Price continues to fall exactly as expected.
The Elliott wave count remains the same, and all targets are the same.
Summary: Downwards movement should continue. Price is today finding support at the green channel. On the hourly chart, the new red channel may show where the next small correction finds resistance. The next move down may break below the green trend line, and if it does, then expect downwards momentum to increase strongly, but it may not be very strong until some fifth waves arrive.
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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). Within intermediate wave (3), minor wave 3 has yet to show an increase in momentum beyond that seen for the end of minor wave 1 at the left of the chart. This is why I still expect to see more downwards movement to show a further increase in downwards momentum.
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. The low on my data feed for Friday is at 1,131.22, so we don’t quite have full confirmation.
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. During the consolidation from 27th March to 30th June (about), it was four down days which had the strongest volume (pinpointed on the daily TA chart).
5. On Balance Volume on the weekly chart breached a trend line from back to December 2013. This was 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 part of intermediate wave (3).
Minute wave ii cannot now continue any further. Minute wave iii is underway and may only subdivide as an impulse. Minuette wave (iv) within this impulse may not move into minuette wave (i) price territory above 1,169.63.
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 thirteen days. Because minute wave ii shows on the daily chart so strongly it is extremely likely that minute wave iv will also. Minute wave ii lasted nine days and minute wave iv may be 0.618 the duration about a Fibonacci five days in total. Of all the third wave targets calculated, it is the end of minute wave iii which is the most likely to be where a multi day interruption to this trend arrives.
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. 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.
HOURLY ELLIOTT WAVE COUNT
I am moving everything within micro wave 3 all back up one degree. I am struggling with what degree to label this movement, but whatever degree it is labelled the lines of resistance remain the same, the target at minute degree will be the same at 1,093, and the direction will be the same.
Within the last wave down, it was the fifth wave which exhibits the strongest downwards momentum. This is typical of Gold and other commodities. It may be replicated again for the ends of one or more of these third waves.
Ratios within minuscule wave 3 are: there is no Fibonacci ratio between nano waves i and iii (brown circle), and nano wave v is 0.72 longer than equality in length with nano wave i.
Nano wave v exhibited the strongest downwards momentum. Nano wave ii was a deep 0.63 zigzag and nano wave iv was a shallow 0.19 regular contracting triangle; there is perfect alternation between them.
Ratios within nano wave iii are: subnano wave (iii) (navy blue) has no Fibonacci ratio to subnano wave (i), and subnano wave (v) is 0.70 short of 0.618 the length of subnano wave (iii).
The brown channel is a base channel about nano waves i and ii. Draw the first trend line from the start of nano wave i to the end of nano wave ii, then place a parallel copy on the end of nano wave i. In the first instance, look for upwards movement to find resistance at the lower edge of this channel now that it is breached. If this trend line is breached, then the next line of resistance is the upper edge of the red channel.
The red channel is drawn about submicro wave (3). Draw the first trend line from the ends of minuscule waves 1 to 3 (red), then place a parallel copy up on the end of nano wave iv to contain the whole movement. Minuscule wave 4 may end when upwards movement comes to touch this red trend line. If that line is breached, then look for the next line of resistance to be the upper edge of the brown channel. The upper edge of the red channel is the most likely place for this fourth wave to end.
Minuscule wave 4 may not move into minuscule wave 1 price territory above 1,158.34.
Micro wave 3 would reach 1.618 the length of micro wave 1 at 1,123. Micro wave 4 may or may not show up on the daily chart. Micro wave 2 did show up on the daily chart with two green candlesticks lasting one and a half days.
At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). Minuette wave (iv) may or may not show up on the daily chart. Minuette wave (ii) shows up lasting three candlesticks, but for Gold often its fourth waves are quicker than its second waves giving its impulses a curved look (there is perfect example of this for subnano wave (iii) within nano wave iii on this hourly chart).
ALTERNATE ELLIOTT WAVE COUNT
For a full analysis of this bull wave count see yesterday’s analysis. Today, with price only slightly above the invalidation point at 1,131.09 (my FXCM data feed has today’s low at 1,131.22), there is not enough room for minute wave c down to complete as a five wave impulse. I expect this bull wave count to be invalidated next week.
The only option now for minute wave c is to see its third wave over. But minuette wave (iii) will not subdivide easily as an impulse on the hourly chart, and on the daily chart this does not look at all like an impulse. This wave count now looks all wrong.
Weekly Chart: Price has broken out of the prior sideways range downwards, which is the direction indicated by volume. During this prior sideways movement, it was four down days and a down week which had 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. OBV may now break below support at its green trend line. If that happens, then it will be further bearish indication.
Now that price has broken below the prior area of consolidation volume has increased. This fall in price was supported by volume for the first three down weeks, but not this last week which has just ended. That’s okay. Price can fall on light volume because it does not need more sellers to drive price down, only an absence of buyers. This is why analysts say “the market can fall of its own weight”. That may be what is happening this week, and volume does continue to be reasonable.
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: The ADX line is comfortably above 20 and rising, which indicates a strengthening trend. The -DX line is above the +DX line indicating the trend is down. A trend following trading system should be used.
The idea illustrated here is very simple, and simple is usually best. It uses trend lines to show support and resistance. Expect upwards movement to end at the upper trend line and to bounce down from there. Look for downwards movement to find support at the lower trend line, although this line may be breached. For a downwards trend selling at resistance and exiting at support, staying with the trend, is one of the simplest trend following methods.
Price and On Balance Volume both have breached their small blue lines. While volume for Friday was lower than Thursday, On Balance Volume agrees with price.
RSI on the daily chart is slightly dipping below 30 indicating oversold. However, for the weekly chart there is still room for Gold to fall. For a wave at primary or intermediate degree, RSI should be used at the weekly chart level first. At the end of intermediate waves (3) and primary wave 3, RSI managed to be much lower than 30 on the weekly chart before price found its lows.
This analysis is published about 07:38 p.m. EST.