Downwards movement was expected. Friday closed with a small red candlestick fitting both Elliott wave counts nicely.

Summary: Downwards movement should continue next week. The lower volume for Friday supports the main wave count which expects a correction to 1,172 most likely. If the alternate is to remain viable it must prove itself next week with a strong increase in momentum, an increase in volume, and a new low below 1,142.82. A new low below 1,131.09 would provide full and final confirmation of the alternate and invalidation of the main wave count.

Click on charts to enlarge.

Main Daily Wave Count

There are more than thirteen possible corrective structures that cycle wave b may take. At this stage it is unclear what degree to label this big movement. I will leave labelling as is at primary degree, but it is equally possible that this degree may be moved down one level and primary wave A is an incomplete zigzag.

Cycle wave b may be a single zigzag as labelled, but may also be a double zigzag with the first zigzag unfolding as labelled. It may be a triangle with only primary wave A zigzag incomplete, or a double combination within a zigzag for primary wave W incomplete. It may be a flat correction with primary wave A as an unfolding zigzag. All these structures are equally likely. Of all Elliott waves, B waves exhibit the greatest variety in form and structure and are the hardest to label correctly as they unfold.

When the big zigzag labelled primary waves A-B-C is complete I will have alternate wave counts to manage the various possibilities for cycle wave b. When the big zigzag is complete that does not mean that cycle wave b must be complete, and only means that if cycle wave b is a single zigzag it would be complete there. All other possibilities will remain open.

A new high above 1,308.10 would invalidate the alternate and confirm this main wave count at primary and cycle degree.

The upwards wave labelled primary wave A fits only as a five wave structure, a leading expanding diagonal. Within a leading diagonal the first, third and fifth waves are most commonly zigzags, and the fourth wave should overlap first wave price territory. I have tried to see this movement as a three; if it is a three then wave A would end at the high labelled intermediate wave (3) within primary wave A. That would see wave A a leading contracting diagonal, but within it the third wave would be longer than the first. This violates the rule for wave lengths of contracting diagonals so that idea is not a viable wave count. This leads me to the conclusion that primary wave A is a five wave structure and cannot be seen as a three.

Because primary wave A subdivides as a five, primary wave B may not move beyond its start below 1,131.09.

At 1,320 primary wave C would reach equality in length with primary wave A. This would complete a 5-3-5 zigzag trending upwards. At that stage alternate wave counts would be required to manage the various possibilities for cycle wave b.

At 1,429 primary wave C would reach 1.618 the length of primary wave A.

Because primary wave A is a diagonal then it is highly likely primary wave C will be an impulse in order to exhibit alternation. Primary wave C may end about the upper edge of the channel drawn about cycle wave b.

This wave count sill has problems of structure within primary wave 5 of cycle wave a:

– within primary wave 5 intermediate wave (2) is a running flat with its C wave looking like a three and not a five.

– within intermediate wave (5) the count is seven which is corrective; either minor wave 3 or 5 will look like a three wave structure on the daily chart where they should be fives.

It is for these reasons that I will retain the alternate until price confirms finally which wave count is correct and which is invalidated.

The decline in volume for Friday’s session fits this main wave count. If price has entered a correction and not a new trend at a larger degree then it should be expected that during the correction volume declines.

Main Wave Count – First Hourly

This first hourly wave count expects minor wave 2 to be the most likely structure of a zigzag. Within a zigzag minute wave a must subdivide as a five wave structure. So far minuette wave (iii) must be incomplete.

I have tried to see if a third wave could fit in this choppy downwards movement and I cannot resolve it. I have concluded the third wave must be incomplete.

Within minute wave a, when minuette wave (iii) is complete the following sideways correction for minuette wave (iv) may not move back into minuette wave (i) price territory above 1,202.03.

At 1,177 minuette wave (iii) would reach 1.618 the length of minuette wave (i).

This first wave count expects a zigzag downwards to end in another two or four days if minor wave 2 lasts a Fibonacci three or five days in total.

This first wave count does not allow for a new high beyond the start of minute wave a at 1,219.99. When minute wave a subdivides as a five then minute wave b may not move beyond its start.

Main Wave Count – Second Hourly

There are still several possible structures that minor wave 2 may unfold as. The only corrective structure it may not be is a triangle.

This second hourly wave count looks at the possibility that minor wave 2 may be a flat correction.

Within a flat minute wave a must subdivide as a “three”. Here minute wave a may be an incomplete double zigzag. It is common for A waves of second wave corrections to end close to the 0.382 Fibonacci ratio and so minute wave a may end about 1,191.

When minute wave a subdivides as a three then minute wave b must retrace a minimum 90% length of minute wave a, and it may make a new high beyond the start of minute wave a above 1,219.99.

The length of minute wave b in relation to minute wave a tells us what kind of flat may be unfolding, and so what ratio to apply to the target for minute wave c.

This second wave count at this stage has no upper invalidation point.

As more of the structure of minor wave 2 unfolds over the next few days these two hourly wave counts may change. My focus will be on determining when the correction is over.

Alternate Daily Wave Count

This alternate wave count sees Gold as still within a primary degree downwards trend, and within primary wave 5 intermediate wave (3) has begun.

At 956.97 primary wave 5 would reach equality in length with primary wave 1. Primary wave 5 may last a total Fibonacci 55 weeks. So far it is now in its 36th week.

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.

This wave count still has a better fit in terms of better Fibonacci ratios, better subdivisions and more common structures within primary wave 5, in comparison to the main wave count above.

Within intermediate wave (3) minor wave 1 is a long extension. Within minor wave 1 minute waves iv and ii are grossly disproportionate, with minute wave iv more than 13 times the duration of minute wave i. This also reduces the probability of this wave count.

Although the invalidation point is at 1,308.10, this alternate wave count should be discarded long before that price point is reached. If the maroon channel is breached again by one full daily candlestick above it and not touching it then I would discard this alternate wave count.

A new low below 1,131.09 would confirm that intermediate wave (3) down is underway.

The decline in volume for Friday’s session is concerning for this wave count. If minor wave 3 of intermediate wave (3) has just begun volume should increase. Minor wave 2 already has lasted 7 days and is longer than minor degree corrections normally are. Although it is possible that only minute wave a is over and this downwards movement is minute wave b, that would see minor wave 2 far too long in duration. The probability of that idea is very low indeed. So low I hesitate to publish it.

This alternate sees upwards movement as a completed zigzag. Unfortunately, sometimes waves are ambiguous: they are not clearly either threes or fives. With the many subdivisions within this upwards movement it is possible to see it as both a three and a five.

This alternate also expects downwards movement from here. Minor wave 3 should show a clear strong increase in downwards momentum. This is a third wave within a third wave which should gather momentum next week. At 1,055 minor wave 3 would reach equality in length with minor wave 1. This target expects minor waves 1 and 3 to be both extended, so minor wave 5 to end should be shorter.

The channel on this hourly chart is more clearly breached than the main wave count, although for both there is at least one full hourly candlestick below the lower edge of the channel. That is all that is required for a clear channel breach.

For this alternate downwards movement must be a series of overlapping first and second waves. This wave count expects an increase in momentum on Monday.

This analysis is published about 12:32 a.m. EST.