Category Archives: Public Analysis

3 Most Important Things to Consider for Candlestick Reversal Patterns | 11th October, 2017

This daily chart of the S&P 500 identifies 16 candlestick reversal patterns. Only reversal patterns are considered here, not continuation patterns.

S&P500 2017
Click chart to enlarge.

The first #1 and #2 patterns are both Three White Soldiers. Pattern #1 comes after a short sharp fall in price, so it may be considered a reversal pattern. But pattern #2 comes within an upwards trend, so it is more of a continuation pattern here and would not be considered a reversal pattern as there was nothing to reverse.

This leads to point number 1:

For a reversal pattern to have meaning there must be something to reverse. A bullish reversal pattern should come after a decline in price. A bearish reversal pattern should come after a rise in price.

Pattern #3 is an important reversal pattern and it does come after a steady rise in price. It correctly predicted a consolidation.

This leads to point number 2:

Reversal patterns mean a reversal of the prior trend to the opposite direction or sideways. They do not only mean a complete 180 degree reversal; sideways is a direction too.

The Shooting Star at #4 does not come after a bullish rally. It comes within a consolidation, so it should not be considered a reversal pattern. This is another illustration of point number 1.

Likewise, the Bullish Engulfing pattern at #5 comes within a consolidation. There is nothing here to reverse.

The Piercing Pattern at #6, however, does come after a short sharp fall in price, so it should be considered a reversal. It did correctly predict the following 7 days of upwards movement.

This leads to point number 3:

Reversal patterns make no comment on how far price may travel in the new direction.

The Morning Star at #7 is the second reversal pattern at lows after a short sharp fall. Along with the Piercing pattern, it correctly predicted the next rise in price.

However, the Bullish Engulfing pattern at #8 does not come after a fall in price. It comes within a consolidation. There is nothing here to reverse, so it should be ignored.

The Gravestone Doji at #9 is normally a bearish reversal pattern. Its forte is in calling tops. Here, it comes at the end of a bearish movement, so it is out of context. It cannot be calling a reversal in a bull move as there was no bull move prior to the pattern.

At #10 the Bullish Engulfing pattern does come after a reasonable fall in price, so it should be considered a reversal pattern. This pattern was followed by a persistent bullish move.

Like the Gravestone Doji, the Dragonfly Doji at #11 is out of context. Here, it is at highs and within a small consolation. Dragonfly Doji are bullish reversal patterns when they occur after a bearish move, but this one does not.

Another pattern within the consolidation at #12 should be ignored. There is no bullish move here to reverse for the Bearish Engulfing pattern.

The Hammer pattern at #13 does not come after a reasonable bearish trend; it was only the second day of a fall in price. There is nothing to reverse, so it should be ignored. The long lower wick is still bullish though. As a Hanging Man pattern it would require bearish confirmation in the following candlestick, which did not come.

The Hanging Man at #14 though does come after a bullish move. But the bullishness of its long lower wick still requires bearish confirmation, which did not come. The following candlestick is quite the reverse; it is another bullish signal. As #15 comes within a small consolidation, it may be considered as a bullish signal.

Finally, the Piercing pattern at #16 comes after a long upwards trend, so it should be considered as a bearish signal.

Published @ 05:57 a.m. EST.

Trading With Gaps – A Case Study Using AAPL | 10th October, 2017

Following on from the last two education posts on gaps here is an example of practical trading application.

Google 2017
Click chart to enlarge.

This daily chart of AAPL data shows at least 11 gaps.

After a period of consolidation gap #1 appears. It breaks above an upper range from a consolidation, so it should be considered a breakaway gap. A position may be entered in the direction of the gap, with a stop just below the lower edge of the gap. Breakaway gaps should not be closed, so the lower edge should offer support if there is a new upwards trend.

After some upwards movement price curves down to test support, but the breakaway gap remains open and so should long positions.

Thereafter, another gap at #2 indicates another breakaway from the last consolidation. Stops may now be moved up to the lower edge of this gap.

Another gap at #3 may be initially expected to be a measuring gap, which would give a target at 119.28. If this is a measuring gap, it should not be closed for a long time and the lower edge should offer support; stops may again be pulled up to just below it. But this gap is closed three days later, which should trigger an exit from a long position opened after gap #1 and which should yield a reasonable profit.

Gap #4 may initially be expected to be another breakaway gap after another small consolidation. It may trigger another long entry, but the gap is closed six days later for a small loss.

Gap #5 is not a breakaway below support and should be considered a pattern gap. These are most often closed. This should not trigger any new position.

After several days of falling price, a trend line may be drawn across resistance. When the trend line is breached, a long position may be entered or traders may choose to wait for another gap. There is not another gap until a few weeks later at #6.

Gap #6 may be taken as another breakaway gap after a small consolidation. This may again signal an entry in the direction of the gap with a stop just below the lower edge. Four days later price curves down to test support and the gap remains open.

Another large gap opens at #7. Given the size of this gap the appropriate measure for the movement before it may be the last reasonable swing low on the 14th of November. This gap looks like a measuring gap. A target may be calculated from the base of the movement prior to the gap and added to the upper edge of the gap. This gives a target at 144.32.

Stops may again be moved up to just below the lower edge of the gap; it should provide support as measuring gaps should not be closed. Now some profit is protected on a long position with a target at 144.32.

