Upwards movement hit the first target zone of 1,281 – 1,287, but structure indicates the correction is not over there.
Summary: In the short term I expect one more upwards zigzag to a target at 1,299. This may give one more green candlestick or doji to show this second wave correction as a big deep movement on the daily chart. Volume supports a trend change to the downside. When the correction is over I am expecting a strong third wave down.
*Note: I can publish text and charts only today. I am travelling and my current internet connection is not strong enough to upload video. I have said everything I intend to say in the text below. I will be back home later today and video will resume tomorrow.
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Main Daily Wave Count
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 very deep second wave corrections, often 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. 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.
Corrections following leading diagonals in first wave positions are normally very deep. Minute wave ii so far has reached to about the 0.618 Fibonacci ratio, but it does not look like this correction is over yet.
The downwards movement labelled minuette wave (x) does not subdivide as a five, but it does subdivide as a three. It has a cursory count of 11 which is corrective. Because this wave is a three this indicates minute wave ii is not over. I expect it may be continuing as a very deep double zigzag.
Double zigzags have the purpose of deepening a correction when the first zigzag does not move price deep enough. Although in this case the first zigzag has made minute wave ii a deep correction, close to the 0.618 Fibonacci ratio, this is a second wave following a first wave leading diagonal. These are quite often deeper than the 0.618 Fibonacci ratio. Double zigzags should have a clear slope against the main trend.
This double zigzag may fit within this best fit channel drawn here. I will use the lower edge of this channel to confirm a trend change. When we can see at least one hourly candlestick below the lower green trend line and not touching it then I would expect minute wave ii is over and minute wave iii down should have begun.
At 1,299 minuette wave (y) would reach equality in length with minuette wave (w).
Minute wave ii may not move beyond the start of minute wave i above 1,308.10.
Alternate Daily Wave Count
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 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 structures.
This wave count has more common structures than the main wave count, and it has 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 at least a couple of weeks.
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.
The short term structure, targets and invalidation points are the same for both wave counts at this stage.
This analysis is published about 01:39 p.m. EST.