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Downwards movement was expected.

Summary: The short term target is 1,198 – 1,193, and should be met within the next 24 hours. While this fifth wave is underway corrections should find resistance at the lower edge of the pink base channel, and at the upper edge of the Elliott channel on the hourly chart. The trend remains down.

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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.

The first five up may be a complete leading expanding diagonal. 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 deep second wave corrections, sometimes deeper than the 0.618 Fibonacci ratio. This wave count expects a big deep correction downwards, and it should subdivide as a clear three on the daily chart (the alternate below expects a 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 it’s 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) 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 at minor degree. When this 5-3-5 is complete then how high the following movement goes 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.

From January 23rd onwards, since the expected trend change, volume is highest on down days. This supports the idea that we may have seen a trend change and the trend is now down. Volume for Silver is even clearer, with a big spike on the down day there for 29th January.

GOLD Elliott Wave Chart 2015

Sideways movement turned out to be a regular contracting triangle for subminuette wave iv. There is now perfect alternation between the deep zigzag of subminuette wave ii and the shallow triangle of subminuette wave iv. Triangles are normally more time consuming structures than zigzags, so the wave count now has a more typical look.

At 1,198 subminuette wave v would reach equality in length with subminuette wave iii. At 1,193 minuette wave (iii) would reach 2.618 the length of minuette wave (i). This gives a $5 target zone for this fifth wave to end.

If this target is wrong it may be too low. Sometimes fifth waves following triangles are more brief and weak than otherwise expected. At this stage it looks like subminuette wave v is moving towards its middle, and looks like an incomplete five wave structure. When it is done it must be a clear five on the hourly chart.

Now that price has managed to break through support at the lower edge of the pink base channel it should remain below this trend line. Along the way down upwards corrections may find resistance at this lower pink trend line.

Draw a channel about minuette wave (iii) using Elliott’s second technique: draw the first trend line from the ends of subminuette waves ii to iv, then place a parallel copy on the end of subminuette wave iii. Along the way down upwards corrections should find resistance at the upper edge of this channel. Subminuette wave v may end about the lower edge of this channel.

When this channel is subsequently breached by upwards movement that shall provide trend channel confirmation that minuette wave (iii) is over and minuette wave (iv) is underway.

While subminuette wave v unfolds no second wave correction may move beyond its start above 1,238.27.

When subminuette wave v is complete then the following correction for minuette wave (iv) may not move back into minuette wave (i) price territory above 1,255.59. Because minuette wave (ii) shows on the daily chart I would expect minuette wave (iv) to also show on the daily chart. It may last one to four days, depending on what structure it takes.

The mid term target for minute wave iii is now only at 1,140. This target may be one to two weeks away.

Alternate Daily Wave Count

Gold Elliott Wave Chart Daily Alternate 2015

The maroon channel about cycle wave a from the weekly chart is now breached by a few 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 and this reason only 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 an expanded flat correction. Minor wave C is a complete expanding ending diagonal. Expanded flats are very common structures.

This wave count has more common structures than the main wave count, and it has a better fit.

For this alternate wave count the diagonal is an ending diagonal for minor wave C. 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.

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 short term structure, targets and invalidation points are still the same for both wave counts at this stage. They probably won’t diverge for a few weeks.

This analysis is published about 02:52 p.m. EST.