Downwards movement was expected, again, and this has occurred.
Supported again by technical analysis indicators, the Elliott wave count remains the same.
Summary: Downwards movement should continue. Use the brown channel on the hourly chart to indicate where upwards corrections should find resistance. The target for the next interruption to the trend may be at 1,123 which may be met in three days time.
To see weekly charts click here.
Changes to last analysis are bold.
MAIN ELLIOTT WAVE COUNT
The main 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).
This 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 2nd July which 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 thirty four days, then this target may be reached in another fourteen days.
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.
If the green channel is breached to the upside, then my wave count may be wrong. It is technically possible (but extremely unlikely) that minute wave ii could continue further sideways as an expanded flat or double combination. However, it may not move beyond the start of minute wave i above 1,232.49.
HOURLY ELLIOTT WAVE COUNT
This hourly chart works in exactly the same way for the alternate wave count. The only difference for the alternate wave count is the degree of labelling would be one degree lower.
Today I have moved the degree of labelling all down one degree starting at the end of micro wave 2. I do not think the middle of the third wave has yet passed, and so only submicro wave (1) may be unfolding, not submicro wave (3).
From the end of micro wave 2, submicro wave (1) is unfolding as an impulse, and within it, minuscule (red) waves 1 and 2 are complete and minuscule wave 3 is incomplete.
Within minuscule wave 3, nano waves (brown circle) i and ii are complete. Nano wave iii is unfolding as an impulse and its fourth wave within it is completing today. Subnano (navy blue) wave (iv) may not move into subnano wave (i) price territory above 1,151.20.
When subnano wave (iv) is complete, then subnano wave (v) should make new lows. At 1,134 nano wave iii would reach 4.236 the length of nano wave i. This looks like a reasonable target for subnano wave (v) to complete the impulse for nano wave iii.
When nano wave iii is over, then nano wave iv must unfold. Nano wave iv is extremely likely to be a sideways movement, and likely to be very shallow in relation to nano wave iii. Nano wave ii was a very deep 0.93 zigzag. Nano wave iv is most likely to be very shallow, either 0.236 or maybe even 0.146 of nano wave iii. Nano wave ii was not time consuming enough to show on the daily chart so nano wave iv should not be either and should be over within a few hours.
When nano wave iv is complete, then nano wave v should move lower to complete minuscule wave 3.
Minuscule wave 2 was a very deep 0.77 zigzag which was quick enough to not show on the daily chart. When minuscule wave 4 arrives, then it should be very shallow, most likely 0.236 the length of minuscule wave 3, and likely to be very quick.
Overall, I expect more downwards movement with corrections along the way down to find resistance now at the upper edge of the brown channel.
When the lower edge of the brown channel is breached, then look for price to next find support at the lower edge of the green channel. When that green channel is breached by downward movement (at the daily chart level), then I would expect downward momentum to show a very strong increase.
At 1,123 micro wave 3 would reach 1.618 the length of micro wave 1. Micro wave 2 was a very deep 0.74 double zigzag so micro wave 4 should be very shallow, maybe 0.236 of micro wave 3. Micro wave 4 may be a flat, combination or triangle, may not show on the daily chart, and may be too quick.
As before, I am still expecting the strongest piece of downward movement to be within the fifth wave of either (or more than one of) of the third waves of micro, subminuette, minuette or minute degrees.
At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i).
ALTERNATE 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.
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.
At 1,136 minuette wave (iii) would reach equality in length with minuette wave (i).
Weekly Chart: Overall volume still favours a downwards breakout which may now be underway. During this sideways movement, it is still three 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. 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. A breakout should come with increasing volume, which looks like what is happening. Last week has slightly higher volume than the week immediately prior; the fall in price is supported by volume.
RSI is usually a fairly reliable indicator of lows. At the weekly chart level, RSI is well above 30 indicating there is room yet for Gold to move lower.
Daily Chart: ADX is very clear. ADX is above 20 and the -DX line is above the +DX line. There is a trend and it is down. The Trend Is Your Friend. Trading against a trend is not advised, and only the most experienced traders can profit from a mean reverting system to trade against a trend. With the EW wave count supported by this TA, and the EW count expecting strong downwards movement to turn up soon, any trades against the trend have the potential for huge losses.
It is easier to profit in a trending market. If you know what direction the trend is, and especially if there are clear lines of support or resistance for corrections against the trend, it should be relatively easy to join the trend at the end of a correction.
The green trend channel shows where price is finding resistance and support. The upper green trend line on the daily chart should continue to show where corrections against this trend find resistance, along with the brown channel on the hourly chart. The lower green trend line on the daily chart may show where the trend is finding support, but be warned this trend line is expected to be breached at some stage by very strong downwards movement.
If price moves above the upper edge of the green channel on the daily chart, then the EW count would be wrong and something else may be happening. At that stage, the trend for the short / mid term may be in doubt. At this stage, there are no indicators that we are about to see reasonable upward movement, so is not expected.
Volume for the last three days is increasing, whereas for the last movement up against the trend volume declined. Volume is still clear; the trend is down.
On Balance Volume is showing some positive bullish divergence: while price makes new lows in the last two days, OBV has failed to also make new lows. This is because overall the last rise in price was on heavier volume than this current fall in price. Because volume bars are still showing an increase for this fall in price, I am not concerned, at this stage, with this bullish divergence in OBV.
Price is finding support at the downward sloping blue line. When downward movement breaks through this line, then we should see some increase in momentum.
During the sideways consolidation from 27th March to 24th June, it was three down days which had the strongest volume.
RSI remains above 30, so there is still room for Gold to fall. RSI does not indicate there is a low in place.
This analysis is published about 04:33 p.m. EST.