Yesterday’s analysis was unclear as to what direction to expect with three different Elliott wave counts with different expectations. A new low below 1,178.08 eliminated one Elliott wave count, now leaving only two which expect the same direction next.
Summary: There is now only one bull and one bear wave count. Both need more downwards movement to complete an impulse which is in its fifth wave. I have two targets: 1,165 and 1,157. The second lower target may be more likely. Any new low below 1,142.82 would confirm the bear wave count and invalidate the bull.
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. The possible leading diagonal for minor wave 1 and particularly minute wave ii within it look too large.
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. 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.
This bull wave count sees minor wave 1 a short brief impulse and minor wave 2 now an incomplete expanded flat correction. Within minor wave 2, minute wave c has now moved below the end of minute wave a at 1,178.59 avoiding a truncation and a very rare running flat.
After completion of minor wave 2, then a new high above 1,232.49 would eliminate the bear wave count and provide full confidence in the targets.
I have spent time today on the five minute chart to see subdivisions within the end of the triangle of minuette wave (iv). It is vital to find out exactly where the triangle ends and the next wave down begins. I have concluded the triangle ended at 1,191.60, and it may even have been a nine wave triangle. This is where minuette wave (v) began.
The triangle looks more like a barrier than a regular contracting triangle because the b-d trend line is essentially flat. Fifth waves following barrier triangles are either very short and brief, or long extensions. This one is incomplete and so it may be a long extension.
At 1,165 minuette wave (v) would reach equality in length with minuette wave (i). Also at 1,165 minuette wave (c) would reach 1.618 the length of minuette wave (a). This first target would see minuette wave (v) relatively short and brief.
At 1,157 minuette wave (v) would reach equality in length with minuette wave (iii). Both minuette waves (iii) and (v) would be extended. Because minuette wave (v) has so far taken two days (two candlesticks on the daily chart) and it is incomplete, this lower target may have a slightly higher probability.
In the very short term a small fourth wave may have just ended. When Gold’s fifth waves extend they often do so as the fifth wave of a third. The next downwards movement could be a swift strong fifth wave to end subminuette wave iii, and may show an increase in downwards momentum.
Minuscule wave 4 may not move into minuscule wave 1 price territory above 1,182.39.
As the structure unfolds downwards, the short term invalidation point will move to each corresponding first wave end; each fourth wave yet to unfold may not move into its counterpart first wave price territory. Submicro wave (1) has its extreme at 1,180.52, micro wave 1 at 1,182.01, and subminuette wave i at 1,179.60.
If the labelling of minuette wave (v) here is wrong and its second wave correction is yet to unfold, then it may not move beyond the start of its first wave above 1,191.60.
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 is incomplete on the hourly chart.
Minute wave ii may not move beyond the start of minute wave i above 1,232.49.
The bull and bear wave counts both see a five wave impulse down incomplete. They do not diverge at this stage.
If this impulse takes price below 1,142.82, then the bull wave count would be invalidated. 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.
When this five wave impulse is complete, then the bull wave count will expect a third wave up and this bear wave count will expect a second wave correction. At that stage, the bear wave count would be invalidated with a new high above 1,232.49 and the bull wave count would be confirmed.
Structures, subdivisions, invalidation points and expectations are the same at this stage for both bull and bear wave counts.
ADX is still below 15 and flat, still indicating no clear trend. Stochastics is still oversold. This approach expects an upwards swing from here, and the higher target of 1,165 for the Elliott wave counts would be favoured as that would see only an overshoot of the lower aqua blue trend line.
If the lower aqua blue trend line is breached by a close of 3% or more of market value, that would indicate a downwards breakout underway. That price point is at 1,143, which is almost the same as the price point of 1,142.82 which differentiates the bull and bear Elliott wave counts.
This traditional TA approach of using Stochastics plus support and resistance expects another upwards swing to begin about here. But an overshoot of the lower trend line is allowed for, and this illustrates the very high risk in trading a sideways moving market. The lower aqua trend line was overshot by 8.65 on 1st May, and it could again be overshot by a similar amount.
Volume is increasing as price is declining over the last seven days. This price decline is supported by volume. This favours the bear wave count.
Overall since price entered the sideways movement on 27th March it remains the downwards days and weeks which have highest volume. This favours the bear wave count.
Only when ADX moves to 15 or higher and is trending upwards would the start of a new trend be indicated.
This analysis is published about 05:45 p.m. EST.