A small green doji candlestick fits for a fourth wave correction. In the mid term, the degree for this correction can now be known.
Summary: Gold is currently in a small fourth wave correction against the trend. Both bull and bear wave counts expect sideways movement for at least one more day to complete an expanded flat, triangle or combination. All three options are charted at the hourly chart level. Lower volume and a small doji candlestick for Monday’s session supports the view that Gold is currently in a correction.
Click on charts to enlarge.
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.
Last week 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.
Minute wave iii is unfolding as an impulse; currently, it is within the fourth wave at minuette wave degree.
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.
For both bull and bear wave counts, Gold is within minuette wave (iv). There are three possible structures, and the three hourly charts below all apply to both bull and bear wave counts. I will favour neither wave count as they are all equally likely. It is impossible at this stage to tell which structure will complete. The only thing which looks clear today is that Gold is within a small correction, a consolidation phase against the current upwards trend.
This hourly chart looks at the possibility of an expanded flat unfolding for minuette wave (iv).
Subminuette wave b is a 130% correction of subminuette wave a. Both subdivide as threes. This indicates an expanded flat. The most common length for subminuette wave c would be 1.618 the length of subminuette wave a at 1,206. This is close to the 0.382 Fibonacci ratio of minuette wave (iii) at 1,204, giving a $2 target range.
Within subminuette wave c, micro wave 2 may not move beyond the start of micro wave 1 above 1,232.49. Subminuette wave c must subvidide as a five wave structure downwards.
It is extremely likely for subminuette wave c to make at least a slight new low below the end of subminuette wave a at 1,211.11 to avoid a truncation and a very rare running flat.
If minuette wave (iv) is an expanded flat correction it may end more quickly. It may even end with one red candlestick for Tuesday, to total a Fibonacci three days.
This hourly chart looks at the possibility of running contracting triangle unfolding for minuette wave (iv).
Within both contracting and barrier triangles, subminuette wave c may not move beyond the end of subminuette wave a below 1,211.11. Within a contracting triangle, subminuette wave d may not move beyond the end of subminuette wave b above 1,232.49.
Within a barrier triangle, subminuette wave d may end about the same level as subminuette wave b at 1,232.49. In practice this means subminuette wave d may end slightly above 1,232.49 as long as the b-d trend line of the triangle remains essentially flat. This upper invalidation point is not black and white.
Subminuette wave e of both barrier and contracting triangle types may not move beyond the end of subminuette wave c.
In the short term, a three wave structure should unfold downwards for submineutte wave c and within it micro wave B may not move beyond the start of micro wave A above 1,232.49.
A contracting or barrier triangle may take a few days to complete; should see choppy overlapping movement within an ever decreasing range as well as declining volatility; should see MACD hover about the zero line; and, it may total a Fibonacci five or eight days (so far it has lasted only two).
There is a third possible structure which may be unfolding. This hourly chart looks at a combination for minuette wave (iv).
The first structure in the combination is a zigzag labelled subminuette wave w. The combination is joined by a three, a zigzag in the opposite direction labelled subminuette wave x. Within combinations the X wave may make a new price extreme beyond the start of the first structure of W.
There may only be one zigzag within a double or triple combination. Because subminuette wave w is a zigzag, this means subminuette wave y may not be. It may only be a flat or triangle.
Within subminuette wave y, the first wave down for micro wave A must be a three wave structure and most likely unfold as a zigzag. When it is complete, then micro wave B upwards must be a minimum 90% of micro wave A if subminuette wave y is a flat correction. If subminuette wave y is a triangle, there is no minimum upwards depth for micro wave B.
Subminuette wave y may be an expanded flat or running triangle, and within it micro wave B may include a new price extreme beyond the start of micro wave A above 1,232.49. There is no upper invalidation point for this wave count for this reason.
Subminuette wave y may take another few days to unfold. Minuette wave (iv) may complete in a Fibonacci five or eight days in total, and so far it has lasted only two.
ADX is still just below 15 and flat. Because ADX is not trending up this indicates low volatility, with very short swings and no clear trend. ADX supports the Elliott wave count which sees Gold currently within a small consolidation phase for a small fourth wave correction.
Volume is lower for Monday. When price is within a correction it is common for volume to be lower.
Stochastics indicates price is overbought, but this may be relieved as the correction continues sideways and / or lower.
I would look for price to find support about the upper lilac trend line which has indicated recent support / resistance, or at least close to this line.
Currently the +DX line (green line) is above the -DX line (red dashed line). This supports an upward breakout as more likely than downward.
This analysis is published about 05:17 p.m. EST.