Upwards movement was expected. This is not what happened.

The invalidation point on the hourly chart was breached by unexpected downwards movement.

Summary: The structure is still incomplete. I am moving the degree of labelling for this correction up one more degree because a fifth wave up is still required to end an impulse. The target is recalculated at 1,199 – 1,200. The target may be met in one to three days time. For the triangle idea at the daily chart level, I will leave the degree of labelling for this correction as it was yesterday and that target will remain similar to yesterday at 1,219 – 1,226.

To see weekly charts for bull and bear click here.

New updates to this analysis are in bold.

BULL ELLIOTT WAVE COUNT

DAILY – COMBINATION

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If cycle wave b is a combination, then the first structure in the double combination (or double flat) was an expanded flat. The double is joined by a three in the opposite direction labelled primary wave X which was a zigzag.

The second structure in the double may be another flat for a double flat, or it may be a zigzag or triangle for a double combination. Because a triangle for primary wave Y would essentially make the whole of cycle wave b the same as a triangle for cycle wave b, this chart will focus only on a possible zigzag for primary wave Y.

If primary wave Y is a zigzag, then intermediate wave (A) must be a five wave structure and may be unfolding as a leading diagonal.

If primary wave Y is a flat correction, then intermediate wave (A) must be a three wave structure and may be unfolding as a double zigzag (this idea is how the Daily – Triangle chart labels upwards movement).

For all possibilities, a five wave impulse is still required to complete upwards. The degree of labelling for the current correction is moved up one degree again today. Subdivisions of minuette wave (iii) are shown on the two hour chart below. The expected direction is still upwards for a fifth wave, but the target is now lower. At 1,199 minute wave c would reach 1.618 the length of minute wave a. At 1,200 minuette wave (v) would reach equality in length with minuette wave (i). This gives a $1 target zone calculated at two wave degrees, so it would have a reasonable probability.

The point at which minor wave 3 would reach equality in length with minor wave 1 is 1,196.95. If minor wave 3 ends above this point, the leading diagonal would be expanding. If it ends below this point, the leading diagonal would be contracting. When it is known if the diagonal is contracting or expanding, then a minimum and maximum for minor wave 4 shall be known.

Minuette wave (iv) may not move into minuette wave (i) price territory below 1,1141.38.

DAILY – EXPANDED FLAT

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Cycle wave b may also be a flat.

If cycle wave b is an expanded flat, then primary wave C must be a five wave structure. If the current diagonal unfolds as a contracting diagonal (most common), then it would be intermediate wave (1) of a five wave impulse upwards for primary wave C. If the current diagonal unfolds as an expanding diagonal, then the degree of labelling within primary wave C may be moved up one degree because an expanding diagonal may be an ending diagonal for primary wave C in its entirety.

At 1,196.95 minor wave 3 will pass equality in length with minor wave 1. Above that point the diagonal must be expanding and not contracting.

A leading diagonal requires the second and fourth waves to subdivide as zigzags. The first, third and fifth waves are most commonly zigzags, but sometimes may appear to be impulses. So far minor wave 1 fits well as a zigzag.

Minor wave 2 is 0.73 the depth of minor wave 1, nicely within the normal range of between 0.66 to 0.81 for a second wave within a diagonal.

Third waves within leading diagonals are most commonly zigzags, but sometimes they may be impulses. Minor wave 3 is now showing some increase in upwards momentum beyond that seen for minor wave 1. Minor wave 3 has moved above the end of minor wave 1 above 1,170.19.

There now looks like a five up on the daily chart within minor wave 3. This may be minute wave a within a zigzag or it may also be minute wave i within an impulse.

Current upwards movement would be minute wave c or minute wave iii. Either way, it must subdivide as an impulse. On the hourly chart so far the structure still looks incomplete.

The two hour chart below will suffice both the combination and flat bull wave count ideas.

HOURLY CHART

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It is possible that minuette wave (iii) ended at the last high. The subdivisions within it will fit.

Minuette wave (iii) would be 2.01 longer than 1.618 the length of minuette wave (i). Minuette wave (iii) shows an increase in upwards momentum beyond minuette wave (i).

Ratios within minuette wave (iii) are: subminuette wave iii is 2.62 longer than 1.618 the length of subminuette wave i, and subminuette wave v has no Fibonacci ratio to either of subminuette waves i or iii.

Within minuette wave (iii), there is good alternation between subminuette waves ii and iv. Subminuette wave ii is a deep 0.72 flat correction and subminuette wave iv is a more shallow 0.33 zigzag.

Minuette wave (ii) was a shallow 0.30 zigzag. Minuette wave (iv) exhibits alternation as a deeper 0.46 double combination (flat – X – zigzag).

The channel is drawn using Elliott’s second technique. If minuette wave (iv) is over, then the lower edge should provide support as minuette wave (v) unfolds upwards. If this wave count is wrong, then the first indication would now be a breach of the lower edge of the channel. If that happens, then minuette wave (iv) may be ending with a short final fifth wave down within micro wave C.

A new high above 1,173.27 would provide some confidence at this stage that micro wave C within the last wave of minuette wave (iv) is over.

DAILY – TRIANGLE

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This first daily chart looks at what a triangle would look like for cycle wave b. The triangle would be a running contracting or barrier triangle. Within the triangle, primary wave C up must be a single or multiple zigzag. Primary wave C may not move beyond the end of primary wave A above 1,308.10.

