Downwards movement was expected for Friday. The session did begin with some downwards movement, but price turned higher to complete a green candlestick for Friday which was not what was expected.
Price remains below the invalidation point on the hourly Elliott wave chart and is again finding resistance perfectly at the trend line on the daily chart.
Summary: The main wave count is still bearish and still expects the middle of a strong third wave down to begin from here. The target is slightly recalculated at 1,123.
To see weekly charts click here.
Changes to last analysis are bold.
BEAR ELLIOTT WAVE COUNT
The bear wave count expects that cycle wave a is an incomplete impulse.
Within primary wave 5, the daily chart focuses on the middle of intermediate wave (3). Intermediate wave (3) has yet to show an increase in downwards momentum beyond that seen for intermediate wave (1).
The bear wave count has increased in probability with a new low below 1,162.80. Full confidence may be had in this wave count with a new low below 1,131.09.
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) (to the left of this chart) 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 (to the left of this chart) 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 the downwards day of 9th April which still has strongest volume.
5. On Balance Volume on the weekly chart breached a trend line from back to December 2013. This is another bearish indicator.
1. Intermediate wave (2) (to the left of this chart) looks too big on the weekly chart.
2. Intermediate wave (2) (to the left of this chart) has breached the channel from the weekly chart which contains cycle wave a.
3. 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.
4. 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.
Minor waves 1 and 2 are complete. Minute waves i and ii are also complete. Gold may be ready to move to the strongest middle of intermediate wave (3).
Minute wave ii may not move beyond the start of minute wave i above 1,232.49.
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.
At 1,093 minute wave iii would reach 1.618 the length of minute wave i. If minute wave iii ends in a total Fibonacci twenty one days, then this target may be reached in another five days time.
Draw a base channel about minuette waves (i) and (ii) as shown (green trend lines). Look for upwards corrections along the way down to continue to find resistance at the upper edge of that channel. When the strongest part of downwards movement arrives, then it may have the power to break through support at the lower edge of the channel. For now this channel is perfectly showing where price is finding support and resistance. This channel is drawn in the same way on the daily and hourly charts, but the daily chart is on a semi-log scale and the hourly is arithmetic. Use the channel on the daily chart as a guide.
HOURLY BEAR ELLIOTT WAVE COUNT
This hourly chart works in exactly the same way for the bull wave count. The only difference for the bull wave count is the degree of labelling would be one degree lower.
Upwards movement continues to look clearly corrective and finds resistance at the upper edge of the channel on the daily chart. I have drawn a trend line on the hourly chart across the last two highs because the channel copied over from the daily chart is not perfect at the hourly chart level (the charts are on different scales). The aqua blue trend line may be useful to show resistance at the hourly chart level.
I have checked the subdivisions for submicro wave (1) on the one and five minute charts. There is a lot of overlapping within that downwards wave, but it can be seen as an impulse. Submicro wave (2) looks like a very strong three wave structure. It would most likely be over now.
Within micro wave 3, no second wave correction may move beyond the start of its first wave above 1,167.92.
If price moves above 1,167.92, then it is still possible that micro wave 2 may be continuing sideways as a double combination: zigzag – X (triangle) – second structure. If that happens, then I would expect upwards movement to end close to 1,167.92 because combinations should move sideways and don’t have a clear slope. The second structure in the double normally ends very close to the same level as the first. This is technically possible, but highly unlikely because it would mean the parallel channel on the daily chart would be overshot.
At this stage, with the strong third wave still not yet showing itself, I am not concerned that there has been a trend change. Upwards movement is on light volume, which is important. If upwards movement is a new trend, then it must show an increase in volume. That it does not, that it is happening on weakening volume, indicates it must be a correction against the trend.
There is no indication that the trend has changed to up; all indicators are that the downwards trend is not just intact but still in its early stages.
The upper edge of the parallel channel on the daily chart has now been tested six times since it began. That this trend line is holding perfectly indicates strong resistance.
The last small wave down on the five and one minute charts is a very clear five.
At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If minuette wave (iii) lasts a total Fibonacci thirteen days, then this target would be four days away.
BULL ELLIOTT WAVE COUNT
This bull wave count looks at the possibility that cycle wave a is a complete impulse and that cycle wave b began back at 1,131.09. Within cycle wave b, primary wave A is incomplete and subdividing either as a zigzag or an impulse.
1. The size of the upwards move labelled here intermediate wave (A) (to the left of this chart) looks right for a new bull trend at the weekly chart level.
2. The downwards wave labelled minor wave W 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 (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 problem which substantially reduces its probability.
2. Intermediate wave (5) of primary wave 5 (to the left of this 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). There is also now a second expanding leading diagonal for minute wave i.
4. Volume does not support this bull wave count.
5. Intermediate wave (B) or (2) may only be continuing as a double combination. Minor wave X is shallow, and X waves within double combinations are normally very deep. This one looks wrong.
Volume for 8th July shows a strong increase for an up day at 218.9K. It is stronger than all the prior down days since Gold entered the sideways consolidation back on 27th March except for one, that of 9th April at 230.3K.
Intermediate wave (A) (to the left of this chart) 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.
The only option now for the bull wave count is to see intermediate wave (B) or (2) continuing sideways as a double combination. The first structure in the double is a zigzag labelled minor wave W. The double is joined by a brief three in the opposite direction labelled minor wave X, a zigzag. The second structure in the combination is an expanded flat labelled minor wave Y which is incomplete.
Within minor wave Y, minute wave b is a 1.15 times the length of minute wave a indicating an expanded flat. Both minute waves a and b are three wave structures.
Minute wave c downwards must subdivide as a five, and because the first wave within it is an impulse and not a zigzag minute wave c may only be unfolding as an impulse.
Within minute wave c downwards, the third wave is incomplete for minuette wave (iii). At the hourly chart level, this bull wave count sees the subdivisions in exactly the same way as the bear (the bull sees everything one degree lower) so the hourly charts are the same. For this reason I will publish only hourly charts for the bear because they work in exactly the same way for the bull.
There does not look to be enough room for minute wave c to complete as a five wave impulse and remain above the invalidation point at 1,131.09. This is now the biggest problem with the bull wave count.
Weekly Chart: Overall volume still favours a downwards breakout which may now be underway. During this sideways movement, it is still one down day 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. Price is now breaking below support at the green trend line, which is another bearish indicator.
At the weekly chart level, volume is strongest in a down week. Overall volume up until two weeks ago volume was declining, typical of a maturing consolidation. Each series of down weeks includes a week with stronger volume than the following series of up weeks. The last two weeks has seen downwards volume increase as price breaks below the green trend line. A breakout should come with increasing volume, which looks like what is happening. This week has slightly higher volume than last week, and the fall in price is supported by volume.
Daily Chart: The ADX line is above 15 and still rising, which indicates that price may be in the earliest stages of a new trend. The -DX line is still above the +DX line, which indicates the trend is down.
Three small green candlesticks in a row have come with clearly declining volume. This rise in price is clearly not supported by volume and is suspicious. If this rise in price is a correction, then it should show lighter volume which supports the wave count.
This analysis is published about 04:23 p.m. EST.