Again upwards movement was unexpected for the bear Elliott wave count, but for the bull Elliott wave count the target was met.
Summary: Both bull and bear wave counts expect downwards movement from here. The bear wave count expects the middle of a third wave down to start, and its target is at 1,093. The bull wave count expects a deep second wave correction to move below 1,180. The invalidation / confirmation point is at 1,162.80. A new low below that point in the next few days would strongly favour the bear wave count. If price does not move below 1,162.80 in the next few days the bull wave count would be favoured.
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
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 further slightly reducing 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.
Minuette wave (v) is now a complete zigzag, and within it subminuette wave c is a complete five wave impulse. I have checked the subdivisions for this wave carefully on the five minute chart and it can be seen as complete.
Second wave corrections following leading diagonals in first wave positions are often very deep. Minute wave ii should be expected to be very deep, likely deeper than the 0.618 Fibonacci ratio at 1,180.
Minute wave ii may not move beyond the start of minute wave i below 1,162.80.
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, five of them.
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.
At this stage, a new low below 1,162.80 would provide a lot of confidence in the bear wave count. Further confidence would come with a new low below 1,142.82 and final confidence would come only with a new low below 1,131.09.
Minute wave ii is now very likely to be over here. If it moves any higher, then it should find strong resistance at the blue trend line.
Hourly Bear Wave Count
Upwards movement is too high and strong to be an X wave within a combination. It would not break any Elliott wave rules, but it does not have the right look at all.
At the daily chart level, it looks like there is a clear three up which may have ended at the 0.618 Fibonacci ratio of minute wave i.
At the hourly chart level, the subdivisions can fit as a zigzag only if the possible triple zigzag for minuette wave (a) is ignored. If minuette wave (a) was a leading contracting diagonal, then it does not have a typical look: the fifth wave of the diagonal is a bigger overshoot than is normal of the i-iii trend line.
Minuette wave (b) is a combination: flat – X (expanding triangle) – zigzag. It has a typical sideways look for a combination, and this is where a B wave looks to have unfolded on the daily chart. The flat for subminuette wave w though is a rare running flat, the second problem with this wave count at the hourly chart level. The subdivisions all fit perfectly, but the rarity of a running flat must reduce the probability of this wave count.
Minuette wave (c) is 1.58 short of 1.618 the length of minuette wave (a).
If this wave count is correct, then a very strong third wave down should begin from here.
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 still strongly indicates there is no clear trend. A range bound system should be employed. With price now fully above the downwards sloping blue trend line, which recently provided resistance, this approach would expect a continuation of upwards movement to the upper horizontal trend lines and for Stochastics to again reach overbought.
This range bound system diverges very strongly now from both Elliott wave counts. I will leave it up to members to use their own preferred analysis methods to supplement this Elliott wave analysis, and to make your own judgements. Only when price breaks above 1,232.49 or below 1,162.80 will we finally have confirmation that a breakout has occurred and will we know what direction it is in.
Volume continues to indicate a downwards breakout may be more likely than upwards, but this does not always work. Volume is an indicator, is not definitive, but is another piece of information to consider.
Within the sideways range, it is six days which have strongest volume and they are all down days: 9th April 230.3k, 30th April 187.8k, 29th April 181.8k, 16th April, 176.9k, 14th April 171.5k. The strongest up day had 171.1k on 13th May.
This analysis is published about 05:58 p.m. EST.