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A new low below 1,184.04 has invalidated two Elliott wave counts, leaving now only two valid Elliott wave counts.

Summary: Gold is breaking out to the downside. Only wave counts 2 and 4 remain, which I will now label bull and bear respectively. A short term target for the bull count is 1,158 (after some sideways consolidation) and the bear count to 1,144. Both wave counts expect downward movement, but the pathway down is different. The bull count expects it to be choppy and overlapping, and the bear count expects it to be a very strong clear downwards trend.

Click on charts to enlarge.

To see weekly charts for bull and bear wave counts go here.

Bull Wave Count

Gold Elliott Wave Chart Daily 2015

The bull wave count sees primary wave 5 and so cycle wave a a complete five wave impulse on the weekly chart. At the weekly chart level this has a good look.

The problem with the bull wave count is within the subdivisions of intermediate wave (5). I have not found a solution which avoids running flats and has good proportion between the second and fourth waves of the impulse. The bear wave count has a better fit for this movement.

So far within cycle wave b there is a 5-3 and an incomplete 5 up. This may be intermediate waves (A)-(B)-(C) for a zigzag for primary wave A, or may also be intermediate waves (1)-(2)-(3) for an impulse for primary wave A. Within cycle wave b primary wave A may be either a three or a five wave structure.

Intermediate wave (A) subdivides only as a five. I cannot see a solution where this movement subdivides as a three and meets all Elliott wave rules. This means that intermediate wave (B) may not move beyond the start of intermediate wave (A) below 1,131.09. Intermediate wave (B) is a complete zigzag. Because intermediate wave (A) was a leading diagonal it is likely that intermediate wave (C) will subdivide as an impulse to exhibit structural alternation. If this intermediate wave up is intermediate wave (3) it may only subdivide as an impulse.

At 1,320 intermediate wave (C) would reach equality in length with intermediate wave (A), and would probably end at the upper edge of the maroon channel. At 1,429 intermediate wave (C) or (3) would reach 1.618 the length of intermediate wave (A) or (1). If this target is met it would most likely be by a third wave and primary wave A would most likely be subdividing as a five wave impulse.

Within the intermediate degree five up minor wave 1 is complete. Minor wave 2 is unfolding as an expanded flat correction, which are very common structures. Minute wave c has made a new low below the end of minute wave a at 1,178.58 avoiding a truncation and a rare running flat.

Within the expanded flat minute wave b is a 111% correction of minute wave a. Minute wave c is not unfolding as an impulse because the waves subdivide as threes and not fives. Minute wave c may be unfolding as an ending expanding diagonal.

Within ending diagonals all the sub waves must subdivide as zigzags, and the fourth wave must overlap first wave price territory. The diagonal should remain contained within its trend lines, and these should provide strong support and resistance.

The third wave of the diagonal must have a corrective wave count of 3, 7, 11 (etc. add further multiples of 4 for each extension). So far on the daily and hourly charts it has a count of 5. Minuette wave (iii) is incomplete.

An ending diagonal nicely explains the choppy overlapping movement of the last several days.

Minor wave 2 may not move below the start of minor wave 1 at 1,142.82.

GOLD Elliott Wave Chart 2015

The hourly chart shows all of minuette wave (iii) so far, which does not have a corrective wave count and must be incomplete. It must subdivide as a zigzag because it is a third wave within an ending diagonal.

At 1,158 subminuette wave c would reach 2.618 the length of subminuette wave i.

Within subminuette wave c micro waves 1, 2 and 3 may be complete. If this is correct then the sideways movement that is beginning at the end of Friday’s session is likely to continue on Monday so that it shows up on the daily chart so that minuette wave (iii) looks like a zigzag on the daily chart. Micro wave 4 may not move into micro wave 1 price territory above 1,184.45.

Micro wave 2 was a deep 0.67 double zigzag. Micro wave 4 should show alternation, and may be a sideways type of structure like a flat, combination or triangle. It should be shallow, most likely ending only about the 0.236 Fibonacci ratio at 1,181.

When micro wave 4 is complete then micro wave 5 down would end minuette wave (iii). It is at this point the bull and bear wave counts will substantially diverge again. This bull wave count would then need minuette wave (iv) within the diagonal to move back up into minuette wave (i) price territory as a zigzag, above 1,184.04 but not above the end of minuette wave (ii) at 1,209.30. The bear wave count would expect price to remain well below these points.

Bear Wave Count

Gold Elliott Wave Chart Daily 2015

This wave count follows the bear weekly count which sees primary wave 5 within cycle wave a as incomplete. At 957 primary wave 5 would reach equality in length with primary wave 1.

Within primary wave 5 intermediate wave (1) subdivides perfectly as an impulse, and intermediate wave (2) subdivides perfectly as an expanded flat correction. Intermediate wave (3) should have begun.

The problem with the bear wave count is twofold. The channel about cycle wave a (upper maroon trend line, copied over from the weekly chart) is clearly breached. If cycle wave a is incomplete this trend line should not be breached.

The second problem is the duration and size of intermediate wave (2). Although all the subdivisions are perfect it looks too big at the weekly chart level.

This wave count sees minor wave 2 as a completed zigzag, and minor wave 3 in its very early stages.

Minute wave ii is seen as a completed double combination and its proportion looks about right.

Upwards movement continues to find resistance at the upper edge of the blue base channel drawn about minor waves 1 and 2.

The middle of the third wave has not yet passed. This wave count expects to see a strong increase in downwards momentum at the daily chart level, beyond that seen for minor wave 1.

At 1,059 minor wave 3 would reach equality in length with minor wave 1.

Minute wave ii may not move beyond the start of minute wave i. This invalidation point on the daily chart allows for the possibility that minute wave ii may continue sideways and higher as a flat correction. However, because that would now need a breach of the blue base channel this possibility is highly unlikely.

Gold Elliott Wave Chart Hourly 2015

Minor wave 3 may have begun with a series of overlapping first and second waves, and so far there are three of them: minute waves i and ii, minuette waves (i) and (ii), and subminuette waves i and ii.

I expect we may be seeing another first and second wave complete; I would not label the low at 1,175.28 for Friday the end of subminuette wave iii, because it is far too short.

Within subminuette wave iii it may be that now micro wave 1 is almost complete. Micro wave 2, when it arrives, may not show up on the daily chart, should be shallow and brief due to the strong downward pull of the middle of a third wave at four degrees, and may not move beyond the start of micro wave 1 above 1,198.05.

At 1,144 subminuette wave iii would reach 2.618 the length of subminuette wave i.

I am drawing a base channel about subminuette waves i and ii. Subminuette wave iii should have the power to break below support at the lower edge of this orange channel. Along the way down upwards corrections should now find resistance at the upper edge of this channel.

This analysis is published about 04:47 p.m. EST.