Upwards movement was unexpected and invalidated both hourly Elliott wave counts. At the daily chart level they both remain valid. I have a new Elliott wave count today.
Summary: The main bull and the bear wave counts both expect downwards movement. The new bullish alternate expects upwards movement. If we see a new high above 1,210.88 then a third wave up should be underway. If we see a new low below 1,175.28 a third wave down may be underway for the bear count, but that requires an increase in downwards momentum and preferably also an increase in volume for a strong down day. After checking subdivisions and structures at the hourly chart level, and despite the surprise of Monday’s upwards day, I will still judge the bear wave count to be slightly more likely than the bull count. However, Gold remains within a consolidation phase, the breakout has not yet arrived, and extreme caution is required until price tells us which wave count is correct.
I am away from home today and I do not have a good enough internet connection to upload video. The text analysis will be thorough, and I will say everything I need to say here.
Click on charts to enlarge.
To see weekly charts for bull and bear wave counts go here.
Main Bull Wave Count
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 still unfolding as an expanded flat correction; these 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 may be unfolding as an ending expanding diagonal. At 1,157 minute wave c would reach 1.618 the length of minute wave a.
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. Overshoots are acceptable, breaches are not.
An ending diagonal still 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.
All hourly charts today show the movement since the high of 1,209.30.
For this main bull wave count minute wave c is an ending diagonal. Within the ending diagonal the third wave of minuette wave (iii) is complete. Minuette wave (iii) may only be a zigzag. Within this zigzag subminuette wave c subdivides on the hourly chart as an ending diagonal.
There is a problem with the ending diagonal structure though. The wave lengths all fit the rules for an expanding diagonal: the fifth wave is longer than the third, the third wave is longer than the first, and the fourth wave is longer than the second, but the problem is the trend lines contract instead of diverge. This gives the expanding diagonal a contracting look. It does not violate a rule, but it does not meet the guidelines of how this structure should look. This problem persists for all three wave counts at the hourly chart level and I cannot find a solution which avoids it.
Within diagonals the second and fourth waves are normally very deep, between 0.66 to 0.81 the first and second waves. For minute wave c minuette wave (ii) is 0.57 of minuette wave (i), and now minuette wave (iv) is 0.90 of minuette wave (ii). Neither of these corrections are within the normal length. However, at the daily chart level the expanding diagonal of minute wave c does have a reasonably normal look.
Because the diagonal is expanding minuette wave (v) should be longer than minuette wave (iii). This gives a minimum length to 1,172. The target at 1,157 would pass this minimum length.
Minuette wave (v) must subdivide as a zigzag for the ending diagonal. It may take a few days, and may be longer in duration than minuette wave (iii) which lasted 10 days.
Within a diagonal the fourth wave should overlap first wave price territory (it does). The rule for the fourth wave is it may not move beyond the end of the second wave. Minuette wave (iv) may not move above 1,210.88.
Alternate Bull Wave Count
I have tried to see a wave count which would allow for more upwards movement from this point.
It is possible that the intermediate degree movement up for the bull wave count is beginning with a leading diagonal in the first wave position for minor wave 1.
A leading diagonal must have second and fourth waves which subdivide as zigzags. The first, third and fifth waves are most commonly zigzags but sometimes they are also impulses.
Here, within minor wave 1, minute wave i may be a zigzag, and now minute wave ii also may be a completed zigzag.
Within minute wave ii minuette wave (a) subdivides as a five wave structure, minuette wave (b) subdivides as a double combination (flat – x – zigzag) and minuette wave (c) subdivides as an ending diagonal.
This alternate wave count sees very time consuming first and second waves at minuette degree, but sometimes within diagonals the waves may be longer in duration.
Diagonals don’t normally exhibit Fibonacci ratios between their actionary waves, so a target for minute wave iii cannot be calculated until some structure within it can be used. Minute wave iii must move above the end of minute wave i at 1,224.35.
I would judge this alternate to have a lower probability than the main bullish wave count. A new high above 1,210.88 in the short term would see it substantially increase in probability. At that stage I would expect a third wave up is underway.
Within minute wave iii no second wave correction may move beyond its start below 1,175.28.
Upwards movement for Monday is ambiguous. I think it looks better as a three than a five, but it can be seen either way.
If this is a five then minuette wave (i) may be complete. Minuette wave (ii) should unfold downwards as a three, and is most likely to end about the 0.618 Fibonacci ratio about 1,187. It may not move beyond the start of minuette wave (i) below 1,175.28.
If the next move down is slow and overlapping, remaining above 1,175.28, then this alternate would be possible.
Bear Wave Count
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 close to the upper edge of the blue base channel drawn about minor waves 1 and 2, although there is a small overshoot today.
The middle of the third wave has not yet passed. This wave count still 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.
The key to determining which wave count is correct is identifying the sub waves within the diagonal on all hourly charts and here labelled minuette wave (i). If any of the first, third and fifth waves within this diagonal are impulses and not zigzags then the diagonal may only be leading (favouring the bear wave count). I have checked subminuette waves i, iii and v on the ten minute chart. I do think they fit slightly better as impulses, but it is also possible to see them as zigzags. At this stage I would judge the subdivisions to still slightly favour the bear wave count at the hourly chart level.
Leading diagonals in first wave positions are normally followed by very deep second wave corrections. This nicely explains the deep correction of minuette wave (ii).
At 1,118 minuette wave (iii) would reach 2.618 the length of minuette wave (i). Minuette wave (i) lasted four days, so minuette wave (iii) may last longer. A fibonacci eight days would be likely.
At 1,090 minute wave iii would reach 4.236 the length of minute wave i. This fits with the target for the next degree of minor wave 3 at 1,059.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,209.30. If this bear wave count is invalidated by more upwards movement in the next 24 – 48 hours the probability of it will substantially reduce, and it would be relegated to a very unlikely alternate. I would keep it until price tells us finally it is wrong. A new high above 1,224.35 and a breach of the maroon channel again on the daily chart would be required to discard it at this point.
This analysis is published about 05:41 p.m. EST.