This idea slightly diverges from the other two ideas for cycle wave b as an expanded flat or combination.

The expected direction is still exactly the same, and the current upwards structure is still seen as an impulse. The first short term target is changed. At 1,222 minuette wave (v) would reach equality in length with minuette wave (i). At 1,226 minute wave iii would reach 2.618 the length of minute wave i. This target is higher than the first target for the end of primary wave C, so if the short term target is only the end of minute wave iii, then the second higher target would be more likely for primary wave C.

The first target at 1,218 is where primary wave C would reach 0.618 the length of primary wave B. If price gets up to the first target and the structure of minor wave C is a complete five wave impulse, then it may be over there.

The second target at 1,256 is where minor wave C would reach 2.618 the length of minor wave A, and at 1,261 primary wave C would reach 0.8 the length of primary wave A.

For the triangle idea, for cycle wave b, a five wave impulsive structure only needs to complete upwards. The next wave down for primary wave D should be fairly time consuming, lasting about 2 to 6 months. Primary wave D may not move beyond the end of primary wave B at 1,072.09 for a contracting triangle. Alternatively, primary wave D may end about the same level as primary wave B at 1,072.09 for a barrier triangle, as long as the B-D trend line remains essentially flat. In practice this means primary wave D can end slightly below 1,072.09 and this wave count remains valid. This is the only Elliott wave rule which is not black and white.

HOURLY – TRIANGLE

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This two hour chart has the same subdivisions for upwards movement as yesterday’s hourly chart. I will note Fibonacci ratios and alternation, so it may be compared with the first hourly chart given for the flat and combination ideas.

There is no Fibonacci ratio between minuette waves (i) and (iii).

Minuette wave (ii) was a deep 0.73 zigzag and minuette wave (iv) exhibits alternation as a more shallow 0.51 double combination.

Ratios within minuette wave (iii) are: there is no Fibonacci ratio between subminuette waves i and iii, and subminuette wave v is 0.51 short of 0.236 the length of subminuette wave iii.

The channel drawn here is also drawn using Elliott’s second technique. If minuette wave (iv) is over and minuette wave (v) upwards has begun, then the lower edge of this channel should provide support. If that lower trend line is breached, then it would be an early warning that minuette wave (iv) would be continuing lower; micro wave C could need one small final fifth wave down to complete it.

A new high above 1,173.27 would add confidence to the idea that minuette wave (iv) would be over.

At 1,219 minuette wave (v) would reach equality in length with minuette wave (iii). At 1,226 minute wave iii would reach 1.618 the length of minute wave i.

Minuette wave (iv) may not move into minuette wave (i) price territory below 1,153.80.

BEAR ELLIOTT WAVE COUNT

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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. While price remains below this line, it must be accepted that Gold has been in a bear market since 2011 and we don’t have technical confirmation that the bear market has ended.

The only option now for a bear wave count is to see minute wave ii continuing higher as a double zigzag.

Minute wave ii has strongly breached the dark blue base channel drawn about minor waves 1 and 2. When a lower degree second wave correction breaches a base channel drawn about a first and second wave one or more degrees higher, then the probability of the wave count reduces, particularly at higher time frames.

The structure of upwards movement for the bear wave count is exactly the same as the bull for the short term: a five wave impulse is unfolding upwards and it is incomplete.

Minute wave ii may not move beyond the start of minute wave i above 1,232.49. A new high above that price point would be final price invalidation of any bear wave count. That would fully eliminate the concept that Gold remains in a bear market. No bear wave count should be considered above that point.

TECHNICAL ANALYSIS

Click chart to enlarge. Chart courtesy of StockCharts.com.

Regular technical analysis has been updated after NY closed and StockCharts data was available.

Daily: Wednesday’s downwards day comes on slightly reduced volume. The fall in price was not supported by volume. This supports the wave count which expects it was part of a correction and not a new trend.

Price has closed below the horizontal trend line which previously provided support and resistance. Price has also closed below the 9 day EMA. At this stage, neither this trend line nor moving average are proving useful to show where price may find support.

ADX is still rising and comfortably above 20 indicating a new trend. The trend is upwards with the +DX line above the -DX line.

The pink trend line is not working well for On Balance Volume. It is not technically significant enough. OBV may now find some support at the orange trend line, but that too is too short lived and not tested enough to be highly technically significant. It may provide some weak support.

RSI is not yet overbought. There is room for further upwards movement.

I added Average True Range (ATR) today to supplement ADX. ATR may be used as an indicator of trending / consolidating. When ATR declines the range price is travelling in declines; this is more typical of price behaviour during a consolidation. When ATR increases the range price is travelling in increases; this is more typical of price behaviour during a trend. Caution must be applied to the use of this indicator. Looking at how it behaves on this daily chart, the overall direction should be considered not each small daily movement.

Since 15th of September ATR has been overall moving higher indicating a trend while price moves higher. At this stage, ATR supports ADX in indicating the market is trending and the trend is up.

Overall, it looks like Gold has broken out of the recent consolidation and the breakout was upwards, despite the strongest volume day during the consolidation being downwards. The strongest piece of technical analysis on this chart is the horizontal trend line, although that today failed to show where price found support.

This analysis is published about 05:51 p.m. EST.

This analysis was updated about 11:15 p.m. EST.