Yesterday’s hourly chart expected some more downwards movement short term and warned a new low may be seen. This is what happened.
Last analysis expected a third wave down was most likely underway.
Further downwards movement fits the Elliott wave count perfectly so far.
A new high above 1,095.89 confirmed the preferred alternate Elliott wave count.
I have only one bullish Elliott wave count for the USD Index.
New updates to this analysis are in bold.
The US Dollar has been in a bull market since July 2011. So far there is no confirmation of a trend change. The bull market should be assumed to remain intact until proven otherwise.
Ratios within intermediate wave (1) are: minor wave 3 is 24.98 longer than 2.618 the length of minor wave 1, and minor wave 5 has no Fibonacci ratio to either of minor waves 3 or 1.
Within minor wave 3, there are no Fibonacci ratios between minute waves i, iii and v.
Ratios within minute wave iii are: minuette wave (iii) has no Fibonacci ratio to minuette wave (i), and minuette wave (v) is 8.46 short of 0.382 the length of minuette wave (iii).
Within intermediate wave (3), minor wave 3 is 87.36 longer than 4.236 the length of minor wave 1.
Minor wave 3, within intermediate wave (3), shows strongest upwards momentum. MACD supports the Elliott wave count.
Within intermediate wave (3), minor wave 2 was a very deep 0.98 zigzag. Minor wave 4 is now complete as a shallow flat correction.
Draw a channel about intermediate wave (3) using Elliott’s first technique: draw the first trend line from the highs labelled minor waves 1 to 3, then place a parallel copy on the low labelled minor wave 2. So far this contains all of intermediate wave (3). The lower edge of this channel is again proving useful in showing where downwards movement is finding support.
The US Dollar was in a sideways consolidation since mid March. During this sideways movement it is an upwards week which has strongest volume. This indicates that when the consolidation is complete an upwards breakout is more likely than downwards. So far, at this stage, it looks like price has now broken out of this consolidation upwards as expected.
A final support line is shown in bright aqua blue.
Minor wave 4 did not complete as a triangle, as last analysis expected, but was over sooner as a flat correction. Minute wave b is a 105% correction of minute wave a, so this is a regular flat. Minute wave c is longer than normal for a C wave within a regular flat. There is no Fibonacci ratio between minute waves a and c.
The sideways consolidation was not a fourth wave triangle, which was what I had expected. Instead, the sideways consolidation turned out to be a leading contracting diagonal for minute wave i. This was followed by a relatively deep 0.52 flat correction for minute wave ii.
At 13,062 minute wave iii would reach 2.618 the length of minute wave i.
This wave count expects a long extension for minor wave 5.
No second wave correction may move beyond the start of its first wave below 11,855 within minute wave iii. Minuette wave (ii) should find strong support again about the lower edge of the blue channel copied over here from the weekly chart.
A small inside day leaves both Elliott wave counts valid.
A green candlestick or doji was expected for Thursday’s session but did not happen.
The third hourly wave count was confirmed with a new low below 1,075.31.
Summary: A new low below 1,074.27 would indicate a strong fifth wave down is underway. The target is at 937 – 932. A new high above 1,094.27 would indicate a multi day correction has arrived, with the most likely target at 1,118.
To see weekly charts click here.
New updates to this analysis are in bold.
MAIN ELLIOTT WAVE COUNT
Gold has been in a bear market since September 2011. There has been no confirmation of a change from bear to bull. Price remains below the 200 day moving average and below the final bear market trend line (copied over from the weekly chart). The bear market should be expected to be intact until we have technical confirmation of a big trend change. At this stage, all bull wave counts have been invalidated.
The final line of resistance (bright aqua blue line copied over from weekly charts) is only overshot and not so far properly breached. While this line is not breached the bear wave count will remain possible. Simple is best, and the simplest method to confirm a trend change is a trend line.
Minute wave ii is a complete double zigzag and deep at 0.75 the length of minute wave i. It has breached the dark blue base channel drawn about minor waves 1 and 2, one degree higher. When a lower degree second wave correction does this it reduces the probability of the wave count but does not invalidate it. Base channels most often work to show where following corrections find support or resistance, but not always.
At 932 minute wave iii would reach 1.618 the length of minute wave i. If minuette wave (v) has begun as per the main hourly wave count below, then at 937 minuette wave (v) would reach 1.618 the length of minuette wave (iii). It is expected that minuette wave (v) will be a long strong extension. Minute wave iii should show an increase in downwards momentum beyond that seen for minute wave i.
Gold often exhibits swift strong fifth waves, particularly its fifth waves within its third waves. Minuette wave (v) may be explosive. For this wave count look out for surprises to be to the downside.
Draw a channel about this downwards movement using Elliott’s first technique: draw the first trend line from the end of minuette wave (i) to minuette wave (iii), then place a parallel copy on the high of minuette wave (ii). At the moment price is finding resistance about the mid line of this channel.
No second wave correction may move beyond its start above 1,094.27 within minuette wave (v).
