Two Elliott wave counts expected downwards movement to 1,197 to 1,200. The alternate bear Elliott wave count expected the start of a strong third wave down. Price has moved strongly lower. All three Elliott wave counts remain valid.
Summary: The wave counts now diverge. The bull and main bear counts need upwards movement from here and the target is 1,242. The alternate bear wave count expects downwards movement to 1,168, and only a new low below 1,175.28 would confirm it. Gold has still not broken out of this range it has been in since 27th March. Volume continues to favour the bear alternate wave count, and this is another piece of information which must be considered carefully.
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To see weekly charts for bull and bear wave counts go here.
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. That is why 1,131.09 is final confirmation for the bear wave count at the daily and weekly chart level.
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.
It is possible that the intermediate degree movement up for the bull wave count is beginning with a leading diagonal in a 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 may be impulses.
Here, within minor wave 1, minute wave i may be a zigzag, and now minute wave ii also may be a completed zigzag.
This wave count sees very time consuming first and second waves at minute degree, but sometimes within diagonals the waves may be longer in duration. The diagonal is most likely to be contracting so minute wave iii is most likely to be shorter than minute wave i and so end before 1,257.
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.
There is another problem for this bull wave count today. If minor wave 1 is unfolding as a leading contracting diagonal then the ii-iv trend line will be overshot by the lower shadow on today’s strong red candlestick. Diagonals normally adhere very well to their trend lines, providing strong support and resistance and rarely overshot. The only way this problem could be resolved is if the leading diagonal is expanding, which is entirely possible but less likely than the contracting variety.
Volume does not support this wave count. If the last two up days are the start of minute wave iii then volume for those two days should be higher than volume of the following two down days. If the trend is up then corrections against the trend should have lower volume. But they do not. They have higher volume.
Within the leading diagonal of minor wave 1 minute wave iii would most likely be a zigzag but it may also be an impulse. So far neither are complete. Minute wave iii must move beyond the end of minute wave i above 1,224.35.
Within minute wave iii minuette wave (b) or (ii) subdivides as a double zigzag. If this downwards wave is corrective and if it is complete then the only way I can see it subdividing at this stage is as a double zigzag. If this correction continues any further it may not move beyond the start of minuette wave (a) or (i) below 1,175.28.
At 1,242 minuette wave (c) or (iii) would reach 1.618 the length of minuette wave (a) or (iii). If this is where minute wave iii ends then the diagonal would be contracting.
Main 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.
Because the base channel on the alternate bear wave count is now clearly breached it has been relegated to a less likely alternate. This main bear wave count has about an even probability with the bull wave count at this stage.
Minor wave 2 may be continuing as a double zigzag. The only problem with this part of the wave count is the duration of minor wave 2. Now both minor wave 2 and intermediate wave (2) look too big on the weekly chart.
The purpose of a second zigzag is to deepen a correction when the first zigzag does not move price deep enough. Within double zigzags the X wave is normally shallow, but here it is 0.60 of minute wave w. That is acceptable, but slightly unusual. The second zigzag may end when price touches the parallel copy of the upper edge of the maroon channel, in line with resistance at the high of intermediate wave (2).
Minor wave 2 may not move beyond the start of minor wave 1 above 1,308.10. Before price reaches that point this wave count would substantially reduce in probability.
The structure and expectations for this main bear wave count are today identical to the bull wave count for the short term. At 1,242 minuette wave (c) would reach 1.618 the length of minuette wave (a). This target is high enough for minute wave y to move comfortably above minute wave w so minor wave 2 has a reasonable double zigzag look, and it would have a clear upwards slope at its end.
Within the zigzag of minute wave y minuette wave (b) may not move beyond the start of minuette wave (a) below 1,175.28.
Alternate Bear Wave Count
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 complete expanded flat correction.
The base channel about minor wave 2 is breached reducing the probability of this wave count. This alternate bear wave count has a lower probability than the main bear wave count, but only for the reason of the breach of the channel. Base channels often work as they should, but not always. Sometimes a lower degree second wave does breach a base channel.
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.
If minute wave ii were to continue higher it may not move beyond the start of minute wave i.
Volume supports this bear wave count. If the trend has switched back to down then down days with the trend should have higher volume than up days against the trend. The last two down days show higher volume than the prior two up days. Volume keeps indicating that the breakout is more likely to be down than up, and it is a piece of information which should be carefully considered. Although this is an alternate wave count at this stage, it is entirely viable and has volume in its favour.
If this downwards movement is the start of a third wave then it would be an impulse and it would be incomplete.
At 1,168 subminuette wave iii would reach 4.236 the length of subminuette wave i. Subminuette wave iii has passed 1.618 and 2.618 the length of subminuette wave i, so this is the next Fibonacci ratio in the sequence.
When minuette wave (i) is over then minuette wave (ii) should correct upwards. At that stage both the 0.382 and 0.618 Fibonacci ratios would be reasonable targets for this correction. It is a low degree second wave correction within a third wave one, two and three degrees higher. There may be enough of a strong downwards pull at this stage within the third wave to force a second wave correction to be more shallow than second wave corrections normally are.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,215.20.
If price breaks above 1,215.20 this alternate bear wave count would substantially reduce in probability. It is difficult to see how minute wave ii on the daily chart could continue yet further.
Weekly Bear Wave Count – Volume
I publish this weekly bear wave count today just to illustrate a couple of interesting points regarding volume. During the sideways move from 27th March it is a downwards week which also has strongest volume.
On balance volume has just breached a trend line which began in December 2013. This favours the bear wave count.
This analysis is published about 05:42 p.m. EST.