Sideways movement was expected from last Elliott wave analysis, which is what happened.
Summary: This movement is a small correction against the trend, which for both bull and bear counts is up at least at minute degree. This fourth wave is either a zigzag to end about 1,183 for the main bull hourly wave count, or a lower degree fourth wave to move sideways for the alternate hourly bull count and the bear hourly count. This correction is not over and should continue for another one to seven days. For the bear count and alternate hourly bull count it may be a flat, combination or triangle, which means it could move sideways only and be very shallow. For the main bull count it must be a zigzag and it must be deeper to have the right look.
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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.
1. The size of the upwards move labelled here intermediate wave (A) looks right for a new bull trend at the weekly chart level.
2. The downwards wave labelled intermediate wave (B) looks best as a three.
3. The small breach of the channel about cycle wave a on the weekly chart would be the first indication that cycle wave a is over and cycle wave b has begun.
1. Within intermediate wave (3) of primary wave 5 (now off to the left of this chart), to see this as a five wave impulse requires either gross disproportion and lack of alternation between minor waves 2 and 4 or a very rare running flat which does not subdivide well.
2. Intermediate wave (5) of primary wave 5 (now off to the left of the chart) has a count of seven which means either minor wave 3 or 5 looks like a three on the daily chart.
3. Expanding leading diagonals are are not very common (the contracting variety is more common).
4. The possible leading diagonal for minor wave 1 and particularly minute wave ii within it look too large.
For the last three days, volume shows an increase. This supports the bull count a little, but the increase is not higher than prior down days within the sideways chop. For volume to clearly support the bull wave count it needs to show an increase beyond 187.34 (30th April) and preferably beyond 230.3 (9th April). Only then would volume more clearly indicate a bullish breakout is more likely than a bearish breakout.
Within cycle wave b, primary wave A may be either a three or a five wave structure. 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.
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 (with the sole exception of a very rare triple zigzag which does not look right). 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 intermediate wave (C) 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.
Within diagonals, the most common depth of the second and fourth waves is between 0.66 and 0.81. Minute wave ii is 0.67 of minute wave i.
Because minute wave iii is more likely to be a zigzag than an impulse it is possible that it is over now and shorter than minute wave i. This means minute wave iv should move lower as a zigzag, to last maybe five or eight days, and not be longer than equality with minute wave ii at 1,173.13. Minute wave iv must overlap back into minute wave i price territory (which it has already) and may not move beyond the end of minute wave ii below 1,169.94.
Main Bull Hourly Wave Count
I have checked the downward wave labelled here minuette wave (a) on the five minute chart. It will subdivide both as a five and a three.
Within a leading diagonal, the first, third and fifth waves are most commonly zigzags, but they may also be impulses. Both structural possibilities must be considered, with the zigzag possibility more likely.
For this bull wave count, minute wave iv should show up very clearly on the daily chart as a three wave zigzag, may last either a Fibonacci five or eight days, and may not be longer than equality in length with minute wave ii because the diagonal is contracting and the maximum limit is at 1,173.13.
The normal depth for second and fourth wave corrections within diagonals is between 0.66 to 0.81 the prior actionary wave. This gives a range for minute wave iv between 1,190 – 1,181.
If minuette waves (a) and (b) are over as labelled, then at 1,183 minuette wave (c) will reach 1.618 the length of minuette wave (a).
Minute wave iv must subdivide as a zigzag, and within it the B wave may not move beyond the start of the A wave above 1,227.54.
A new low below 1,200.03 would invalidate the alternate hourly bull wave count below (and the hourly bear wave count) providing confirmation for this main hourly bull wave count.
Alternate Bull Hourly Wave Count
Within a leading diagonal, the first, third and fifth waves may also be impulses. If one of these actionary waves is an impulse it is usually the third wave, so this alternate wave count must be seriously considered.
In the short term, a small fourth wave correction should unfold sideways and should show alternation with the deep 0.70 zigzag of minuette wave (ii). Minuette wave (iv) should be a shallow correction, ending at either the 0.236 or 0.382 Fibonacci ratios.
It is most likely to be a flat, combination or triangle. These structures may include a new high beyond its start above 1,227.54 as in an expanded flat, running triangle or an X wave within a combination. This hourly wave count looks at the possibility of a triangle. If this structure is how the fourth wave unfolds, then it may just move sideways in an ever decreasing range for another four or seven days.
A new high above 1,227.54 would invalidate the main hourly wave count and confirm this alternate.