Minuette wave (ii) was a deep expanded flat correction. Minuette wave (iv) exhibits alternation as a very shallow combination. Minuette wave (ii) lasted six days and minuette wave (iv) lasted three days. They both show up at the daily chart level giving the wave count the right look.
The first wave down will fit as a leading contracting diagonal within minuette wave (v). This may have been followed by a relatively deep 0.55 expanded flat correction.
Within micro wave 2, submicro wave (B) is unusually deep and 2.87 times the length of submicro wave (A). This is much longer than the maximum common length of 1.38. There is no rule stating the maximum length of a B wave within a flat and I have seen flats which very long B waves unfold before, but this is unusual. For this reason mostly, the alternate below must be considered to have a reasonable probability.
If micro wave 2 is not over and continues further as a double flat or combination, then it may not move beyond the start of micro wave 1 above 1,094.27.
A new high above 1,094.27 would invalidate this main wave count and confirm the alternate below.
ALTERNATE ELLIOTT WAVE COUNT
Everything is identical up to the high labelled minute wave ii for this alternate wave count.
Thereafter, within the recent downwards movement, everything is moved down one degree to see another first wave complete. All subdivisions within recent downwards movement are the same up to the low labelled subminuette wave iii. Thereafter, it is seen a little differently on the hourly chart.
If minuette wave (i) within minute wave iii has just ended, then minuette wave (ii) should show up on the daily chart and may last a total Fibonacci five or eight days. It may be longer lasting, but at this early stage a quicker end should be expected. The middle of a big third wave is still approaching which may force corrections to be more brief and shallow than otherwise.
Minuette wave (ii) should first breach the orange channel containing minuette wave (i). If it ends at resistance at the dark blue line, it may reach only up to the 0.382 Fibonacci ratio of minuette wave (i) at 1,118. Final resistance would be at the final bear market trend line.
This may resolve RSI being oversold.
All subdivisions up to the low labelled here subminuette wave iii are identical for both hourly wave counts. Thereafter, the hourly wave counts differ.
What if the fourth wave was a quick shallow zigzag? Subminuette wave (iv) may have been over in one day exhibiting perfect alternation with the deep expanded flat of subminuette wave ii.
If the fourth wave is over there, then following downwards movement fits well as an ending expanding diagonal. All the sub waves subdivide perfectly as zigzags (as they must for an ending diagonal) and this part of the wave count has a better fit than the main wave count. The 1-3 trend line is overshot; sometimes fifth waves of diagonals do that. Micro wave 2 is 0.94 of micro wave 1 and micro wave 4 is 0.88 of micro wave 3. Both are deeper than the common depth of 0.66 – 0.81, but deeper is better than more shallow. All the rules for this structure are met.
The problem of the unusual depth for a B wave within an expanded flat that the main wave count has is resolved.
Micro wave 4 fits better as a zigzag than it does as an ending diagonal. This part of the wave count has a better fit for this alternate.
Minuette wave (ii) may unfold as any corrective structure except a triangle. If it unfolds as an expanded flat or combination, then it may include a new low below its start at 1,074.22. However, the first movement up for a multi day correction should be a five wave structure. Within the five wave structure no second wave correction may move below the start of its first wave below 1,074.22. For the next 24 hours this invalidation point will remain. Thereafter, the invalidation point may be removed.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,191.66.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Note: This analysis is prepared before NY close. It may be updated after 6:30 p.m. EST when StockCharts data is finalised, if volume data at that stage differs substantially from what’s presented here.
Daily: Again, a downwards day shows an increase in volume. The fall in price is supported by volume.
ADX still indicates a downwards trend. Today ATR disagrees indicating that price is currently most likely consolidating. ADX is a lagging indicator and indicates the overall trend is down, while ATR declining indicates a small consolidation within the downwards trend is currently unfolding. This would support the alternate hourly Elliott wave count.
On Balance Volume agrees with price as it too has made a new low. The last two major lows in price diverge from OBV; while OBV has made a strong new low price has not. This divergence indicates weakness in price and is bullish. This may indicate the alternate hourly wave count is correct.
RSI remains oversold; some upwards movement from here may resolve this.
Oscillators may remain extreme for some time while price is trending. They should be used for divergence and trend lines during a trending market such as Gold is in now.
This analysis is published about 05:11 p.m. EST.
Last week’s analysis had three Elliott wave counts. Since then one Elliott wave count has been invalidated.
There are now only two Elliott wave counts. The situation is becoming clearer for Silver.
Downwards movement to a slight new low still fits the Elliott wave count.
Sideways movement to complete a small real body for Tuesday’s candlestick fits the Elliott wave count nicely.
Some more upwards movement to 48.09 – 49.35 was expected. Thereafter, the main Elliott wave count expected price to turn back down.
Price moved higher to reach 48.36 and turned down from there.
The third hourly Elliott wave count is confirmed by a green daily candlestick.
The trend was expected to be down.
Price continued lower.