Price began the session with some upwards movement, which the last Elliott wave analysis expected, but price then moved lower to complete a red candlestick.
Summary: A new high above 1,105.18 would indicate more upwards movement to a target at 1,121. A new low below 1,086.57 would indicate sideways movement as most likely for another one to three days to complete a fourth wave triangle. A new low below 1,073.56 would indicate the fourth wave is complete and a fifth wave down is underway to a target at 1,035. The fourth wave is most likely incomplete today. When it is done, then the next wave down may be very swift and strong.
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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 now shows a slight increase in momentum beyond that seen for the end of minor wave 1 at the left of the chart. Third waves for Gold usually have clearly stronger momentum than its first waves, so I still expect to see a further increase in downwards momentum. The strongest downwards momentum may appear in a fifth wave somewhere within minor wave 3, or maybe the fifth wave to end minuette wave (iii) or 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 orange 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.
Subminuette wave iii looks like it is over at the daily chart level. Subminuette wave iii has a typical curved look to it at the daily chart level and this wave count has the right look.
Subminuette wave iv may not move into subminuette wave i price territory above 1,157.14.
Draw a channel about minuette wave (iii): draw the first trend line from the ends of subminuette waves i to iii then place a parallel copy now on today’s high. Do the same on the hourly chart. The upper orange trend line may continue to provide resistance.
When subminuette wave iv is complete, then subminuette wave v down should unfold. It may be swift and strong, typical of Gold. At 1,035 minuette wave (iii) would reach 4.236 the length of minuette wave (i). When subminuette wave iv is complete, then I can add to this target at a second wave degree and at that point the target may change or widen to a small zone.
At 957 primary wave 5 would reach equality in length with primary wave 1.
HOURLY CHART – TRIANGLE
There are multiple structural possibilities for a fourth wave. At this stage, one possibility is that this fourth wave is most likely unfolding as a triangle, or a second possibility is that it may complete as a flat correction (second hourly chart below).
Subminuette wave iv may be a regular contracting or barrier triangle. All five sub waves must be corrective structures, and four of them must be zigzags while one of five sub waves must be a zigzag multiple (longer lasting and more complicated). So far, it looks like micro wave B was most likely a double zigzag, which may have been the longer lasting more complicated triangle sub wave. Micro waves D and E may complete as simple zigzags, most likely.
If subminuette wave iv is a regular contracting triangle, then micro wave D may not move beyond the end of micro wave B below 1,073.56. Micro wave E to complete it may not move beyond the end of micro wave C above 1,105.18. Micro wave E is most likely to end short of the A-C triangle trend line particularly if it finds resistance at the orange trend line. Alternatively and less likely, micro wave E may overshoot the A-C trend line.
If subminuette wave iv is a regular barrier triangle, then micro wave D should end about the same level as micro wave B at 1,073.56 so that the B-D trend line is essentially flat. What this means in practice is that micro wave D can move slightly below the end of micro wave B at 1,073.56. This lower invalidation point is not black and white, and this is the only Elliott wave rule which is not black and white.
The triangle may complete in one more day most likely; if not, then it may take up to three days. It looks like it is running out of room if that upper orange trend line is to continue to provide resistance.
At its end, subminuette wave iv would be very shallow and provide perfect alternation with the relatively deep 0.58 zigzag of subminuette wave ii.
HOURLY CHART – FLAT
While price remains above 1,086.57, then it will remain possible that subminuette wave iv is completing as a regular flat correction.
Flat corrections subdivide 3-3-5 and the B wave within them must retrace a minimum 90% of the A wave. Here micro wave B is 97% of micro wave A. Micro wave C must subdivide as a five wave structure, either an impulse or an ending diagonal. So far it is subdividing as an impulse.
Within the impulse of micro wave C, the fourth wave of submicro wave (4) may not move into submicro wave (1) price territory below 1,086.57.
Micro wave C would be highly likely to make at least a slight new high above the end of micro wave A at 1,119.23 to avoid a truncation. At 1,121 micro wave C would reach equality in length with micro wave A. Micro wave C would most likely end when it touches the upper edge of the violet channel, because regular flat corrections normally fit nicely within their channels.
This idea expects subminuette wave iv to not find resistance at the upper edge of the orange channel. Sometimes fourth waves aren’t nicely contained within Elliott or best fit channels so this is possible. But now it has a lower probability because it is more common for the channel to be adhered to than not.
Subminuette wave iv may not move into submineutte wave i price territory above 1,157.14.
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.
As price falls volume is increasing and OBV is moving lower. 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 still above 30 indicating there is room yet for Gold to move lower.
Daily Chart: Volume is flattening off. If this fourth wave correction is incompletem, then I would expect to see lower volume at its end for tomorrow’s session.
ADX is still clear. The ADX line is above 20 and still 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.
The Trend Is Your Friend. Trading against the trend may be possible for very experienced professionals, but for everyone else it is strongly advised to trade only with the trend. It is relatively easy to profit in a clearly trending market, but only if you trade with the trend. Corrections against the trend offer an opportunity to join the trend at a good price.
The aqua blue trend line may show where this correction finds resistance.
This approach outlined here is just one trend following method of many.
There is a little positive bullish divergence last week: the low for 23rd July did not move below the prior low of 17th July, but On Balance Volume did make a new low. OBV moved lower while price did not. This bullish divergence supports a wave count which expects upwards movement to end the correction, and it also supports a wave count which expects sideways movement for a correction. Overall it indicates a correction against the trend to unfold here.
The red candlestick for Monday has about equal lengths for upper and lower wicks indicating balance and indecision with bears slightly favoured.
This analysis is published about 06:11 p.m. EST.