Gap #8 opens up prior to the target being met. This should be expected to be another measuring gap until proven otherwise. Stops may again be moved up to just below the lower edge of the gap to protect more profit. The new target would be calculated from the last rise from the last gap and added to the upper edge of the gap, giving a new target at 148.02.

But this gap is closed six days later signalling it was an exhaustion gap and not a measuring gap. Positions would then be closed for a reasonable profit.

After some further consolidation in which trend lines may be used to find another entry, or traders may wait for another gap, the next gap opens up at #9 a few weeks later. Again, this comes after some consolidation, so it may be either a pattern gap (it may be considered within a consolidation) or it may be a breakaway gap. A position may be entered in the direction of the gap with a stop just below the lower edge. If it is a pattern gap, a small loss may be incurred. If it is a measuring gap a good entry point for the next upwards movement may be found.

Price curves down to test support at the upper edge of the gap two and three days later. The gap remains open and long positions remain open.

Another gap opens at #10. This may be another breakaway gap, but coming so soon after the last one it may also be a measuring gap. The move prior to it is small, so the target would be calculated from the move prior to the gap and added to the upper edge of the gap, giving a target at 146.08. This target is met the following day, so positions may be closed for a profit. Two days later the gap is closed indicating it is an exhaustion gap and not a measuring gap. No new positions should be entered as price may be entering a larger consolidation.

Another gap opens up at #11 on a strong upwards day. This may be another breakaway gap, so a new position in the direction of the gap may be opened with a stop just below the lower edge of the gap.

The last gap opens up at #12. This may be another measuring gap, so it should not be closed. Stops may be moved up to just below the lower edge of the gap, which would now protect some profit. A target calculated from the rise prior to the gap added to the upper edge of the gap gives a target at 159.69. This target is not met and the gap is closed three days later as the stop is hit yielding another profit.

Conclusion: Gaps can be useful for trading in markets where they appear regularly. Some patience is required in holding onto positions, which may be underwater for the first few days, but overall this approach may yield more profit than loss. Small losses are inevitable and risk must still be managed.

Published @ 05:32 a.m. EST.

SILVER Elliott Wave Technical Analysis – 5th October, 2017

More downwards movement was expected after last week’s analysis. Silver has made a new low, which fits expectations so far.

With this market in a large consolidation, volume analysis will be used to indicate the breakout direction.

Summary: Downwards movement has support from classic technical analysis. The target is at either 16.347 or as low as 15.799 – 15.649.

It is possible that a bounce may unfold about here for Silver, but the low does not look to be in place yet.

New updates to this analysis are in bold.

Last monthly chart is here.

ELLIOTT WAVE COUNTS

FIRST WAVE COUNT

WEEKLY CHART

Silver weekly 2017
Click chart to enlarge.

Cycle wave b may be completing as a double combination: zigzag – X – flat. The second structure, a flat correction for primary wave Y, may be underway.

Within a flat correction, intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) at 15.938. Intermediate wave (B) has met this minimum requirement; the rule for a flat correction is met. Intermediate wave (B) is longer than 1.05 times the length of intermediate wave (A) indicating this may be an expanded flat. Expanded flat corrections are the most common type. Normally their C waves are 1.618 or 2.618 the length of their A waves.

The target calculated would see primary wave Y to end close to same level as primary wave W about 21.062. The purpose of combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double normally ends about the same level as the first.

While the combination wave count at the weekly chart level does not currently work for Gold, it does still work for Silver. They do not have to complete the same structures for cycle wave b, and fairly often their structures are different.

DAILY CHART

Silver daily 2017
Click chart to enlarge.

For this first wave count, upwards movement for intermediate wave (C) must subdivide as a five wave structure. It may be unfolding as an impulse.

Within the impulse of intermediate wave (C), only minor wave 1 was over at the last high and now minor wave 2 may be unfolding. Minor wave 2 may not move beyond the start of minor wave 1 below 15.197.

The most likely point for minor wave 2 to end may be the 0.618 Fibonacci ratio of minor wave 1 at 16.347.

Minor wave 1 lasted 44 days. Minor wave 2 so far has lasted 19 days. It would be likely to continue further, so that it has better proportion to minor wave 1. A Fibonacci 21 or 34 days may be expected at this stage.

SECOND WAVE COUNT

WEEKLY CHART

Silver daily 2017
Click chart to enlarge.

It remains possible for Silver that a large regular contracting or regular barrier triangle may be completing.

Within a triangle, one of the sub-waves must be a more complicated multiple, usually a multiple zigzag. This may be complete for primary wave B.

Primary wave C upwards may now be complete. The upper A-C trend line does have a fairly steep slope though, so it must be accepted that primary wave C may not be over and may continue higher. If it does, it may not move beyond the end of primary wave A above 21.062.

Primary wave C must subdivide as a three wave zigzag.

DAILY CHART

Silver daily 2017
Click chart to enlarge.

Primary wave C now looks complete and primary wave D downwards looks to have begun for this wave count. Primary wave D downwards must subdivide as a zigzag, which subdivides 5-3-5.

Primary wave D of a contracting triangle may not move beyond the end of primary wave B below 15.197.

Primary wave D of a barrier triangle may end about the same level as primary wave B at 15.197; as long as the B-D trend line is essentially flat, the triangle will remain valid. Unfortunately, there is some subjectivity in this rule; it is not black and white.

