Both Elliott wave counts expected downwards movement.
Summary: Both bull and bear wave counts expect more downwards movement. The bull count should see downwards movement unfold as a three; the bear expects a five down. If the bear is right, then it may be confirmed this week with a new low below 1,162.80; if that happens, then the target for downwards movement to end is at 1,093 for a third wave.
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 ii looks like it is unfolding as the most likely structure, a zigzag.
Sometimes zigzags can look like impulses, if the B wave within them is quick and shallow, but more often zigzags have a clear three wave look to them because normally the B wave within a zigzag is somewhat in proportion to the A and C waves in terms of duration. It is likely that minute wave ii will have a clear three wave look to it at the daily and hourly chart level, which means when minuette wave (b) arrives it should show up as one or more green candlesticks or doji.
So far minuette wave (a) would be an incomplete impulse. It may end about the 0.618 Fibonacci ratio of minute wave i at 1,179.
Draw a best fit channel about minuette wave (a): draw the first trend line from the lows labelled micro waves 1 to 3, then place a parallel copy on the end of submicro wave (4). Micro wave 4 may end when price finds resistance at the upper trend line.
Micro wave 4 may not move into micro wave 1 price territory above 1,198.79.
When minuette wave (b) arrives, it may not move beyond the start of minuette wave (a) above 1,205.89. If minuette wave (a) completes as a five wave structure, then this invalidation point applies; but, if it completes only as a three, then the invalidation point does not apply because minute wave ii may yet unfold as a flat correction and minuette wave (b) within it may move beyond the start of minuette wave (a). A flat correction for minute wave ii has a lower probability than a zigzag.
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
Downwards momentum has increased, but is not yet substantially stronger than that seen during minute wave i down. This bear wave count expects a further strong increase in downwards momentum.
For the bear wave count, minuette waves (i) and (ii) will subdivide 5-3, exactly the same as minuette waves (a) and (b) for the bull wave count. At this stage, the wave counts do not diverge in their short term expectations and they may not for another few days.
For this bear wave count, at 1,172 subminuette wave iii would reach 4.236 the length of subminuette wave i. Thereafter, another small correction for subminuette wave iv and a final wave down for subminuette wave v would complete an impulse for minuette wave (i). At that stage, both bull and bear wave counts would expect some upwards movement that may show up on the daily chart as a green candlestick or doji, which would be a second wave correction for this bear or a B wave for the bull.
At this stage, both wave counts require a five down to complete which may be achieved in one or possibly two days.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,205.89.
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.
At the weekly chart level, volume consistently favours a bearish breakout: over the last three weeks, the two up weeks have lower volume than the prior down week; and, this pattern was also seen for prior moves within this sideways range, with the four down weeks from 29th March to 26th April stronger than the following two up weeks.
Daily Chart: ADX still indicates there is no clear trend. A range bound trading system would be better employed than a trend following system. Trading in a range bound market, as Gold has been in since the 27th of March, is inherently more risky than trading a trending market. Careful money management rules are essential to avoid wiping out your account. A good rule to follow would be to invest no more than 2% of the equity in your account on any one trade.
The range bound system illustrated here uses horizontal lines of support and resistance along with fast Stochastics to illustrate overbought and oversold. The idea is to expect the end of one swing and the start of another when price is at support or resistance and Stochastics is at oversold or overbought.
Stochastics is overbought, but price has not reached the upper horizontal trend lines providing resistance. A judgement must be made at this point: Should we expect this upwards swing to end only when price reaches resistance? And so expect Stochastics to remain overbought while price moves higher? Or is the upwards swing possibly over here?
The other consideration is that eventually price will break out of this range, of that we may be 100% confident. When it does, ADX may be slow to show the new trend and the breakout may come when this system would be expecting price to move in the opposite direction.
With the Elliott wave counts both expecting more downwards movement from here, and volume indicating a downwards breakout is more likely, I would advise extreme caution with this range bound trading approach. If price moves below the horizontal lines of support, then at this stage a downwards breakout may be more likely and the upwards swing this system expects may not happen.
There is slight cause for concern today in that volume is slightly lower than the prior down day. This is slightly suspicious because volume should be increasing if this downwards move is the start of something bigger. However, this is not absolutely necessary as the market can fall of its own weight.
This analysis is published about 05:58 p.m. EST.