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A new low below 1,272.34 has provided the breakout we were waiting for. This invalidates the main Elliott wave count and confirms the Elliott wave alternate counts.

Summary: The short term target for this third wave is 1,240. I expect a red candlestick for Monday’s session to this target. When this third wave is done a following fourth wave correction should show up on the daily chart and may not move above 1,272.34.

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Main Daily Wave Count

Gold Elliott Wave Chart Daily 2015

At this stage I judge this main wave count to have an even probability with the alternate below. I will let the structure of downwards movement, and momentum, tell us which wave count is correct over the next few weeks. At this stage they both expect more downwards movement so there is no divergence in the expected direction.

This wave count sees a five wave impulse down for cycle wave a complete, and primary wave 5 within it a completed five wave impulse. The new upwards trend at cycle degree should last one to several years and must begin on the daily chart with a clear five up.

It is entirely possible that there was a leading expanding diagonal as the first five up within primary wave A. For diagonals, the contracting variety is more common than expanding and ending diagonals are more common than leading. While a leading expanding diagonal is not rare, it is not very common either.

Within leading diagonals the second and fourth waves must subdivide as zigzags. The first, third and fifth waves are most commonly zigzags but they may also be impulses. This wave count sees minor waves 1, 3 and 5 as zigzags.

Leading diagonals are almost always followed by very deep second wave corrections, often deeper than the 0.618 Fibonacci ratio. This wave count expects a big deep correction downwards, and should subdivide as a clear three on the daily chart (the alternate below expects a clear five down).

My biggest problem with this wave count, and the reason I will retain the alternate, is the structure of intermediate wave (2) within primary wave 5. This is a rare running flat but the subdivisions don’t fit well. Minor wave C should be a five wave structure, but it looks like a clear three on the daily chart. If you’re going to label a running flat then its vital the subdivisions fit perfectly and this one does not. This problem is very significant and this is why I judge the two wave counts to be about even in probability..

Intermediate wave (5) still looks like a zigzag rather than an impulse, and has a corrective wave count. This is also a problem I have with this wave count.

Intermediate wave (2) is most likely to subdivide as a zigzag, which subdivides 5-3-5. When this 5-3-5 is complete then how high the following movement will tell us which wave count is correct.

Intermediate wave (2) of this new cycle degree trend may not move beyond the start of intermediate wave (1) below 1,131.09.

GOLD Elliott Wave Chart 2015

A third wave down is drawing to a close. A series of fourth and fifth waves are required to complete minute wave iii.

At 1,240 minute wave iii would reach 1.618 the length of minute wave i. The following upwards correction for minute wave iv should be shallow and should show up on the daily chart as one or more green candlesticks or doji. It may not move into minute wave i price territory above 1,272.34.

Draw a base channel about minute waves i and ii. Now that this channel is breached to the downside we may see the lower pink trend line provide resistance to upwards movement.

Minute wave iii should now show a slowing of momentum, and may end in another session.

This main hourly wave count expects minor wave A to subdivide as a five wave structure so that intermediate wave (2) is a zigzag. However, this is not the only possible structure for intermediate wave (2). When this current five wave impulse is complete I must have an alternate hourly wave count looking at the possibility that minor wave A may be a completed zigzag and intermediate wave (2) may be a flat, combination or double zigzag.

Alternate Daily Wave Count

Gold Elliott Wave Chart Daily Alternate II 2015

The maroon channel about cycle wave a from the weekly chart is now breached by four daily candlesticks, and is now also breached on the weekly chart by one weekly candlestick. If cycle wave a is incomplete this channel should not be breached. For this reason this wave count, despite having the best fit in terms of subdivisions, only has an even probability with the main wave count. It will prove itself if we see a clear five down with increasing momentum on the daily chart.

Draw the maroon trend line on a weekly chart on a semi-log scale, and copy it over to a daily chart also on a semi-log scale (see this analysis for a weekly chart).

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.

Intermediate wave (2) is now a complete expanded flat correction. Minor wave C is a complete expanding ending diagonal. Expanded flats are very common, and ending expanding diagonals are more common than leading expanding diagonals. This wave count has more common structures than the main wave count, and a better fit.

Within an ending diagonal all the sub waves must subdivide as zigzags. The fourth wave should overlap first wave price territory. The rule for the end of a fourth wave of a diagonal is it may not move beyond the end of the second wave.

Although Gold almost always adheres perfectly to trend channels, almost always is not the same as always. This wave count is still possible. The trend channel breach is a strong warning that this wave count may be wrong and we need to heed that warning with caution at this stage.

A new low below 1,131.09 would confirm that a third wave down is underway.

When the first 5-3-5 down is complete on the daily chart this wave count would see it as 1-2-3 and the main wave count would see it as A-B-C. The following upwards movement will tell us which wave count is correct. If it moves back into price territory of the first 5 down then it can’t be a fourth wave correction so the main wave count would be correct. If it remains below the price territory of the first five down then it would be a fourth wave correction and this alternate would be correct. This divergence will not begin for a few weeks yet, most likely.

At 956.97 primary wave 5 would reach equality in length with primary wave 1.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 1,345.22. If this invalidation point is passed this wave count would be fully invalidated.

Gold Elliott Wave Chart Hourly Alternate 2015

The subdivisions on the hourly chart are identical for both wave counts today.

This wave count requires a five down to complete for minor wave 1. Intermediate wave (3) may only subdivide as a five wave impulse and minor wave 1 is very likely to be a simple impulse.

This analysis is published about 02:37 p.m. EST.