Within primary wave D, intermediate wave (A) now looks like a complete impulse. Intermediate wave (B) may now bounce higher up to the 0.382 or 0.618 Fibonacci ratios of intermediate wave (A).

It would be extremely unlikely for this wave count that intermediate wave (B) is over already. It should last at least two weeks and quite likely longer, so that it has reasonable proportion to intermediate wave (A).

Intermediate wave (B) should break out above the channel that contained intermediate wave (A).

Intermediate wave (B) may not move beyond the start of intermediate wave (A) above 18.207.

TECHNICAL ANALYSIS

WEEKLY CHART

Silver Chart Weekly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Price is still within a large consolidation zone. Volume remains relatively strong. So far, within the consolidation, it is only now one downwards week that has strongest volume suggesting a downwards breakout eventually is more likely than upwards. However, the difference is very slight between this week and the next strongest week which was an upwards week, so the signal is not a clear one.

Support is some distance away. There is room for price to fall further here.

The bearishness of the long upper wick on the last completed weekly candlestick may now be resolved by this current week making a new low. How this current candlestick closes may offer a clue as to how next week may unfold.

DAILY CHART

Silver Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

At the daily chart level, during the most recent consolidation which began back in July, it is an upwards day of the 5th of September that has strongest volume suggesting an upwards breakout is more likely than downwards.

The volume profile is bearish for the very short term, but overall as price falls volume is declining. The low does not look to be in place yet, but it may be near.

For the short term, On Balance Volume is also bearish.

Published @ 10:52 p.m. EST.

[Note: Analysis is public today for promotional purposes. Specific trading advice and comments will remain private for members only.]

Continue reading SILVER Elliott Wave Technical Analysis – 5th October, 2017

GOLD Elliott Wave Technical Analysis – 4th October, 2017

All three hourly Elliott wave charts published yesterday expected at least some upwards movement. So far that is what has happened. Classic analysis will be used today to judge which of the three scenarios looks most likely.

Summary: Assume the trend remains down while price remains below 1,289.67.

A new high above 1,289.67 (the high for 2nd of October) by any amount at any time frame would indicate more upwards movement. At that stage, use the target at 1,330 – 1,334 in the first instance.

If upwards movement shows reasonable strength with support from volume, then it may go as high as 1,420, but that would require a new high above 1,357.09 for reasonable confidence.

Always trade with stops and invest only 1-5% of equity on any one trade.

New updates to this analysis are in bold.

Last monthly charts for the main wave count are here, another monthly alternate is here, and video is here.

Grand SuperCycle analysis is here.

The wave counts will be labelled first and second. Classic technical analysis will be used to determine which wave count looks to be more likely.

FIRST ELLIOTT WAVE COUNT

WEEKLY CHART

Gold Elliott Wave Chart Weekly I 2017
Click chart to enlarge.

There are more than 23 possible corrective structures that B waves may take, and although cycle wave b still fits well at this stage as a triangle, it may still be another structure. This wave count looks at the possibility that it may be a double zigzag.

If cycle wave b is a double zigzag, then current upwards movement may be part of the second zigzag in the double, labelled primary wave Y.

The target remains the same.

Within intermediate wave (C), no second wave correction may move beyond the start of its first wave below 1,205.41. However, prior to invalidation, this wave count may be discarded if price breaks below the lower edge of the black Elliott channel. If this wave count is correct, then intermediate wave (C) should not break below the Elliott channel which contains the zigzag of primary wave Y upwards.

There are two problems with this wave count which reduce its probability in terms of Elliott wave:

1. Cycle wave b is a double zigzag, but primary wave X within the double is deep and time consuming. While this is possible, it is much more common for X waves within double zigzags to be brief and shallow.

2. Intermediate wave (B) within the zigzag of primary wave Y is a double flat correction. These are extremely rare, even rarer than running flats. The rarity of this structure must further reduce the probability of this wave count.

DAILY CHART

Gold Elliott Wave Chart Daily 2017
Click chart to enlarge.

The analysis will focus on the structure of intermediate wave (C). To see details of all the bull movement for this year see daily charts here.

Intermediate wave (C) must be a five wave structure, either an impulse or an ending diagonal. It is unfolding as the more common impulse.

It is possible that minor wave 1 may have been over at the last high and the current pullback may be minor wave 2. Minor wave 2 may not move beyond the start of minor wave 1 below 1,205.41.

Minor wave 2 may not be over and may continue lower to reach a more normal depth of about 0.618 the length of minor wave 1, about 1,261. This would also see minor wave 2 have a better proportion to minor wave 1 in terms of duration; minor wave 1 lasted 44 days and so far minor wave 2 has lasted only 18 days. If it continues now for another 3 days, it may total a Fibonacci 21.

HOURLY CHART

Gold Elliott Wave Chart Hourly 2017
Click chart to enlarge.

BarChart have fixed the problem with their data for current data, but the problem of past data for the sessions from 28th September to 2nd of October is not fixed. As members can see, the data for the whole of minuette wave (b) is still wrong. This was probably some kind of combination; I will analyse that when the data is fixed. At this time, it will make no difference at all to the analysis because it is clear that minuette wave (b) is over no matter what structure it was.

