Yesterday’s analysis expected downwards movement.
Price continued lower, which is what the wave count expected while price remained within the channel.
Price has moved a little lower after a channel breach of the hourly chart. The long term Elliott wave targets remain the same.
A small inside day has not clarified which Elliott wave count is correct.
A small correction followed by more upwards movement is exactly what was expected.
Summary: If price remains above 1,255.66 and makes a new high above 1,266.27, then it would be most likely that a third wave up is underway towards 1,327. Alternatively, a new low below 1,255.56 would indicate that a second wave correction is deepening towards 1,243.50. The trend for Gold remains up with a fifth wave up underway. Although the hourly wave counts are labelled “main” and “alternate” they have an even probability; price will tell us which one is correct within the next 24 hours.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
Gold has very likely changed from bear to bull.
So far, within the first five up, the middle of the third wave is now most likely complete. The strongest move may still be ahead. Gold often exhibits swift strong fifth waves typical of commodities.
Ratios within minor wave 3 are: there is no Fibonacci ratio between minute waves iii and i, and minute wave v is just 0.07 short of 1.618 the length of minute wave i.
There is perfect alternation between the deep double zigzag of minor wave 2 and the very shallow 0.23 expanded flat correction of minor wave 4.
Minor wave 4 is within the price territory of one lesser degree. Minute wave iv has its range from 1,261.94 to 1,190.9.
Upwards movement has confirmed that the last wave down within minor wave 4 is complete. The probability that minor wave 4 in its entirety is complete is high. Within minor wave 5, no second wave correction may move beyond the start of its first wave below 1,225.95.
Minor wave 1 lasted one day. Minor wave 2 lasted nine days (one longer than a Fibonacci eight). Minor wave 3 lasted fifty four days (one short of a Fibonacci fifty five). Minor wave 4 lasted seven days (one short of a Fibonacci eight).
At this stage, minor wave 5 may be expected to last either a Fibonacci five or eight days. It may be swift and strong but not necessarily extended. It is very likely to end with a strong upwards day on a volume spike.
MAIN HOURLY ELLIOTT WAVE COUNT
There is now a clear five up on the hourly chart. This provides further confidence that minor wave 4 is most likely over.
Ratios within minute wave i are: there is no Fibonacci ratio between minuette waves (i) and (iii), and there is no Fibonacci ratio between minuette wave (v) and either of (i) or (iii).
Minor wave 5 must subdivide as a five wave structure, either an impulse or an ending diagonal.
If minor wave 5 is unfolding as an impulse, then within it minute wave i is complete. The question today is whether or not minute wave ii is complete.
Minute wave ii may be complete as a relatively quick shallow zigzag ending just short of the 0.382 Fibonacci ratio. It shows on the daily chart as a small green doji. This is possible if minor wave 5 is not going to be a long extension like minor wave 3. As price fell for minute wave ii, it comes on declining volume at the hourly chart level. This fall in price is not supported by volume. This looks like a correction and not a new trend.
The middle of the third wave of minuette wave (iii) has strongest volume. Minuette wave (iii) has strongest momentum within minute wave i. This wave count fits the volume profile and fits with MACD.
At 1,327 minute wave iii would reach 1.618 the length of minute wave i.
At 1,338 minor wave 5 would reach 2.618 the length of minor wave 1.
Within minute wave iii, no second wave correction may move beyond its start below 1,255.66.
A new high above 1,266.27 would add confidence to this hourly wave count as at that stage the alternate below would reduce in probability.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Although this is labelled an alternate hourly wave count, it is my judgement that it has an even probability with the main hourly wave count. We need to let price tell us which one is correct.
Minute wave ii may be incomplete. It would most likely continue lower as a double zigzag.
Within a double zigzag, the purpose of the second zigzag is to deepen a correction when the first zigzag does not move price deep enough. To achieve this purpose X waves within double zigzags are normally shallow and often also quick.
For minuette wave (x) to be shallow it would be unlikely to move above the start of subminuette wave c within minuette wave (w) at 1,266.27. A new high above 1,266.27 would reduce the probability of this wave count in favour of the main hourly wave count.
A new low below 1,255.66 would invalidate the main hourly wave count in favour of this alternate. At that stage, expect it is most likely that minute wave ii is continuing lower as a double zigzag. The most likely target for it to end is the 0.618 Fibonacci ratio of minute wave i at 1,243.50.
The green channel is drawn using Elliott’s first technique about minute wave i. Minute wave ii should be expected to be very likely to break out of this channel.
Minute wave ii may not move below the start of minute wave i at 1,225.95.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Thursday’s small red candlestick with a long upper shadow is more bearish than bullish. The small real body and small range for Thursday indicate indecision, a balance between bulls and bears with the bears winning. A slight increase in volume for this small downwards day is not of great concern, but it is of very slight concern. It indicates that a little more downwards movement may be likely as there is some support for the fall in price from volume. This favours the alternate hourly Elliott wave count.
Price has not yet broken out of a trading range between about 1,280 and 1,225 delineated by pink trend lines. We need to see a breakout above or below this range to have confidence that the next wave up or down is underway.
During this consolidation, which began back on 7th March, it is still an upwards day which has strongest volume. This indicates an upwards breakout is more likely than downwards, and this supports the Elliott wave count.
ADX is flat to slightly declining, indicating the market is not yet trending; it is still consolidating. A range bound trading approach is indicated or stepping aside and waiting for a breakout.
Price recently found support and is moving up. A range bound approach would expect upwards movement to overall continue and to not end until price finds resistance and Stochastics is overbought at the same time.
ATR over the last few days has begun to level off. It is now indicating that the market is not trending; it is consolidating. Both ADX and ATR are lagging indicators as they are both based on 14 day averages.
On Balance Volume may be useful in conjunction with volume bars to indicate the next direction for price. A break below the orange line would be bearish. A break above the green line would be bullish. OBV has come down again to find support at the orange line. If this line holds and OBV turns upwards for the next day, then the strength of that line will be reinforced, and this would be a reasonable bullish signal.
This analysis is published @ 07:48 p.m. EST.
[Note: Analysis is public today for promotional purposes. Member comments and discussion will remain private.]
Last analysis expected a correction should continue.
Although price breached a short term upper invalidation point the red candlestick with a long upper shadow fits a correction.
Downwards movement on lighter volume fits the profile of a continuing correction for Gold.
Upwards movement was expected.
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.
Upwards movement invalidated the bear Elliott wave count and confirmed the bull. With some adjustment, the bear Elliott wave count is still valid and will only be discarded when the channel containing this bear market is breached. The bear wave count will remain possible while price remains within that channel, but today it has a greatly reduced probability.
A small red doji candlestick fits both Elliott wave counts nicely, for the short term.
Yesterday’s analysis expected a little more downwards movement to 1,116 for both Elliott wave counts, but this is not what happened. Price moved higher.
Upwards movement was expected for both the bull and main bear Elliott wave counts.