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Price made a slight new high but failed by a considerable margin to reach the target, which was at 1,299. The trend channel on the Elliott wave hourly chart indicated a trend change, and a third wave down.

Summary: A third wave has most likely begun. In the short term another small second wave correction may have recently ended, or it could move sideways for a while yet. It is unlikely to show up on the daily chart. The next move down should show a strong increase in momentum. The short term target for the middle of the third wave is 1,218. The mid term target for this third wave to end is at 1,196 or 1,140. When there is more structure within it I can figure out which target will be more likely.

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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 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.

GOLD Elliott Wave Chart 2015

Minute wave ii is now a complete correction, and the channel drawn about it is clearly breached to the downside indicating it is over. A new low below the start of minuette wave (y) at 1,266 is further confirmation that this correction should now be over.

On the five minute chart minuette wave (i) subdivides nicely as a five wave impulse, which is further confirmation that minute wave ii is most likely over.

Minute wave iii may only subdivide as an impulse, and it should show a strong increase in downwards momentum beyond that seen for minute wave i. 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 (this second target really only fits well with the alternate wave count though). When minuette waves (i) through to (iv) within minute wave iii are complete then I can add to the target calculation at a second wave degree, and I can state which of these two targets is more likely.

At this stage the first downwards wave from the end of minuette wave (ii) looks like a five on the five minute chart. This may be the first wave down within minuette wave (iii).

I am labelling minuette wave (ii) as complete because it fits as a zigzag, and it is brief and shallow. The downwards pull of minute wave iii may force corrections along the way down to be relatively brief and shallow.

Alternatively, minuette wave (ii) may continue sideways and / or higher. The upwards wave labelled minuette wave (ii) may be only wave A within a flat correction, or wave W within a double zigzag or combination. If minuette wave (ii) does continue then because the first move up within it is a three, this indicates a flat or combination as most likely which would see it move only sideways, and not end substantially above 1,268. However, it is possible it may move higher as a double zigzag, a most likely end for that structure would be about the 0.618 Fibonacci ratio at 1,275. If it moves above this point then it should find strong resistance at the lower edge of the green channel drawn about minute wave ii, but it is very unlikely to be that deep.

Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,286.47. This leaves rather a lot of room for the market to move before the next downwards wave is underway.

Alternate Daily Wave Count

Gold Elliott Wave Chart Daily Alternate II 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 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 minor 1-2-3 and the main wave count would see it as minor 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 (minor wave A on the main wave count and minor wave 1 for this alternate) 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 a few 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.

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 08:02 p.m. EST.