I have checked the subdivisions within minuette wave (c) on PMBull data and this will subdivide neatly into a five wave structure at the hourly chart level.

If minuette wave (c) is not complete, then only subminuette waves i and now ii within it may be over. Subminuette wave ii may be a zigzag that may have ended very close to the 0.618 Fibonacci ratio of subminuette wave i.

However, to see subminuette wave ii as a completed three wave zigzag results in the subdivisions not having as neat a fit as when we see this upwards movement as a five wave structure. Either my labelling here of subminuette wave ii as complete is wrong and it may move higher, or either of the alternate below or the second hourly Elliott wave chart below is right.

This hourly wave count now expects another wave down with some increase in momentum for subminuette wave iii.

If the target for this hourly wave count is wrong, it may not be low enough.

If it continues further, then subminuette wave ii may not move beyond the start of subminuette wave i above 1,289.67.

Price remains so far within the best fit channel, copied over from the daily chart. While price remains within that channel, then no confidence in the idea of a low in place for Gold may be had.

ALTERNATE HOURLY CHART

Gold Elliott Wave Chart Hourly 2017
Click chart to enlarge.

It is possible to see that minor wave 2 could be over by simply moving the degree of labelling within minuette wave (c) all up one degree.

This wave count requires a new high above the high for the 2nd of October (which for BarChart data was at 1,289.67) before any confidence may be had in it.

The trend remains the same until proven otherwise. Assume the trend is down until price proves it is not.

If the next wave up is the start of a third wave at minor degree, then it should have support from volume. Upwards movement does have some support from volume today, but the weak candlestick is problematic for this wave count.

SECOND ELLIOTT WAVE COUNT

WEEKLY CHART

Gold Elliott Wave Chart Weekly I 2017
Click chart to enlarge.

It is still possible that cycle wave b is unfolding as a regular contracting triangle.

Within a triangle, one sub-wave should be a more complicated multiple, which may be primary wave C. This is the most common sub-wave of the triangle to subdivide into a multiple.

Intermediate wave (Y) now looks like a complete zigzag at the weekly chart level.

Primary wave D of a contracting triangle may not move beyond the end of primary wave B below 1,123.08. Contracting triangles are the most common variety.

Primary wave D of a barrier triangle should end about the same level as primary wave B at 1,123.08, so that the B-D trend line remains essentially flat. This involves some subjectivity; price may move slightly below 1,123.08 and the triangle wave count may remain valid. This is the only Elliott wave rule which is not black and white.

Finally, primary wave E of a contracting or barrier triangle may not move beyond the end of primary wave C above 1,295.65. Primary wave E would most likely fall short of the A-C trend line. But if it does not end there, then it can slightly overshoot that trend line.

Primary wave A lasted 31 weeks, primary wave B lasted 23 weeks, and primary wave C lasted 38 weeks.

The A-C trend line now has too weak a slope. At this stage, this is now a problem for this wave count, the upper A-C trend line no longer has such a typical look.

Within primary wave D, no part of the zigzag may move beyond its start above 1,357.09.

DAILY CHART

Gold Elliott Wave Chart Daily 2017
Click chart to enlarge.

This second wave count expects the new wave down may be deeper and longer lasting than the first wave count allows for.

A common length for triangle sub-waves is from 0.8 to 0.85 the length of the prior wave. Primary wave D would reach this range from 1,170 to 1,158.

If primary wave C is correctly labelled as a double zigzag, then primary wave D must be a single zigzag.

Within the single zigzag of primary wave D, intermediate wave (A) is labelled as an incomplete impulse.

Within intermediate wave (A), minor wave 1 will fit as a five wave impulse. While it is possible that minor wave 2 could have been over at the high for the 25th of September, it would be remarkably brief and shallow; the proportions between minor waves 1 and 2 would be very poor.

It is still more likely that minor wave 2 is continuing further as an expanded flat correction. Expanded flats are very common structures. The most common length for their B waves is from 1 to 1.38 times the length of their A waves. Here, minute wave b is now a 1.80 length to minute wave a. This is longer than the most common length but still within allowable limits of up to 2 times the length of minute wave a.

If price continues lower to 1,263 or below, then minute wave b would reach 2 times the length of minute wave a. At that stage, the idea of an expanded flat correction would be discarded based upon a very low probability.

The structure of minute wave b now looks to be complete at the hourly chart level. Here, on the daily chart, it looks like a three wave structure. So far this idea of an expanded flat currently unfolding still has a very good look.

HOURLY CHART

Gold Elliott Wave Chart Daily 2017
Click chart to enlarge.

If price makes a new high above 1,289.67, then both the alternate hourly chart for the first wave count and this hourly chart for the second wave count will be possible. This wave count expects that upwards movement may be more brief: only minute wave c to end minor wave 2 of an expanded flat.

Expanded flats are very common structures. They can be identified as viable possibilities by looking for weakness within their B waves. Here, minute wave b shows a strong decline in volume and a decline in ATR. This offers some support to this wave count. However, there is no divergence with Stochastics at recent lows to indicate weakness, which is often a feature of B waves within expanded flats (often is not the same as always).

Because minute wave b is longer than 1.618 the length of minute wave a, the appropriate target for minute wave c is calculated using the 2.618 Fibonacci ratio. Minute wave c would be extremely likely to make at least a slight new high above the end of minute wave a at 1,292.62 to avoid a truncation and a very rare running flat correction.

