Price continues to move slowly lower.
Another red candlestick fits the main Elliott wave count.
I have a new alternate Elliott wave count for you today.
Summary: The main wave count and the new alternate still expect more downward movement as does the regular technical analysis. For the main wave count the target for a third wave to end remains at 1,060. At that point, another fourth wave correction should unfold which may or may not show up on the daily chart. The new alternate expects a third wave to end at 1,061 and there a multi-day correction should begin for a fourth wave. When the correction arrives, then trend lines showing where price should find resistance may be used to show which wave count is correct. For now expect any more surprises to be to the downside; a fifth wave to end a third wave is approaching and they can be very swift, strong and extended.
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Changes to last analysis are bold.
MAIN 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. The strongest downwards momentum may turn up in a fifth wave somewhere within minor wave 3, maybe the fifth wave to end minute wave iii or that to end minor wave 3 itself.
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.
Gold often exhibits swift strong fifth wave extensions, and they usually turn up to end its third waves. We saw this to end micro wave 3. It is entirely possible, and should be expected, that it may happen again to end one or more of subminuette wave iii, minuette wave (iii), minute wave iii, minor wave 3 and maybe even intermediate wave (3). Look out for any more surprises on the way down to be to the downside.
Ratios within micro wave 3 (the middle of this whole third wave) are: submicro wave (1) has no Fibonacci ratio to submicro wave (3) and submicro wave (5) is 2.5 longer than 1.618 the length of submicro wave (3). Because there is a good Fibonacci ratio within this movement for this main wave count and there is not for the alternate, this main wave count has a higher probability.
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. This fifth wave down for micro wave 5 will complete subminuette wave iii impulse. Subminuette wave iii has now lasted a Fibonacci thirteen days and the structure is incomplete. It may not exhibit a Fibonacci ratio, or it may end in one more day and be one day longer than a Fibonacci thirteen.
I am changing the analysis within micro wave 5. I have checked the five minute chart and it is possible to see submicro wave (1) over as labelled, not higher up. This has better proportion and overall a better look. It makes no difference to expected direction or the target. Micro wave 5 may have two overlapping first and second waves for submicro waves (1) and (2) and now minuscule waves 1 and 2. This still expects an increase in downward momentum to come as the middle of a third wave unfolds. When submicro wave (3) is complete it is possible that submicro wave (4) may be quick and shallow and submicro wave (5) may be swift, strong and extended. It does not have to be like this, but do look out for this tendency of Gold to exhibit this behaviour.
Within minuscule wave 3, no second wave correction may move beyond the start of its first wave above 1,106.09.
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. This happens often because Gold’s second wave corrections are often more time consuming than its fourth waves; because it has swift strong fifth waves, they tend to force the fourth wave corrections to be relatively swift and shallow.
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.
At 1,023 minute wave iii would reach 2.618 the length of minute wave i. Minute wave iii has now lasted twenty five days and its structure is incomplete. If minute wave iii totals a Fibonacci thirty four days, then it may end in another nine days. If that expectation is wrong, then minute wave iii may be too long in duration, it may not exhibit a Fibonacci duration, and may end quicker than this.
ALTERNATE ELLIOTT WAVE COUNT
It is possible that minuette wave (iii) was over at the last low. The structure within minuette wave (iii) can fit as a completed five wave impulse on the hourly chart, shown below.
Minuette wave (iii) has no Fibonacci ratio to minuette wave (i). This means a Fibonacci ratio for minuette wave (v) would be extremely likely.
Minuette wave (ii) lasted three days and shows up on the daily chart. Minuette wave (iv) would be very likely to be quicker than three days because it came after a swift strong fifth wave. It is very likely that minuette wave (iv) is over as labelled in just one day, and it also shows up on the daily chart.
If minuette wave (iv) is not over and continues higher, then it may not move into minuette wave (i) price territory above 1,169.63. It should find resistance at the upper edge of the best fit channel.
This two hourly chart shows all of minuette wave (iii).
Within minuette wave (iii), there are no Fibonacci ratios between subminuette waves i, iii and v. This is unusual for Gold and substantially reduces the probability of this wave count.
Further, it does not have as typical a look on the daily chart as the main wave count. This wave count is an alternate with a lower probability.
Minuette wave (ii) was a relatively deep 0.52 expanded flat correction. Minuette wave (iv) was a more shallow 0.41 and quicker zigzag. There is very good alternation between these two corrections.
If minuette wave (v) were to reach only equality with minuette wave (i), then it would be truncated. This is unlikely. The next likely target would be at 1.618 the length of minuette wave (i) at 1,061. This target would see minute wave iii have no Fibonacci ratio to minute wave i.
Because it should be expected that minute wave iv shows up on the daily chart (most likely lasting five days), this alternate wave count expects that multi-day correction against the trend to come sooner than the main wave count. Because this alternate wave count has a lower probability, my conclusion is that it is possible but less likely the multi-day correction will arrive sooner than later.
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 this week is already showing an increase beyond last week, and Friday has not yet begun. This fall in price is supported by volume at the weekly chart level.
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.
I have looked back again at the ends of third and fifth waves within primary wave 3 during April, May and June 2013. During that downwards movement there were a few strong down days with volume spikes, similar to what we have seen this week for Monday. Each time this happened it was not the temporary price low. A brief discussion of some of those important down days follows.
The strong days of 12th and 15th April, 2013, (a Friday and Monday, so consecutive trading days) saw one more day down after that to reach the low on 16th April. At the low price diverged with RSI: price made a new low while RSI turned up. That low ended minute wave iii within minor wave 5 within intermediate wave (3) within primary wave 3.
There was a series of strong down days culminating in a volume spike on 16th May, 2013. The price low happened the following trading day on 20th May and was again seen with divergence between price and RSI on that day. That low ended a truncated fifth wave (the third wave prior was the strongest move; too far too fast) for minor wave 5 within intermediate wave (3) within primary wave 3.
The strong downwards day of 19th June, 2013, was impressive with a price range of 27.65 for the day and the strongest volume spike of them all at 124.9K. But that was not the end of the fall. The low came six days later on 27th June 2013. Only that last day with the final low for primary wave 3 saw a divergence between price and RSI. The final day also produced a new low but a green candlestick and a strong bullish engulfing candlestick pattern. That was the end of primary wave 3 and the start of primary wave 4.
With this analysis we should expect the pattern to be repeated again within primary wave 5. At the price low for Monday’s strong downwards day to 1,072.09, there is no divergence between price moving lower and RSI also moving lower. The short term / mid term low may not be seen for another one to three days yet. This analysis fits nicely with the Elliott wave count and potential Fibonacci durations.
A correction may be expected soon, but not quite yet.
ADX is still clear. The ADX line is above 20 and rising indicating a strengthening trend. The -DX line (red dashed) is above the +DX line (solid green) indicating the trend is down. A trend following trading system should be used.
The simplest system for a downwards trend like this is to use resistance lines: each time price touches resistance that represents an opportunity to enter in the direction of the trend. Trades may be held until price either reaches support, a target, or if the trade is held for one day if you are a day trader. Depending upon your trading style, your risk management, and management of the equity in your account, stops as always are essential: they may be money management stops, they may be just above lines of resistance (allow for small overshoots), or they may be Elliott wave invalidation points.
Today I have added another likely trend line (in aqua blue) showing resistance.
This approach outlined here is just one trend following method of many.
This analysis is published about 06:05 p.m. EST.