Price has moved slowly lower on slightly lower volume.
This downwards movement looks corrective and fits both bull and bear Elliott wave counts.
Summary: In the very short term (next 24 hours) a little upwards movement to 1,180 may complete a small second wave correction for the bear. When that is done, then it will be poised to fall off a cliff. Volume favours the bear wave count; if the bear is correct, then the trend is down. The trend is your friend; trading against the trend does not usually end well. The bull wave count expects a third wave up to be in its earliest stages. The bull wave count requires some price confirmation while volume continues to indicate it is less likely.
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 problem which violates an Elliott wave rule.
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). There is also now a second expanding leading diagonal for minute wave i.
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 187.34K (30th April) and preferably beyond 230.3K (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
Downwards movement so far fits perfectly as a zigzag. This may be a second wave correction.
At 1,280 minute wave iii would reach 2.618 the length of minute wave i. This target may be about a month away. Along the way up downwards corrections should show on the daily chart.
If minute wave ii continues any further, then it may not move beyond the start of minute wave i below 1,162.80.
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 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 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.
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.
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 twelve days time.
Tuesday and Wednesday have completed down days with high volume. If a downwards breakout is beginning, then it would be expected to happen with increased volume.
Hourly Bear Wave Count
Gold often shows the second and fourth wave subdivisions clearly on the daily chart, within its third wave impulses, which is probably what is happening here. Subminuette waves ii and iv may show up on the daily chart so that minuette wave (iii) looks like a clear five wave impulse on the daily chart.
Subminuette wave ii is incomplete. Because micro wave A subdivides so well on the five minute chart as an impulse, micro wave B should not move beyond its start below 1,166.86. Subminuette wave ii looks like it is unfolding as a zigzag.
Micro wave C is very likely to make at least a slight new high above the end of micro wave A at 1,179.17 to avoid a truncation. At 1,180 micro wave C would reach equality in length with micro wave A and subminuette wave ii would correct to the 0.618 Fibonacci ratio of subminuette wave i.
When subminuette wave ii is complete, then that will be the fifth second wave correction in a series of five overlapping first and second waves. The next movement down may be explosive as the middle of a third wave begins, which may be deep and strong enough to make a downwards breakout clear.
At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If minuette wave (iii) lasts a Fiboancci five or eight days in total, then this target may be met in either another three or six days time.
Subminuette wave ii may not move beyond the start of subminuette wave i above 1,188.16. If this invalidation point is breached in the short term, then it would be minuette wave (ii) continuing sideways as a double flat or double combination. This idea is technically possible, but it has a very low probability. It would expect only sideways movement so not much movement above 1,188.16 at all.
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 is strongest in a down week. Overall volume is 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 breakout should come very soon now and volume indicates a downwards breakout is more likely than upwards.
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.
Eventually Gold will break out of this range it entered on 27th March; a breakout is 100% certain. What is uncertain is what direction the breakout will be. When the breakout comes, then this range trading system will be expecting a move in the opposite direction and the final swing will never come. Additionally, ADX may be slow to indicate the existence of a trend when it finally arrives, which again illustrates why trading this market is so risky.
Gold has been within this range now for 68 days. The longer price remains in this range the closer the breakout will be and the risker it is to expect the sideways swings to continue.
The weight of volume indicators is pointing to a downwards breakout as more likely. This is not definitive and only is indicative. Extreme caution is advised, particularly with any trades to the upside at this stage. The last two down days have completed on high volume, so volume continues to favour a downwards breakout as more likely.
If a new trend is developing, then Stochastics will no longer be useful and may remain oversold for much of a downwards trend.
Price is below the 21 day EMA. The two lower trend lines may offer enough resistance for downwards movement to continue from here. The bear Elliott wave count expects a downwards breakout may happen this week and this would fit with the regular TA picture, with the sole exception of ADX not yet confirming a new trend.
This analysis is published about 05:23 p.m. EST.