The middle of a third wave down has just passed, exactly as expected.
Summary: The middle of a third wave has just passed. The target for it to end is still at 1,224 which may be met on Monday. Be aware Gold sometimes exhibits strong fifth waves and if this target is wrong it may not be low enough. A second possible target for the middle of this third wave may be at 1,194. The mid term target for the larger third wave at minute degree is still either 1,196 or 1,140. The mid term target may be met in one to one and a half weeks.
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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 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. 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.
The strong downwards movement with a strong increase in momentum is exactly what a third wave should look like. There is no Fibonacci ratio between subminuette waves i and iii so I will expect to see a Fibonacci ratio between subminuette wave v and either of i or iii. When subminuette wave iv is complete then I can add to the target calculation for minuette wave (iii) at a second wave degree, so the target of 1,224 may widen into a small zone or it may change.
At 1,224 minuette wave (iii) would reach 1.618 the length of minuette wave (i).
Subminuette wave ii was a deep 70% zigzag correction lasting 12 hours. Importantly, it does not show up on the daily chart. I would expect subminuette wave iv to also not show on the daily chart which means I expect a new low on Monday. Subminuette wave iv is most likely to be a shallow sideways correction ending at either the 0.236 or 0.383 Fibonacci ratios of subminuette wave iii.
Copy the base channel from the daily chart to the hourly chart. The lower edge is slightly breached. The third wave of minute wave iii should have the power to break below support of this lower pink trend line, and once there it should remain below that trend line.
Be aware that Gold often exhibits strong fifth waves, sometimes stronger than its third waves. When each fourth wave correction is over we may see another strong increase in downwards momentum. If the target for minuette wave (iii) at 1,224 is wrong it may be too high. If subminuette wave v is a strong fifth wave typical of commodities then it may end below this target. At 1,194 minuette wave (iii) would reach 2.618 the length of minuette wave (i). This lower target for the middle of this third wave fits only with the lower target for minute wave iii at 1,140.
Subminuette wave iv may not move into subminuette wave i price territory above 1,256.37.
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 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 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.
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 04:03 p.m. EST.