Downwards movement was expected for both bull and bear Elliott wave counts, in the short term, but price has moved mostly sideways to complete a small red candlestick.
Summary: Both bull and bear wave counts still 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. I have an alternate hourly count for the bear today which allows for a final small fifth wave up before the correction is over, but it has a lower probability. 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, then 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 was seen as a leading expanding diagonal. A leading diagonal requires the second and fourth waves to subdivide as zigzags; the first, third and fifth waves are most commonly zigzags. That is why minuette wave (v) on this chart is labelled a-b-c: it’s a zigzag for the fifth wave of a leading diagonal.
Second wave corrections following leading diagonals in first wave positions are normally very deep. Minute wave ii should be expected to be very deep, likely deeper than the 0.618 Fibonacci ratio of minute wave i at 1,179.
Minute wave ii may subdivide as several corrective structures, but it is most likely to be a simple zigzag subdividing 5-3-5. A double zigzag would be the next likely structure.
Within a zigzag, minuette wave (b) may not move beyond the start of minuette wave (a) above 1,205.89. I am not putting this invalidation point on the hourly chart though, because minute wave ii may not be a zigzag and may be a flat or combination.
Within a flat or combination, the b or x wave may move beyond the start of the a or w wave at 1,205.89.
It is too early to tell which corrective structure may unfold for minute wave ii.
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.
Main Hourly Bear Wave Count
Minute wave ii is most likely to be over. Sideways movement for Friday’s session is too time consuming to look like part of the last wave up. It looks like the next wave is underway.
Minute wave ii subdivides as a zigzag (all subdivisions of this movement are seen on yesterday’s hourly chart). Minuette wave (c) is just 1.58 short of 1.618 the length of minuette wave (a). Minute wave ii has ended extremely close to the 0.618 Fibonacci ratio of minute wave i which was at 1,205.39.
At 1,093 minute wave iii would reach 1.618 the length of minute wave i.
The first move down may be a low degree first wave and incomplete second wave correction.
Within micro wave 2, a triangle may be almost complete for submicro wave (B). When it is complete, a short wave up for submicro wave (C) would be very likely to move slightly above the end of submicro wave (A) at 1,203.23 to avoid a truncation. Micro wave 2 may not move beyond the start of micro wave 1 above 1,205.89.
If price moves above 1,205.89 in the short term, then I would use the alternate below.
Alternate Hourly Bear Wave Count
It is also possible that minute wave ii is incomplete, that a final fifth wave up is required to complete minuette wave (c).
However, this sideways movement for subminuette wave iv is grossly disproportionate to subminuette wave ii: subminuette wave ii lasted just two hours while subminuette wave iv is 13.5 times that duration. Triangles are normally more long lasting than zigzags, but this difference is too great which gives this upwards movement a three wave look while it is labelled as a five.
If this idea is correct, then at 1,215 subminuette wave v would reach equality in length with subminuette wave i.
The ratio between minuette waves (a) and (c), which the main bear hourly wave count has, would be lost. Minute wave ii would no longer end at the 0.618 Fibonacci ratio of minute wave i.
This alternate has a lower probability than the main bear hourly wave count.
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.
Stochastics is now overbought and so this system could expect the upwards swing to possibly end here. But this is the problem with this approach. While Stochastics is overbought price has not yet reached the resistance lines. Upwards movement could continue for a few days until price again reaches resistance. Or the upwards swing may be shorter and the next downwards swing (or even a downwards breakout) could begin from here. It is impossible to tell with this approach exactly where one swing ends and the next begins.
The most reasonable approach would be to expect price to continue up until it reaches resistance and for Stochastics to continue to remain overbought for a few days, like it did for the last swing high which ended on 18th May.
This approach does not now diverge so strongly from the Elliott wave counts.
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 04:57 p.m. EST.