Minor wave 2 may not move beyond the start of minor wave 1 above 1,357.09. This is the price point now which differentiates this second Elliott wave count from the first Elliott wave count.

Minute wave c must subdivide as a five wave structure. It would most likely be an impulse, but the less common ending diagonal should be considered if upwards movement is overlapping.

Upwards movement to the high labelled minuette wave (i) for this session will fit as a leading expanding diagonal. Second wave corrections following first wave leading diagonals are usually very deep. For this reason I would expect it to be most likely to see minuette wave (ii) move lower.

Minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,268.42.

TECHNICAL ANALYSIS

WEEKLY CHART

Gold Weekly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Support of the Elliott wave counts which expect overall more downwards movement this week comes from an increase in volume last week for downwards movement, a bearish upper candlestick wick, and a weak bearish signal now from On Balance Volume.

These signals cannot tell us how far price may fall though. Support and resistance may be used as a guide for this. Next strong support for price is about 1,225.

DAILY CHART

Gold Daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Price has reacted from resistance about 1,285. The long upper wick on today’s candlestick is bearish. This supports the second Elliott wave count which sees a bounce within a downwards trend and not a trend change at the low.

Upwards movement has support today from volume, so more upwards movement for at least another day may be expected.

On Balance Volume may assist here to show when upwards movement may end at resistance.

The lack of divergence between price and Stochastics at the last low, and RSI not yet oversold, suggests that there is more downside still.

It is my judgement that this classic analysis best supports the second Elliott wave count today.

GDX

DAILY CHART

GDX Daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Upwards movement for GDX at this stage looks very much like a small bounce within a larger downwards trend. If resistance at 23.45 gives way, then look for next resistance about 23.85. However, light volume with a small green doji today looks like the bounce may be done here.

The one strong note of caution to the above statement is a bullish signal today from On Balance Volume. The purple trend line was strong, but has recently been weakened with a move below it. Now it may rise further given that On Balance Volume is above this line again.

Like Gold, GDX did not exhibit any divergence with Stochastics at the last low nor did RSI reach oversold. There is room for price to move lower.

Published @ 10:17 p.m. EST.

[Note: Analysis is public today for promotional purposes. Specific trading advice and comments will remain private for members only.]

Continue reading GOLD Elliott Wave Technical Analysis – 4th October, 2017

4 Different Types of Gaps | 4th October, 2017

Not all gaps have to be closed. So how can we know which gaps are going to be filled and which ones aren’t? The answer lies in what type of gap the gap may be.

Google 2017
Click chart to enlarge.

The above chart of Google shows daily data.

Equities more commonly have gaps and session only data of indices often does too. Forex rarely has gaps because forex markets are open 24 hours.

The four different types of gaps are:

1. PATTERN GAPS

These gaps are the ones which are almost always closed. Only the very last gap within a consolidation may not be closed.

These gaps suggest a congestion area is forming. They are not useful in trading.

2. BREAKAWAY GAPS

These are the most profitable gaps. After a period of sideways movement draw trend lines to determine support and resistance for the consolidation. A breakout above or below the zone accompanied by a gap signals the end of consolidation and the return of a trend.

Breakaway gaps are rarely closed within any reasonable time frame. They may be used as areas of support or resistance to set stops.

If the gap is filled reasonably quickly, then it is unlikely to be a breakaway gap.

3. MEASURING GAPS

These are gaps that occur within a clear trend. Assume such a gap is a measuring gap until proven otherwise. Proven otherwise means until the gap is closed.

Measuring gaps are not closed within any reasonable time frame. They may be used as areas of support or resistance, and to place stops. They may also be used to set targets. They often occur about mid way within a price run, so calculate the distance of the pole prior to the gap and add that to the end of the gap to give a target.

4. EXHAUSTION GAPS

These gaps are closed within a relatively short time frame. As soon as the gap is closed, it indicates an end to the price run and the start of either a trend change or a period of consolidation.

Exhaustion gaps are filled within a few candlesticks.

Published @ 04:53 p.m. EST.

All Gaps Have to be Closed – Myth or Fact? | 3rd October 2017

The answer to the question is in the charts. If gaps can be seen, which were not filled, then not all gaps must be filled.

SPX 2017
Click chart to enlarge.

Some markets have more gaps than other markets. Gold is a global market and rarely has gaps at the daily chart level, but it may have gaps occasionally at the hourly chart level and below.

The S&P500 is a good example of a market with gaps.

There are two examples of gaps not filled in the daily chart above for the S&P500, from price movement during February of 2017. To this day, 8 months later, these gaps remain unfilled.

Published @ 05:10 p.m. EST.

GOLD Elliott Wave Technical Analysis – 26th September, 2017

Yesterday’s strong upwards movement has been reversed. A new low below 1,296.23 indicated the alternate hourly Elliott wave count should be used.

Summary: The bigger picture reverts to seeing a pullback continue here to about 1,261. It may be as low as 1,170 – 1,158.

However, the very short term picture today is unclear. Although today reversed yesterday’s gains, volume does not support today’s downwards fall in price. It is suspicious.

It is possible that an expanded flat may be unfolding. For the short term, a sideways consolidation may be incomplete.

