Previous analysis warned of possible swift strong fifth wave extensions to end a third wave.
Last analysis also stated that when price broke below the lower edge of the green channel on the daily chart, then an increase in downwards momentum was expected. That was exactly what happened.
Summary: Downwards momentum still needs to show an increase beyond that seen for minor wave 1. This structure is incomplete; the trend is still down. Use the lower green trend line on the daily chart and the upper violet trend line on the hourly chart to show where price may find resistance. The next short term target is at 1,060. The target for the next multi day interruption to this trend is now at 1,023.
To see weekly charts click here.
Changes to last analysis are bold.
DAILY ELLIOTT WAVE COUNT
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.
I now have full confidence in this wave count with a new low below 1,131.09. This confidence is based upon seeing a prior upwards movement as a five (I cannot see a solution where this is a three). Because this has always been the crucial aspect to my wave count, I publish this piece of movement below with a short explanation.
Draw a base channel about minuette waves (i) and (ii) as shown (green trend lines). If the steeper violet channel is breached then look for the lower green trend line to provide resistance. Only if the upper green line is breached would I consider the wave count to be wrong.
Draw a best fit channel about subminuette wave iii as shown (violet lines) and use that channel on the hourly chart.
Micro wave 4 (if it continues further) may not move into micro wave 1 price territory above 1,147.26.
At 957 primary wave 5 would reach equality in length with primary wave 1.
Any bullish wave count at this stage must see cycle wave a over at the low of 1,131.09 (labelled minor wave B on this chart). The first move up for the new bull trend would be this five wave expanding diagonal.
Because the first move up subdivides as a five that means a B or second wave correction may not move beyond its start below 1,131.09.
For any bull wave count to remain viable this upwards wave must now be seen as a three (because when an A wave subdivides as a three the following B wave may move beyond its start).
I have considered all possible corrective structures for this upwards movement. The only possibility which fits and meets all Elliott wave rules is one of the rarest structures, a triple zigzag, but it would look all wrong. Each zigzag in a multiple exists to deepen the correction, but for this idea the second zigzag would barely move beyond the first, and the X waves would be too deep. Where a triple zigzag looks all wrong an ending diagonal looks all right, fits perfectly, and is a much more common structure.
I have concluded that this wave up is an ending expanding diagonal. Which means that with a new low below 1,131.09 any bull wave count should now finally be put to rest.
HOURLY ELLIOTT WAVE COUNT
Gold often exhibits swift strong fifth wave extensions, and they usually turn up to end its third waves. That was exactly what happened yesterday to end micro wave 3.
To end one or both of minuette wave (iii) and minute wave iii, there may be another one or two swift and strong fifth wave extensions. This may be more sustained to increase momentum at the daily chart level.
There is no Fibonacci ratio between micro waves 1 and 3. This is important and means that micro wave 5 is more likely to exhibit a Fibonacci ratio to either micro waves 1 or 3. At 1,060 micro wave 5 would reach 0.618 the length of micro wave 3.
Submicro wave (5) to end micro wave 3 was a swift strong extended fifth wave. Sometimes when a movement is “too far too fast” a fifth wave truncation turns up. It is possible that my target of 1,060 is too low. It is possible that micro wave 5 may be truncated. This is not something that we should expect to see, but it is a possibility to be aware of in this case. When micro wave 5 is a clear five wave structure it may be over, whether or not price reaches the target.
Within micro wave 5, submicro wave (2) may not move beyond the start of submicro wave (1) at 1,119.23 (this invalidation point allows for the possibility that my labelling of micro wave 5 is one degree too high).
At the daily chart level, micro wave 3 now has a curved look to it (very typical for Gold’s third waves). We may see this curved look for one or more of subminuette, minuette or minute degree third waves too.
For now I will focus on looking for the end of subminuette wave iii. When subminuette waves iii and iv are complete, then I will use multiple degrees to calculate the target for minuette wave (iii). I will not provide a target again for it until I can do so at more than one wave degree.
When minuette waves (iii) and (iv) are both complete, then the target for minute wave iii to end may be recalculated and may change. For now I can only calculate that at one wave degree.
Create a mid line to the violet parallel channel. Price has been finding some support at this line. When it is breached look for that mid line to provide resistance.
Weekly Chart: The lilac trend line on On Balance Volume has been breached, which is a longer term bearish indicator.
OBV is now breaking below the shorter green trend line, another bearish indicator.
Volume for recent downwards weeks has shown an increase which comes after the consolidation showed a typical decline in volume as it matured.
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: What is quite stark on this daily chart is the strong volume for Monday. This strong downwards movement was supported very well by volume. There is nothing suspicious about it.
Sometimes a spike in volume on a day where price moves strongly in the direction of the trend indicates an end (at least temporarily) to that trend. I have looked back at primary wave 3, which ended on June 2013, and during its end there were a few volume spikes on strong down days. Not all showed a temporary end to the fall in price. The biggest on 20th June, 2013, was followed by a new low the next day and then four more red daily candlesticks.
What is very clear though as a difference between those volume spikes and this one today is RSI: for each volume spike within primary wave 3 that was at or very near the end of a downwards wave, it came with RSI indicating comfortably oversold. Today RSI is now comfortably oversold, but each price low within the ends of third and fifth waves during April and June 2013, also saw divergence between price and RSI. Today there is no divergence.
A correction may be expected soon, but not quite yet.
This analysis is published about 05:52 p.m. EST.