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Upwards movement was again expected. We have a new high. Downwards movement was not expected to be this deep though.

I have a new Elliott wave count for you to consider today, and price should tell us very quickly if it is likely.

Summary: This correction is too deep. The main hourly wave count now requires a new high above 1,223.33. If we get that confirmation I will have confidence in the target at 1,240 – 1,243. Alternatively, if we see a new low below 1,204.53 the second wave will most likely be over, and the middle of intermediate wave (3) should have begun. The target for a strong third wave down would be 1,055.

Click on charts to enlarge.

Main Daily Wave Count

Gold Elliott Wave Chart Daily 2015

This main 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. 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.

Within intermediate wave (3) minor wave 1 is a completed impulse lasting 18 days. Minor wave 2 is either an incomplete expanded flat which may continue to end in another two or four days (main hourly wave count) or it is a completed double flat correction which lasted 9 days (alternate hourly wave count below).

Main Hourly Wave Count

GOLD Elliott Wave Chart 2015

Within minor wave 1 minute wave v ended right at the lower trend line of the channel drawn using Elliott’s first technique. Minute wave ii is a deep 0.61 double zigzag and minute wave iv is a shallow 0.29 triple zigzag, so there is some alternation between them although not as much as normal for Gold.

Minor wave 2 may be unfolding as an expanded flat correction. Within the expanded flat of minor wave 2 minute wave a itself subdivides perfectly as an expanded flat with minuette wave (b) as a 187% correction of minuette wave (a), and there is no Fibonacci ratio between minuette waves (a) and (c) (but that is not unusual for Gold).

Minute wave b subdivides perfectly as a double zigzag and it is a 174% correction of minute wave a. Minute wave c has so far moved very slightly above the end of minute wave a, which was at 1,223.10, and a truncation and a very rare running flat was avoided. However, I am unable to see minute wave c as a completed five wave structure. A diagonal will not fit in any way within this movement, and an impulse would be incomplete. This wave count requires minute wave c to move higher to complete. At 1,240 minute wave c would reach 2.618 the length of minute wave a. This is just below the 0.382 Fibonacci ratio of minor wave 1 at 1,243, giving a $3 target zone.

Minor wave 1 lated 18 days, with no Fiobnacci duration. So far minor wave 2 has lasted 9 days. If it ends in two more days at 11 days total it may be 0.618 the duration of minor wave 1. Or it could continue for another four days and total a Fibonacci 13.

I am concerned that price is not behaving as expected for this wave count today. Once the green base channel and the pink channel about minor wave 1 are breached, they should provide support, but they are not. If minute wave c is moving towards the middle strongest portion we should see short brief corrections, not full 100% time consuming second wave corrections. This no longer has the right look. This wave count now requires confirmation with a new high above 1,223.33 before I have confidence in it.

Submicro wave (2) may not move below submicro wave (1) at 1,204.53.

Please note: because 1-2-3 and A-B-C of a zigzag subdivide in exactly the same way (they both subdivide 5-3-5) this idea also works for the alternate below. There, intermediate wave (2) may not be over and minor wave B may also be unfolding as an expanded flat correction.

Alternate Hourly Wave Count

GOLD Elliott Wave Chart 2015

Minor wave 2 fits as a completed double flat correction. The first structure in the double is an expanded flat labelled minute wave w, and the subdivisions here are exactly the same as the main hourly wave count. The double is joined by a “three”, a double zigzag in the opposite direction labelled minute wave x. The second structure in the double is a regular flat labelled minute wave y.

Minute wave w is a very typical looking expanded flat correction.

Minute wave y is a rather atypical looking regular flat correction, but the subdivisions fit. Within minute wave y minuette wave (c) is just 0.72 short of 1.618 the length of minuette wave (a).

Ratios within minuette wave (c) are: subminuette wave iii has no Fibonacci ratio to subminuette wave i, and subminuette wave v is 1.46 longer than 0.618 the length of subminuette wave iii.

Double flats have the purpose of taking up time and moving price sideways. To achieve this purpose the second flat in the double usually ends about the same level as the first, so this wave count in that respect has the right look.

If this wave count is confirmed it would be highly likely that minor wave 3 is underway. Depending upon your risk appetite you may want to see the channel about minute wave y breached and / or a new low below 1,189.64. When the channel about minute wave y is breached with downwards movement I would have increased confidence in this wave count. I would have full confidence in it with a new low below 1,189.64.

Alternate Daily Wave Count

Gold Elliott Wave Chart Daily Alternate 2015

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. It is possible now to see intermediate wave (2) as a deep 0.67 single zigzag. If it is over it may have lasted just a little under half the duration of intermediate wave (1).

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) of this new cycle degree trend may not move beyond the start of intermediate wave (1) below 1,131.09. I am leaving the invalidation point on the daily chart here because it is still possible that intermediate wave (2) is not over, because it may be continuing as per the main hourly wave count above.

Gold Elliott Wave Chart Hourly Alternate 2015

Intermediate wave (3) upwards may have begun. It would be beginning with a series of overlapping first and second waves, and so an increase in upwards momentum should be seen also for this alternate idea.

Alternatively, if we see a new low below 1,204.53 then for this alternate I would expect that intermediate wave (2) is not over. The subdivisions for this alternate would be seen in the same way as the hourly alternate wave count above, because A-B-C and 1-2-3 may subdivide in exactly the same way.

This analysis is published about 03:53 p.m. EST.