Downwards movement was expected as 60% likely, which is what happened.
Summary: I expect Gold has just completed a small correction two hours ago. It is extremely likely that the next few days will see strong upwards movement with an increase in momentum and high volume. The target for the next wave up is at 1,272. Initially a new high above 1,206.49 and then a breach of the small downwards sloping channel on the hourly chart are required to confirm that this small correction is over. When that happens I will have confidence in the target. Prior to confirmation the risk exists that price could move lower, but not below 1,178.59.
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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. Primary wave A (or W) is an incomplete zigzag.
It is also possible that primary wave A will subdivide as a five wave impulse if cycle wave b is a big single zigzag. This idea would relabel intermediate waves (A), (B) and (C) to intermediate waves (1), (2) and (3) within primary wave A trending upwards. The length of this current upwards move labelled intermediate wave (C) on the chart will indicate if this scenario is possible.
Cycle wave b may be a flat correction where primary wave A is a zigzag. Cycle wave b may be a triangle where primary wave A is a zigzag. Cycle wave b may be a combination where primary wave W is a zigzag. Cycle wave b may be a double zigzag with the first in the double, primary wave W, incomplete.
When the big zigzag now labelled primary wave A is complete, it is also possible that cycle wave b could be over there with the degree of labelling within it moved up one degree.
When intermediate wave (C) is a complete five wave structure alternate wave counts will be required to manage the various possibilities of cycle wave b continuing.
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 intermediate 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.
Because intermediate wave (A) subdivides as a five, intermediate wave (B) may not move beyond its start below 1,131.09.
At 1,320 intermediate wave (C) would reach equality in length with intermediate wave (A). If price keeps rising through this first target, or if when it gets there the structure is incomplete, then I would use the second target. At 1,429 intermediate wave (C) would reach 1.618 the length of intermediate wave (A).
Because intermediate wave (A) is a diagonal then it is highly likely intermediate wave (C) will be an impulse in order to exhibit alternation. Intermediate wave (C) may end about the upper edge of the channel drawn about primary wave A.
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.
Volume for Wednesday’s session is slightly up which would be expected at the end of a correction, but it is still lower than the prior upwards day which ended minute wave i. This fits perfectly with this wave count. If the last two days are a correction and not the start of a new trend then volume should be lower.
Minor wave 1 lasted seven days (no Fibonacci number) and minor wave 2 lasted a Fibonacci three days. If minor wave 3 exhibits a Fibonacci duration it may last thirteen days, which would see it end in seven more sessions (depends on how long the corrections within it last).
At 1,303 minor wave 3 would reach 1.618 the length of minor wave 1.
Draw a base channel about minor waves 1 and 2 as shown. Minor wave 3 may have the power to break through resistance at the upper edge of the blue channel. Today, downwards movement is finding support just below the blue channel, because it is unusual for a lower degree second wave correction to breach a base channel drawn about a first and second wave one or more degrees higher this lower trend line should provide very strong support. This is where the middle of a third wave up should begin.
The base channel copied over to the hourly chart shows an overshoot but not yet a breach. At this stage with only an overshoot the wave count looks like it is highly likely minute wave ii is over here and minute wave iii has just begun.
Minute wave ii subdivides perfectly as a double zigzag. The first zigzag in the double reached only to about the 0.382 Fibonacci ratio, so the second zigzag in the double was necessary to deepen the correction to the 0.618 Fibonacci ratio. Minuette wave (x) subdivides perfectly as a regular contracting triangle which fits the purpose of a shallow X wave nicely. This is supported by MACD hovering just below zero and flat while the triangle unfolded.
The second zigzag in the double is a perfectly complete zigzag.
Draw a best fit channel about minute wave ii: draw the first trend line from the start of minute wave ii to the end of minuette wave (x), then place a parallel copy on the end of minuette wave (w). Minuette wave (y) ends perfectly on the lower trend line.
There is not enough upwards movement at this stage to confirm that minute wave ii is over. The risk exists that it could continue lower. It is possible that within minuette wave (y) subminuette wave c is not over and will continue. A new high above the start of subminuette wave c at 1,206.49 could not be a second wave correction within subminuette wave c, and so at that stage I would have confidence that subminuette wave c would be over and minute wave ii would be extremely likely to be over. At that stage I would have enough confidence to move the invalidation point up to the end of minute wave ii at 1,197.63.
While we have no confirmation that minute wave ii is over the invalidation point must remain at 1,178.59. Minute wave ii may not move beyond the start of minute wave i.
A clear breach of the green best fit channel about minute wave ii would provide further confidence in a trend change.
Depending upon your risk appetite you may want to use one or both of these tools before you have confidence in this wave count and the target. While we have no confirmation of this trend change the risk exists that price could move lower to 1,178.59 but not below.
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 957 primary wave 5 would reach equality in length with primary wave 1. Primary wave 5 may last a total Fibonacci 55 weeks. It is now in its 39th 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 was the first 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.
Minor wave 2 would now be a completed zigzag. If this alternate is correct it should show itself this week. It now expects a big increase in downwards momentum as a third wave at two degrees begins to gather momentum. An increase in volume as price moves lower would support this wave count. A new low below 1,178.59 would be a strong indication this wave count may be correct.
Volume over the last 14 days is lower for down days and higher for up days. Volume is strongly indicating the current trend is up, which does not support this wave count.
This alternate wave count remains technically possible. Because the implications are important I will continue to publish it at this stage.
This analysis is published about 04:39 p.m. EST.