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Downwards movement breached the invalidation point on the hourly Elliott wave chart, and has now breached the aqua blue trend line on the daily Elliott wave chart slightly. Neither of these situations was what was expected.

Summary: This second wave correction is moving lower. The target for it to end is at 1,199 and the invalidation point is at 1,186.29. It should be over within a few hours, and should be followed by a sharp upwards thrust to new highs. If it continues for long enough to take it into a fifth day then the probability of the new alternate wave count will substantially increase. That expects quite a lot more downwards movement to below 1,172 most likely, before a third wave up starts. Overall the mid / long term target at 1,283.27 remains the same for both wave counts.

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Gold Elliott Wave Chart Daily 2014

Primary wave 4 is complete and primary wave 5 is unfolding. Primary wave 5 may only subdivide as an impulse or an ending diagonal. So far it looks most likely to be an impulse.

Within primary wave 5 intermediate wave (1) fits perfectly as an impulse. There is perfect alternation within intermediate wave (1): minor wave 2 is a deep zigzag lasting a Fibonacci five days and minor wave 4 is a shallow triangle lasting a Fibonacci eight days, 1.618 the duration of minor wave 2. Minor wave 3 is 9.65 longer than 1.618 the length of minor wave 1, and minor wave 5 is just 0.51 short of 0.618 the length of minor wave 1. I am confident this movement is one complete impulse.

Intermediate wave (2) is an incomplete expanded flat correction. Within it minor wave A is a double zigzag. The downwards wave labelled minor wave B has a corrective count of seven and subdivides perfectly as a zigzag. Minor wave B is a 172% correction of minor wave A. This is longer than the maximum common length for a B wave within a flat correction at 138%, but within the allowable range of twice the length of minor wave A. Minor wave C may not exhibit a Fibonacci ratio to minor wave A, and I think the target for it to end would best be calculated at minute degree. At this stage I would expect intermediate wave (2) to end close to the 0.618 Fibonacci ratio of intermediate wave (1) at 1,283.27 (*Note: the Fibonacci retracement tool on Motive Wave works when the chart is on an arithmetic scale, so I will change daily charts from semi-log to arithmetic. However, now the maroon channel does not work so I have removed it).

Intermediate wave (1) lasted a Fibonacci 13 weeks. If intermediate wave (2) exhibits a Fibonacci duration it may be 13 weeks to be even with intermediate wave (1). Intermediate wave (2) is now beginning its tenth week.

So far within minor wave C the highest volume is on an up day. This supports the idea that at this stage the trend is up.

The upper maroon trend line is the upper edge of the Elliott channel drawn about this impulse on the weekly chart, and copied over here to the daily chart. See the most recent Gold Historic Analysis to see how this trend line is drawn on the weekly chart. If minor wave C lasts long enough it should find extremely strong resistance at that trend line, I would not expect that trend line to be broken while primary wave 5 is incomplete.

The aqua blue trend line is a simple TA trend line which is showing where price is currently finding (*edited) support. The power of the middle of the upcoming third wave has broken above this trend line.

The target for primary wave 5 at this stage remains the same. At 956.97 it would reach equality in length with primary wave 1. However, if this target is wrong it may be too low. When intermediate waves (1) through to (4) within it are complete I will calculate the target at intermediate degree and if it changes it may move upwards. This is because waves following triangles tend to be more brief and weak than otherwise expected. A perfect example is on this chart: minor wave 5 to end intermediate wave (1) was particularly short and brief after the triangle of minor wave 4.

Within minor wave C now the third wave is underway. Within minuette wave (iii) no second wave correction may move beyond its start below 1,186.29.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 1,345.22. I have confidence this price point will not be passed because the structure of primary wave 5 is incomplete because downwards movement from the end of the triangle of primary wave 4 does not fit well as either a complete impulse nor an ending diagonal.

To see a prior example of an expanded flat correction for Gold on the daily chart, and an explanation of this structure, go here.