Watch On Balance Volume carefully for a signal. It will come within a very few days.

Always trade with stops and invest only 1-5% of equity on any one trade.

New updates to this analysis are in bold.

Last monthly charts for the main wave count are here, another monthly alternate is here, and video is here.

Grand SuperCycle analysis is here.

The wave counts will be labelled first and second. Classic technical analysis will be used to determine which wave count looks to be more likely.

FIRST ELLIOTT WAVE COUNT

WEEKLY CHART

Gold Elliott Wave Chart Weekly I 2017
Click chart to enlarge.

There are more than 23 possible corrective structures that B waves may take, and although cycle wave b still fits well at this stage as a triangle, it may still be another structure. This wave count looks at the possibility that it may be a double zigzag.

If cycle wave b is a double zigzag, then current upwards movement may be part of the second zigzag in the double, labelled primary wave Y.

The target remains the same.

Within intermediate wave (C), no second wave correction may move beyond the start of its first wave below 1,205.41. However, prior to invalidation, this wave count may be discarded if price breaks below the lower edge of the black Elliott channel. If this wave count is correct, then intermediate wave (C) should not break below the Elliott channel which contains the zigzag of primary wave Y upwards.

There are two problems with this wave count which reduce its probability in terms of Elliott wave:

1. Cycle wave b is a double zigzag, but primary wave X within the double is deep and time consuming. While this is possible, it is much more common for X waves within double zigzags to be brief and shallow.

2. Intermediate wave (B) within the zigzag of primary wave Y is a double flat correction. These are extremely rare, even rarer than running flats. The rarity of this structure must further reduce the probability of this wave count.

DAILY CHART

Gold Elliott Wave Chart Daily 2017
Click chart to enlarge.

The analysis will focus on the structure of intermediate wave (C). To see details of all the bull movement for this year see daily charts here.

Intermediate wave (C) must be a five wave structure, either an impulse or an ending diagonal. It is unfolding as the more common impulse.

It is possible that minor wave 1 may have been over at the last high and the current pullback may be minor wave 2. Minor wave 2 may not move beyond the start of minor wave 1 below 1,205.41.

The strong reversal today indicates that minor wave 2 is most likely not over and may continue lower to reach a more normal depth of about 0.618 the length of minor wave 1, about 1,261. This would also see minor wave 2 have a better proportion to minor wave 1 in terms of duration; minor wave 1 lasted 44 days and so far minor wave 2 has lasted only 12 days. If it continues now for another 9 days, it may total a Fibonacci 21.

HOURLY CHART

Gold Elliott Wave Chart Hourly 2017
Click chart to enlarge.


This wave count would expect minor wave 2 to now continue for another 9 days, if it exhibits a Fibonacci duration of a total 21 days.

When the first zigzag in a correction has not moved price deep enough, then a second zigzag should be considered. Here, the first zigzag of minute wave w is only a 0.45 length of minor wave 1. Second wave corrections are usually deeper than this.

X waves within double zigzags are commonly brief and shallow. Minute wave x fits this definition here.

If this correction for minor wave 2 is correctly identified as a double zigzag, then minute wave y must subdivide 5-3-5. Within the zigzag of minute wave y, minuette wave (b) may not move beyond the start of minuette wave (a) above 1,313.39. Minuette wave (b) should find very strong resistance about the upper edge of the best fit channel if it gets that high.

Along the way down, to the target at 1,261, there should be another bounce to last one to three days for minuette wave (b). Price is not expected to move in a straight line. It almost never does.

Minuette wave (a) looks to be incomplete.

Note: The labelling on the alternate chart for this downwards movement works in the same way for this main wave count. Minor wave 2 may also be a single zigzag. The low of the 21st of September may be minute wave a. Minute wave b may be continuing sideways as an expanded flat or double zigzag.

This means that the expectation of continuing downwards movement here cannot be relied upon. The lack of support today from volume indicates it may be a B wave.

SECOND ELLIOTT WAVE COUNT

WEEKLY CHART

Gold Elliott Wave Chart Weekly I 2017
Click chart to enlarge.

It is still possible that cycle wave b is unfolding as a regular contracting triangle.

Within a triangle, one sub-wave should be a more complicated multiple, which may be primary wave C. This is the most common sub-wave of the triangle to subdivide into a multiple.

Intermediate wave (Y) now looks like a complete zigzag at the weekly chart level.

Primary wave D of a contracting triangle may not move beyond the end of primary wave B below 1,123.08. Contracting triangles are the most common variety.

Primary wave D of a barrier triangle should end about the same level as primary wave B at 1,123.08, so that the B-D trend line remains essentially flat. This involves some subjectivity; price may move slightly below 1,123.08 and the triangle wave count may remain valid. This is the only Elliott wave rule which is not black and white.

Finally, primary wave E of a contracting or barrier triangle may not move beyond the end of primary wave C above 1,295.65. Primary wave E would most likely fall short of the A-C trend line. But if it does not end there, then it can slightly overshoot that trend line.

Primary wave A lasted 31 weeks, primary wave B lasted 23 weeks, and primary wave C lasted 38 weeks.

The A-C trend line now has too weak a slope. At this stage, this is now a problem for this wave count, the upper A-C trend line no longer has such a typical look.

DAILY CHART

Gold Elliott Wave Chart Daily 2017
Click chart to enlarge.

