Downwards movement fits the bear Elliott wave count best.
I have a new bull hourly Elliott wave count today.
Summary: The bear wave count expects more downwards movement to a target at 1,164 which may be met tomorrow. The new bull wave count requires upwards movement to 1,195.71 minimum. A new low below 1,162.80 would very strongly favour the bear wave count at this stage. Gold remains range bound; there is no clear trend. At this stage, the Elliott wave count which looks best is the bear, and it expects Gold is within a low degree correction.
To see the bigger picture and weekly charts go here.
Changes to last analysis are italicised.
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. I have tried to see a solution for this movement, and no matter what variation I try it always has a major problem.
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 (of which intermediate wave (A) or (1) is) are are not very common (the contracting variety is more common).
4. Volume does not support this bull wave count.
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) for an up day. 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. At 1,320 intermediate wave (C) would reach equality in length with intermediate wave (A) and primary wave A would most likely be a zigzag. At 1,429 intermediate wave (3) would reach 1.618 the length of intermediate wave (1) and primary wave A would most likely be an incomplete impulse.
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 (C) is likely to subdivide as an impulse to exhibit structural alternation with the leading diagonal of intermediate wave (A). This intermediate wave up may be intermediate wave (3) which may only subdivide as an impulse.
Minor wave 2 is over here. Minute wave c is just 2.7 longer than 1.618 the length of minute wave a. At 1,288 minor wave 3 would reach 1.618 the length of minor wave 1.
Within minor wave 3, no second wave correction may move beyond its start below 1,162.80.
A new high above 1,232.49 would eliminate the bear wave count and provide full confidence in the targets.
Hourly Bull Wave Count
Yesterday I was not confident with the wave count at the hourly chart level for the bull wave count. This idea above has a higher probability and has a more reasonable look.
Minute wave i must subdivide as a five wave structure, either an impulse or a leading diagonal. Leading diagonals are most commonly contracting, with the expanding variety not so common. This rarity reduces the probability of this wave count.
Leading diagonals require the second and fourth waves to subdivide as zigzags, and the fourth wave must overlap first wave price territory, which this one does. The first, third and fifth waves are also most often zigzags.
The most common depth of second and fourth waves within diagonals is between 0.66 to 0.81 the prior wave. Here minuettte wave (ii) is 0.54 and minuette wave (iv) is 0.86. Neither are within normal range slightly reducing further the probability of this wave count.
Within minuette wave (iv) zigzag, subminuette wave b is labelled as a double zigzag, but it has an atypical look. This structure moves sideways, whereas double zigzags should have a clear slope against the main trend and not a sideways look. If minuette wave (iv) continues further, then this problem may be resolved. Minuette wave (iv) may not move beyond the end of minuette wave (ii) below 1,169.60.
If minuette wave (v) has begun, then it must be longer than minuette wave (iii), because the diagonal is expanding, and must reach above 1,195.71. Leading diagonals may not have truncated fifth waves so minuette wave (v) must end above the end of minuette wave (iii) at 1,192.44.
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. For this piece of movement, the bear wave count has a much better fit than the bull wave count.
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.
4. Volume at the weekly and daily chart continues to favour the bear wave count. Since price entered the sideways movement on 27th March it is a downwards week which has strongest volume, and it is downwards days which have strongest volume.
5. On Balance Volume on the weekly chart recently breached a trend line from back to December 2013. This is another bearish indicator.
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 44 days long.
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.
Minor waves 1 and 2 are complete. Minute wave i within minor wave 3 may be incomplete on the hourly chart.
Minute wave ii may not move beyond the start of minute wave i above 1,232.49.
A new low below 1,142.82 would provide a lot of confidence in this bear wave count. At that stage, the bull wave count may not be continuing its second wave correction. But only a new low below 1,131.09 would invalidate any variation of a bull wave count and provide full and final confirmation for a bear wave count.
Hourly Bear Wave Count
Sideways movement does not look like the start of a third wave down; I will discard yesterday’s alternate hourly bear wave count because the subdivisions no longer fit.
Minute wave ii is likely continuing sideways as a flat correction. Minuette wave (a) is a “three”, a rare triple zigzag, and minuette wave (b) is unfolding lower as a zigzag. At 1,164 subminuette wave c would reach 1.618 the length of subminuette wave a.
Flat corrections require a minimum 90% retracement of their B waves, so minuette wave (b) must end at 1,165.76 minimum.
Minuette wave (b) may make a new low below the start of minuette wave (a) at 1,162.80, and is likely to do so because the most common type of flat is an expanded flat, which would require minuette wave (b) to be a 105% length of minuette wave (a) or more, at 1,161.32 or below.
The most common length of a B wave within a flat is between 100% to 138% the A wave. This gives a range for minuette wave (b) between 1,162.80 to 1,151.54.
When the length of minuette wave (b) is known, then the type of flat would be known. At that stage, the ratio between minuette waves (a) and (c) may be used to calculate a target for minute wave ii to end. For now I leave it at 1,205 which is the 0.618 Fibonacci ratio of minute wave i. This target may change.
Weekly Chart: Overall volume still favours a downwards breakout eventually. During this sideways movement, it is still down days and a down week which have higher volume. On Balance Volume breaches a trend line (lilac line) which began in December 2013, and the breach is significant.
While price has made higher lows, On Balance Volume has made lower lows (green trend lines). This small rise in price is not supported by volume, and it is suspicious.
Daily Chart: ADX is declining and below 15; there is no clear trend. A range bound trading system should be employed. Trading a range bound market is more risky than trading a trending market, so good money management rules are essential to ensure your account is not wiped out in this kind of market. A good rule would be to invest no more than 2% of equity in your account on any one trade.
The downwards sloping trend line which was providing resistance is weakening. The range bound system illustrated here uses fast Stochastics and horizontal support and resistance lines. With Stochastics returning from oversold to within normal range, and price moving higher from the lower support line, this approach would expect another upwards swing is likely.
The best fit Elliott wave count at this stage is the bear, particularly at the hourly chart level. Because it expects downwards movement from here, which may make a new low below 1,162.80, it does not agree with the regular technical analysis picture entirely. It is possible that another swing low may be made before the next upwards swing begins to take price up again to resistance, and that is the problem with this range bound market. It is impossible to tell exactly where one swing ends and another begins, which is why trading this kind of market involves greater risk.
Volume continues to favour the bear wave count. Within this range, it is downwards days which have highest volume. This is an indicator that the breakout, when it comes, will be more likely down than up. This often works, but not always.
Most recently, the last four up days have not managed to complete with higher volume than the prior down day of 4th June. This indicates that upwards and sideways movement from the last low may be a correction against a downwards trend, which fits the bear wave count.
This analysis is published about 04:15 p.m. EST.