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Downwards movement was expected, but price has moved mostly sideways. If Thursday’s session completes as a green candlestick this would be significant.

Summary: The third wave may be over and the following fourth wave for minuette wave (iv) looks like it has begun. I expect choppy overlapping sideways movement for another one to three days while it unfolds. Gold has entered a small consolidation phase, and the breakout when it is done should be downwards.

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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

I am concerned that at the daily chart it looks like this fourth wave correction should be labelled minute wave iv, one degree higher than I have it labelled here. I will take a closer look at this possibility and I may move the degree of labelling of this correction up one degree tomorrow if the subdivisions fit.

Sideways movement since the low at 1,217 looks very corrective, and is subdividing as a series of three wave structures on the five minute chart. Because this is showing up so far on the daily chart as a green candlestick I do not think this is micro wave 2 within subminuette wave v. I think subminuette wave v was over at the low as labelled and subdivided into an ending contracting diagonal. The target for yesterday’s analysis was too low.

Quite often following fourth wave triangles the fifth wave is more brief and weak than otherwise expected. I think this is what has happened here.

Redraw the channel about this downwards movement using Elliott’s first technique: draw the first trend line from the lows labelled minuette waves (i) to (iii) then place a parallel copy on the high labelled minuette wave (ii). The upper edge of this channel may provide resistance to minuette wave (iv) and it may end here. Fourth waves don’t always end within these channels, but they often do.

Minuette wave (ii) was a deep 60% double zigzag. I would expect minuette wave (iv) to be a shallow sideways type of correction. It would be most likely to end about the 0.382 Fibonacci ratio at 1,238.60 which indicates it may overshoot the upper edge of the channel.

Minuette wave (iv) is most likely to be a flat, combination or triangle. These structures may include a new low below 1,216.57 as in an expanded flat, running triangle or combination including either of these. There is no lower invalidation point at this stage for this reason.

I would expect MACD to get close to the zero line and hover about this while minuette wave (iv) unfolds.

Minuette wave (ii) looks like it lasted two days on the daily chart. I would expect minuette wave (iv) to last at least two days in total, and if it is a more time consuming structure like a triangle or combination it may last up to about four days in total.

Minuette wave (iv) may not move into minuette wave (i) price territory above 1,255.59.

When I know where minuette wave (iv) has ended then I will add to the target calculation for minute wave iii at a second wave degree. At that stage the two targets for minute wave iii may again be reduced to one, or they may both widen to small target zones.

At 1,196 minute wave iii would reach 1.618 the length of minute wave i. At 1,140 minute wave iii would reach 2.618 the length of minute wave i. These targets are still at least a week away, maybe longer.

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 02:51 p.m. EST.