This second wave count expects the new wave down may be deeper and longer lasting than the first wave count allows for.

The blue base channel on this second wave count is drawn in exactly the same way as the pink Elliott channel on the first daily chart. For this second wave count the middle of minor wave 3 should have the power to break below support at the lower edge of the base channel. If price does behave like this, it would offer support for this second wave count over the first wave count.

A common length for triangle sub-waves is from 0.8 to 0.85 the length of the prior wave. Primary wave D would reach this range from 1,170 to 1,158.

If primary wave C is correctly labelled as a double zigzag, then primary wave D must be a single zigzag.

HOURLY CHART

Gold Elliott Wave Hourly 2017
Click chart to enlarge.

This wave count now sees the last wave down differently to the first wave count. This wave count sees a possible five down complete. Subdivisions within it are labelled at the daily chart level.

If the trend is down, then a five down labelled minor wave 1 may be complete. Now a bounce may be unfolding as a three wave structure for minor wave 2.

Minor wave 2 would be too brief and shallow, for this wave count, if it was over at yesterday’s high. That may be only minute wave w of a double zigzag for minor wave 2.

The target for this bounce to end is about 1,330.

While minor wave 2 may be a double zigzag labelled w-x-y, it may also be a flat correction labelled a-b-c. The most common type of flat is an expanded flat where minute wave b would be 1.05 times the length of minute wave a or longer. A new low does not mean that minor wave 2 is over; it would at this stage still most likely be part of minor wave 2.

Expanded flats are very common structures. They can often be identified by weakness within their B waves.

TECHNICAL ANALYSIS

WEEKLY CHART

Gold Weekly 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Weak support here from On Balance Volume may halt the fall in price or initiate a small bounce. If On Balance Volume breaks below the support line thisweek, that would be a weak bullish signal.

Overall, this chart remains mostly bullish. At this stage, with downwards movement not being well supported by volume, it should be assumed to be a pullback within a larger trend until shown otherwise.

DAILY CHART

Gold Daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

Trend lines on On Balance Volume are adjusted today. On Balance Volume should be watched very carefully over the next few days. It must break out of these converging trend lines and when it does that shall offer a weak signal. The signal can only be weak because each line has only been tested twice before and neither are very long held.

A lack of support from volume for downwards movement during Tuesday’s session suggests weakness in downwards movement. This supports the alternate hourly wave count slightly; this is how B waves look.

Long lower wicks on the last two daily candlesticks are bullish. Volume short term is bullish. Stochastics is slightly bullish.

On Balance Volume is neutral. ADX is neutral. RSI is neutral.

ATR is bearish.

Overall, this chart is very mixed. It would be wisest to wait for a signal from On Balance Volume to have more confidence in the next direction for price here.

GDX

DAILY CHART

GDX Daily 2016
Click chart to enlarge. Chart courtesy of StockCharts.com.

GDX also lacks support from volume today for downwards movement. Short term volume for both markets is slightly bullish.

Both have trend lines on On Balance Volume, which are converging quickly, so a breakout will come soon. It would be wisest also to wait for an On Balance Volume signal for GDX to have confidence in the next direction for price.

Published @ 06:35 p.m. EST.

[Note: Analysis is public today for promotional purposes. Specific trading advice and comments will remain private for members only.]

Continue reading GOLD Elliott Wave Technical Analysis – 26th September, 2017

Best Fit Channels | 26th September, 2017

If an Elliott channel does not fit a movement, then a best fit channel has to be drawn. The best fit is a channel which contains most or all movement within a trend and is tested the greatest number of times.

Example:

Gold 2017
Click chart to enlarge.

A channel drawn about this impulse using either of Elliott’s techniques does not contain all movement. Therefore, when compared to a best fit channel, Elliott’s channel drawn this way may not be as reliable in indicating when the movement has been over and there may have been a trend change.

Gold 2017
Click chart to enlarge.

Redrawing the channel as a best fit now contains all the impulse. Therefore, for this impulse on this chart, this best fit channel should be a more reliable and more conservative indicator of a trend change.

Published @ 04:36 a.m. EST.

2 Early Channel Techniques | 21st September, 2017

Channels drawn using Elliott’s techniques, outlined here, cannot be drawn until a reasonable amount of a wave has completed. There are two techniques to draw a channel about a new movement earlier.

1. BASE CHANNELS

Gold 2017
Click chart to enlarge.

This is the earliest channel that can be drawn about a new movement. This channel was drawn at the end of minor wave 2.

Base channels have two main purposes:

1. As the wave progresses the edge which is opposite to the main direction of movement should provide support or resistance. Here, the wave is down and the upper edge should provide resistance to bounces along the way down. It is the opposite for a bull wave; the lower edge should provide support for pullbacks along the way up.

A sloping trend line offering support or resistance can be used to place trailing stops.

2. A third wave may be identified or confirmed if it has the power to break through the base channel in the direction of the trend. A third wave should have the power to break above resistance at the upper edge of a base channel for a bull wave. Here, minor wave 3 should have the power to break below support at the lower edge of the base channel.

2. ACCELERATION CHANNELS

Gold 2017
Click chart to enlarge.

Later on in the development of a wave the base channel may be redrawn as an acceleration channel. This may be done after a third wave shows enough power to break out of the base channel in the direction of the trend, or it may be done earlier.

