always good insurance to own some until the world's monetary system is intelligently restructured, a 
development that seems inevitable, whether it happens by design or through natural economic forces. 
That paper is no substitute for gold as a store of value is probably another of nature's laws. 
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