A new high above 1,211.96 invalidated the main hourly Elliott wave count and confirmed the alternate.
Summary: I expect choppy overlapping movement for about five more days (including Friday’s session) to either 1,235 or 1,263, favouring the lower target.
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Main Daily Wave Count
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. For Silver and GDX this idea, that the primary trend is down, is the only remaining wave count. This main wave count has a higher probability than the alternate below.
The maroon channel about cycle wave a from the weekly chart is now breached by a few daily candlesticks and 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 still 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.
Draw a channel about minor wave 1: draw the first trend line from the end of minute wave i to the end of minuette wave (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. A slight increase in volume for Thursday’s session indicates an upwards correction may have begun.
I would expect minor wave 2 to most likely last a Fibonacci eight days. It has completed three candlesticks and has begun the fourth, so I would expect it to continue for another five days including the candlestick just begun for Friday’s session.
Because this is a second wave correction within a larger third wave at intermediate degree I favour the 0.382 Fibonacci ratio at 1,235. If it does not end there it may end higher about the 0.618 Fibonacci ratio at 1,263.
There are several possible structures minor wave 2 may take, the only structure it may not be is a triangle. If it is a flat or combination then it may include a new low below its start at 1,189.64.
So far the upwards movement for minor wave a may be a series of three overlapping first and second waves. It may also be an almost complete double zigzag as per the alternate hourly wave count below. And this is not a completed leading diagonal, because the wave lengths do not work.
In the short term I expect a small zigzag down to complete micro wave 2. I do not have a target for it because it is not clear that sub micro wave (B) is over yet. Micro wave 2 may not move beyond the start of micro wave 1 below 1,201.18.
The wave count will probably change over the next four days as this correction unfolds and the structure becomes clearer. What I am confident of is I expect choppy overlapping movement, generally trending upwards, for about five more days. When that is done the breakout will be down and will be very strong.
Alternate Daily Wave Count
At this stage I judge this alternate wave count to have a lower probability. The structure of downwards movement, and momentum, will determine 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.
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 hourly chart presents another possibility for this unfolding correction, whether it be a second wave or a B wave. This hourly chart works for both the main and alternate wave counts, as does the first hourly chart.
If the correction is unfolding as a flat (or a triangle for this alternate minor wave B) then minute wave a should subdivide as a three. Minute wave a may be a close to complete double zigzag.
If minute wave a subdivides as a three then minute wave b must move price back down 90% of minute wave a or below, and it may make a new low below the start of minute wave a at 1,189.64 as in an expanded flat.
If minute wave a subdivides as a double zigzag then we can eliminate a combination for this correction, because the maximum number of corrective structures within a multiple is three so you cannot have a multiple within a multiple.
In the short term I would expect a zigzag for subminuette wave b to complete, and it may not move beyond the start of subminuette wave a if subminuette wave a is correctly labelled as a five. The short term invalidation point is the same for both wave counts today.
This analysis is published about 07:50 p.m. EST.