GOLD Elliott Wave Chart 2014

The second wave correction of subminuette wave ii is continuing yet lower, and is now even in duration with minuette wave (ii) one degree higher.

This hourly wave count has changed: I am seeing micro wave X not as a brief zigzag but as a running contracting triangle. This double zigzag for subminuette wave ii is an almost perfect copy of the double zigzag of minuette wave (ii) one degree higher, which also has an X wave that was a triangle.

Within the second zigzag of micro wave Y at 1,199 sub micro wave (C) would reach equality in length with sub micro wave (A).

If this wave count is correct then it has to end there. If subminuette wave ii continues for much longer and takes it into a fifth day (it is nearing the end of its fourth day at the time this analysis is published) then the new alternate wave count below will increase in probability before it is confirmed. I would not expect subminuette wave ii to be longer in duration than minuette wave (ii) one degree higher, which would give the wave count the wrong look.

Subminuette wave ii may not move beyond the start of subminuette wave i below 1,186.29. If this price point is passed I will use the alternate below.

Alternate Wave Count

Gold Elliott Wave Chart Daily Alternate 2014

I have tried to see an explanation for this small breach of the aqua blue trend line, which is concerning. I have considered prior alternates, and what if intermediate wave (2) is actually over? That idea has too many problems and has totally the wrong look, so I do not want to publish it.

I am confident of my labelling of intermediate wave (1) as complete and intermediate wave (2) as incomplete. I am also confident of my labelling of minor wave A as a double zigzag structure. This means intermediate wave (2) cannot be a combination, because you can’t have multiples within multiples. So I am also confident of my labelling of intermediate wave (2) as a common expanded flat correction. This means it is extremely likely that minor wave C will move at least slightly above the end of minor wave A at 1,255.40 to avoid a truncation and a very rare running flat.

This wave count still requires upwards movement over coming weeks to complete minor wave C as a five wave structure.

It is possible that within minor wave C minute wave i ended higher as a leading contracting diagonal. Within this structure I am seeing minuette wave (i) as a zigzag, and minuette waves (iii) and (v) probably as impulses. Within leading diagonals the first, third and fifth waves are most commonly zigzags but sometimes they may also be impulses. Within diagonals the fourth wave should overlap the first wave, but may not move beyond the end of the second wave.

Minuette waves (ii) and (iv) subdivide best as double zigzags. There is some confusion (for me at least) over interpretation of diagonals rules in Frost and Prechter (Elliott Wave Principle, 10th edition). I have long held that second and fourth waves within diagonals may only be single zigzags, not doubles. Other Ellioticians hold that because double and triple zigzags may take the place of single zigzags this means second and fourth waves within diagonals may be double or even triple zigzags. The text is unclear.

Within diagonals the second and fourth waves are usually deep, between 0.66 to 0.81 as being the most common length. Here minuette wave (ii) is 0.85 the length of minuette wave (i) and minuette wave (iv) is just 0.43 the length of minuette wave (iii).

When first waves subdivide as leading diagonals they are normally followed by very deep second wave corrections. This wave count would expect minute wave ii to move substantially lower, at least to the 0.618 Fibonacci ratio of minute wave i at 1,172.07 and very likely below this point.

Minute wave ii may not move beyond the start of minute wave i below 1,138.19.

If this invalidation point was to be passed, I would move the degree of labelling of the diagonal up one degree and my wave count would see that as minor wave C in its entirety. Intermediate wave (2) would be a very rare running flat with a substantially truncated C wave of 17.02. The rarity of running flats and the size of this truncation means such a wave count would have an extremely low probability. Also, it is difficult to see how minuette waves (iii) and (v) within the diagonal structure subdivide as zigzags because they look like impulses. Within ending diagonals ALL the sub waves must be zigzags, so this diagonal is more likely to be leading than ending.

This analysis is published about 02:28 p.m. EST.