Acceleration channels are redrawn each time price makes a new extreme in the direction of the trend.

When a third wave is complete, then this channel is an Elliott channel (drawn using the first technique).

Acceleration channels have one main purpose:

1. To show where corrections within the trend find support or resistance, on the side opposite to the trend.

The side opposite to the trend may be used to place a trailing stop when trading the trend.

Published @ 06:22 a.m. EST.

US OIL Elliott Wave Technical Analysis – 13th September, 2017

Downwards movement was expected. Over the last week price has made a lower low and a lower high, but the weekly candlestick so far is green with continued deep bounces.

Summary: The bigger picture for Oil remains bearish. Each time price comes up to touch, or gets very close to the maroon trend line, it should react downwards from there.

The target remains at 34.34. The invalidation point is moved down now to 49.42. A strong increase in downwards momentum is still expected.

New updates to this analysis are in bold.

MONTHLY ELLIOTT WAVE COUNT

US Oil Elliott Wave Chart Monthly 2017
Click chart to enlarge.

Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.

Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.

There is alternation in depth with primary wave 2 very deep and primary wave 4 shallow. There is inadequate alternation in structure, both are of the zigzag family, but there is some alternation within structure. Primary wave 2 is a single zigzag and the triangle for intermediate wave (B) gives it a sideways look. Primary wave 4 is a sharper and quicker double zigzag.

If it continues, then primary wave 4 may not move into primary wave 1 price territory above 74.96.

WEEKLY ELLIOTT WAVE COUNT

US Oil Elliott Wave Chart Daily 2017
Click chart to enlarge.

The wave count sees primary wave 5 beginning with a leading diagonal for intermediate wave (1), and now a deep expanded flat for intermediate wave (2). This has good proportion, and fits at the daily chart level.

Intermediate wave (3) may have now begun. It may only subdivide as an impulse. Within intermediate wave (3), minor waves 1 and 2 may be complete.

Price continues to find resistance just below the upper edge of the maroon channel, which is copied over from the monthly chart. Assume this wave count shall have the right look while price remains below that trend line. Only would an alternate be considered if that trend line is breached.

Within minor wave 3, no second wave correction may move beyond the start of its first wave above 50.43.

DAILY ELLIOTT WAVE COUNT

US Oil Elliott Wave Chart Daily 2017
Click chart to enlarge.

It looks like price is continuing to find very strong resistance at the upper maroon trend line, which is copied over from monthly and weekly charts.

Minor wave 3 is starting out slowly. Oil does seem to have a tendency to begin its impulses slowly, accelerate towards the middle, and end with very strong fifth waves. This tendency is typical of commodities. A good example may be seen on the monthly chart with the slow start to cycle wave c: primary wave 1 was very short, primary wave 2 was deep and time consuming, and primary wave 3 began with another short wave for intermediate wave (1) and another deep correction for intermediate wave (2).

When this third wave gets going, it should then exhibit a strong increase in downwards momentum.

The target for minor wave 3 remains the same.

Subminuette wave ii may not move beyond the start of subminuette wave i above 49.42. If it does continue higher, then expect it to find very strong resistance at the upper maroon trend line. That line should not be breached if this wave count is correct.

TECHNICAL ANALYSIS

DAILY CHART

US Oil Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Recent days’ strongest volume is for downwards movement through the months of May to August. This strongly suggests that the larger trend is still down and upwards movement is still a counter trend movement. So far this year Oil has made a series of lower lows and lower highs, the definition of a downwards trend, although the bounces have been deep and time consuming.

For the shorter term, Oil entered a smaller consolidation range about the 25th of July. Resistance is about 50.40 and support is about 46.45 to 45.60. During this consolidation, it is the downwards day of the 10th of August that has clearly stronger volume suggesting a downwards breakout from this smaller consolidation.

ADX, ATR and Bollinger Bands all indicate that price is consolidating.

With Stochastics just returning now from oversold and price close to resistance, expect a downwards swing for the short term.

VOLATILITY INDEX

OVX Chart Daily 2017
Click chart to enlarge. Chart courtesy of StockCharts.com.

Normally, volatility should decline as price rises and volatility should increase as price falls. Divergence from this normal can provide a bullish or bearish signal for Oil. However, it is noted that this signal occurs both in minor and major lows and it cannot be used to distinguish between them.

No new short term divergence is noted between price and volatility. It is noted that the correlation co-efficient indicates that currently these markets are not inversely correlated.

TRADING ADVICE

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MONTHLY ELLIOTT WAVE COUNT – JULY 2014

US Oil Elliott Wave Chart Monthly 2014
Click chart to enlarge.

This is from the 2014 archives.

I have had for a long time a bearish outlook for US Oil. Back in 2014 I even received some disparaging comments about it, but that’s okay because the record shows that so far the bigger picture was right.

I did struggle for some time with cycle wave b: how to label it, where it ended, and what would be the subsequent structure after it. But this came right some time later and now I am more comfortable with how this movement is currently labelled.

On the post for July 2014, the weekly chart target for the mid term was 74.53.

Published @ 03:52 a.m. EST.

[Note: Analysis is public today for promotional purposes. Specific trading advice and comments will remain private for members only.]

Continue reading US OIL Elliott Wave Technical Analysis – 13th September, 2017