Minuette wave (ii) lasted four days. Minuette wave (iv) may last at least three days, may be as long as five or eight days duration, and may not move into minuette wave (i) price territory below 1,200.03.
Although a zigzag is the more likely structure for minute wave iii (main hourly wave count), it would give this diagonal a clearer look if minute wave iii did continue higher because then the upper i-iii trend line would have a clear upward slope.
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.
1. Intermediate wave (1) (to the left of this chart) subdivides perfectly as a five wave impulse with good Fibonacci ratios in price and time. There is perfect alternation and proportion between minor waves 2 and 4.
2. Intermediate wave (2) is a very common expanded flat correction. This sees minor wave C an ending expanding diagonal which is more common than a leading expanding diagonal.
3. Minor wave B within the expanded flat subdivides perfectly as a zigzag.
1. Intermediate wave (2) looks too big on the weekly chart.
2. Intermediate wave (2) has breached the channel from the weekly chart which contains cycle wave a.
3. Minor wave 2 is much longer in duration than a minor degree correction within an intermediate impulse normally is for Gold. Normally a minor degree second wave within a third wave should last only about 20 days maximum. This one is in its 41st day and it is incomplete.
4. Within minor wave 1 down there is gross disproportion between minute waves iv and ii: minute wave iv is more than 13 times the duration of minute wave i, giving this downwards wave a three wave look.
This bear wave count now needs minute wave c upwards to complete as a five wave impulse. The short term outlook is exactly the same as the bull alternate hourly wave count, and the subdivisions on the hourly chart are exactly the same.
At 1,247 minute wave c would reach equality in length with minute wave a. Minor wave 2 would be very close to the 0.618 Fibonacci ratio at 1,242.
Minor wave 2 may not move beyond the start of minor wave 1 above 1,308.10. However, this wave count would be substantially reduced in probability well before that price point is passed. A breach of the upper maroon trend line, a parallel copy of the upper edge of the channel copied over from the weekly chart, would see the probability of this wave count reduced so much it may no longer be published before price finally invalidates it.
The hourly chart for the bear count is the same as the alternate hourly chart today for the bull count. They both expect sideways movement for a consolidation for one to five days, to be followed by a fifth wave up.
Today I am labelling minuette wave (iv) as a possible flat or combination. Minuette wave (iv) may be one of more than thirteen possible structures, and at this stage it is impossible to tell which will unfold. All possibilities must be considered.
If this is a flat or combination, it may move sideways in very choppy overlapping movement for a few days and would be reasonably likely to include a new high above 1,227.54 and a new low below 1,211.11.
Minuette wave (iv) may also equally as likely be a triangle as outlined in the alternate bull hourly chart.
Markets do one of two things: they are either trading (sideways) or trending. Therefore, different technical analysis approaches are required for these two different scenarios.
For those members who are colour blind I have changed the -DX line in ADX to a red dashed line, and made the ADX line bold black. The +DX line remains green solid.
Since 27th March Gold has been sideways. This chart outlines one possible TA approach to a sideways market. It follows the idea outlined in Kirkpatrick and Dhalquist, “Technical Analysis”, second edition, page 443.
On the 27th March ADX was declining and dropped below 30. This indicated a sideways market, and that an oscillator should be used to indicate support and resistance. I have chosen fast Stochastics with default settings. Also, I have added upper and lower trend lines to the price chart, from the first high and low of this range with upper and lower bands of 5% of market value. The approach would be to sell when price moves into the upper 5% band and stochastics is overbought, and to buy when price moves into the lower 5% band and stochastics is oversold. This approach would have worked in this instance because the market is moving horizontally. But sometimes a trading range is skewed in one direction or the other (usually in a direction against the main trend). In that case horizontal trend lines do not always clearly delineate the trading range, so flexibility in how trend lines are drawn is required. Stochastics would still be used in the same way.
The approach outlined here is one potential idea. As always, it is money management and risk management which makes the difference between profit and loss in the long term.
ADX continues to be low, below 20, and flat. This indicates still low volatility, very short swings, and no trend at this time.
Price has closed just over 3% of market value above the upper horizontal trend line which delineates the upper edge of this sideways movement. This may be taken as an indicator of a possible upwards breakout from this sideways range. But with ADX so low and so flat, the trend has not yet begun to gather steam.
ADX indicates the current direction of price is up.
After a small consolidation period, at this point it looks more likely that upwards movement may continue in a new upwards trend.
This analysis is published about 05:32 p.m. EST.