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Upwards movement was expected, but this is not what happened. We have a small red doji completing for Friday’s session.

Summary: The main wave count still expects one more day of upwards movement for Monday to 1,243. I have a new alternate which sees a third wave gathering downwards momentum, which would be confirmed with a new low below 1,201.61, and the target is 1,124.

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Main Daily Wave Count

Gold Elliott Wave Chart Daily 2015

The wave counts for Silver and GDX, which see a cycle degree (Silver) or primary degree (GDX) trend change at the last low, have both been invalidated. This will reduce the probability that Gold has had a cycle degree trend change, and so I am swapping over the daily wave counts today and giving this main wave count a higher probability.

This main wave count sees Gold as still within a primary degree downwards trend, and within primary wave 5 intermediate wave (3) is in its early stages. At 956.97 primary wave 5 would reach equality in length with primary wave 1.

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. The breach of this channel is a warning this wave count may be wrong, and so I will retain the alternate.

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. Within an ending diagonal all the sub waves must subdivide as zigzags. The fourth wave should overlap first wave price territory. Expanded flats are very common structures and ending diagonals are more common than leading diagonals.

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

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

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.

Use Elliott’s first technique to draw a channel about minor wave 1: draw the first trend line from the ends of minute waves i to iii, then place a parallel copy on the end of minute wave ii. Copy this over to the hourly chart.

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.

The short to mid term outlook for both wave counts is identical. The structure and labelling on the hourly charts are identical for both daily wave counts.

Main Hourly Wave Count

GOLD Elliott Wave Chart 2015

This wave count still has a good fit and still has the right look. Within minor wave 1 (or minor wave A for the alternate daily wave count) minute waves i, ii and iii may be complete. Minute wave iv may be an incomplete expanded flat correction, which are very common structures.

If minute wave iv manages to complete in just one more day it may total a Fibonacci eight days, and it would be 2.618 the duration of minute wave ii at three days.

If minute wave iv completes as an expanded flat it would show perfect alternation with the double zigzag of minute wave ii. Minute wave ii was a deep 0.6 correction, so minute wave iv would show alternation in depth if it ends about the 0.382 Fibonacci ratio of minute wave iii at 1,243.

Minuette wave (c) of the expanded flat must subdivide as a five wave structure. So far the first and now second waves are complete and a third wave up should have begun. I don’t have a target for subminuette wave iii for you because were it to reach 1.618 the length of subminuette wave i this would take price right up to 1,243. Maybe the fifth wave will be very short, or maybe the fifth wave may even be truncated. Or the third wave may not exhibit a Fibonacci ratio to the first wave.

Minute wave iv may not move into minute wave i price territory above 1,251.97.

Alternate Hourly Wave Count

GOLD Elliott Wave Chart 2015

This alternate simply moves the degree of labelling within minute wave iii all down one degree to see it as only minuette wave (i) within an incomplete third wave.

This gives a series of four overlapping first and second waves. If this wave count is confirmed with a new low below 1,201.61 then I would expect to see a strong increase in downwards momentum.

Minuette wave (ii) shows up on the daily chart, and it lasts three days. For the wave count to have the right look at the daily chart level minuette wave (iv) should also show up on the daily chart. The next interruption to the downwards trend should come at the end of minuette wave (iii). At 1,124 minuette wave (iii) would reach 1.618 the length of minuette wave (i).

It is very common for third waves to begin like this, with a series of overlapping first and second waves. When they do this they often convince us a movement is over, and they do this right before they take off strongly in the direction opposite to that expected.

The other alternate I was considering yesterday was the possibility that minute wave iii is over (as labelled on the daily chart and the main hourly chart) followed by minute wave iv as a triple zigzag and an ending diagonal beginning for minute wave v. This idea has too many problems for me to want to publish it, and publishing it would give it too much weight. It has little alternation between the double zigzag of minute wave ii and the triple zigzag of minute wave iv. Minute wave i was a leading diagonal so it is unlikely minute wave v would also be a diagonal. The guideline of alternation should be applied flexibly; first and fifth waves also may show alternation in that both are less likely to be diagonals, although it is common for both to be impulses.

Alternate Daily Wave Count

Gold Elliott Wave Chart Daily Alternate 2015

At this stage I judge this alternate wave count to a lower probability. The structure of downwards movement, and momentum, will determine 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.

My biggest problem with this wave count 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.

Within intermediate wave (5) minor wave 3 looks like a three on the daily chart, where it should be a five. This movement may also be labelled with minor wave 3 ending higher and minor wave 5 looking like a three. Either way, one of the actionary waves within this downwards movement will look like a three and not a five which does not have the “right look” at the daily chart level.

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.

This analysis is published about 01:52 p.m. EST.