Upwards movement was unexpected.
I have two hourly Elliott wave counts for you today.
Summary: It is most likely a triangle has just ended a fourth wave correction. This should be followed by a fifth wave down which is highly likely to make at least a slight new low below 1,072 to avoid a truncation. The target is again 1,071. This first idea has a higher probability, maybe about 80%. Alternatively, a flat correction may be continuing, which would be confirmed if price moves above 1,105.18. If that happens, then upwards movement should continue to at least above 1,119, with the target at 1,121, but this has a low probability of about 20%.
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Changes to last analysis are bold.
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.
Subminuette wave iv was most likely a regular contracting triangle. The structure is clear on the daily and hourly charts. Subminuette wave ii was a relatively deep 0.58 zigzag lasting two days, and subminuette wave iv exhibits perfect alternation as a shallow 0.29 triangle lasting nine days. Zigzags are normally quicker than triangles, so some disproportion would be expected; the disproportion is now bigger but still acceptable.
Redraw the channel about minuette wave (iii) using Elliott’s second technique: draw the first trend line from the ends of subminuette waves ii to iv, then place a parallel copy on the end of subminuette wave iii. Subminuette wave v may end midway within this channel so add a mid line. Along the way down, upwards corrections against the trend should find resistance at the upper edge of this channel.
At 1,071 subminuette wave v would reach equality in length with subminuette wave i. At this stage, this would be my preferred target because fifth waves to follow fourth wave triangles are sometimes surprisingly short. The target would avoid a truncation.
If price reaches this target and the structure is incomplete, or if price just keeps falling through it, then a second target may be at 1,035 – 1,038; at 1,035 minuette wave (iii) would reach 4.236 the length of minuette wave (i) and at 1,038 subminuette wave v would reach 0.618 the length of subminuette wave iii.
Extend the triangle trend lines outwards. The point in time at which they cross may see a trend change. Sometimes this is when the fifth wave to follow ends. Sometimes it is a trend change within the fifth wave. If the fifth wave ends, then it may be a long extension and the lower target may be met.
Once price is below 1,072, look for the structure of subminuette wave v to be a completed five wave impulse on the hourly chart. Once that is clear, a subsequent breach of the upper edge of this orange channel would provide trend channel confirmation that minuette wave (iii) would be over and minuette wave (iv) would have begun.
Minuette wave (iv) should unfold sideways. It may be very shallow because minuette wave (ii) was relatively deep at 0.52. Minuette wave (ii) lasted three days and was an expanded flat. Minuette wave (iv) may exhibit alternation as another triangle or a zigzag most likely, and may last about five to eight days.
At 957 primary wave 5 would reach equality in length with primary wave 1.
MAIN HOURLY ELLIOTT WAVE COUNT
The triangle is still the neatest fit for this fourth wave correction and it has the best look so far at the daily chart level. I would judge this idea to have about an 80% probability.
At the daily chart level the upper A-C trend line is perfectly adhered to, but at the hourly chart level it is not. The overshoot for submicro wave (B) within the triangle is small though, which is acceptable.
Micro wave E ends with an overshoot of the A-C trend line. This is the second but less common way for E waves to end. The upper triangle trend line is so far providing support to downwards movement.
Subminuette wave v must subdivide as a five wave structure, either an impulse or an ending diagonal.
It is most likely to be relatively short, and reach equality with subminuette wave i in length. It may last about one to three days, with a shorter time frame more likely than longer.
Alternatively, it may be much longer lasting and extended to reach the second target.
Along the way down, micro wave 2 may not move beyond the start of micro wave 1 above 1,103.61. If that price point is breached, then the triangle for subminuette wave iv may not be over; if it is continuing, then micro wave E may not move beyond the end of micro wave C above 1,105.18.
If price moves above 1,105.18, then I would use the alternate below.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
I have considered other structures. A combination does not work, because there is no flat correction within it, so this idea can be eliminated at this stage. A double zigzag would fit at the hourly chart level, but it would have completely the wrong look at the daily chart level. Double zigzags look like single zigzags, but they don’t move price sideways and should have a clear slope against the trend. This is very obviously a sideways movement, so I will discard the idea of a double zigzag.
By a process of elimination the only alternate I am comfortable with today is a flat correction.
This wave count has a very low probability because within micro wave C submicro wave (2) is huge. The proportion looks all wrong. But this is the best alternate that I can see, at this stage.
At 1,121 micro wave C would reach equality in length with micro wave A. This is a regular flat correction because micro wave B is between 90% and 105% of micro wave A at 97%, and a ratio of equality between the A and C waves is most common for a regular flat.
Regular flat corrections normally sit well within their parallel channels. Micro wave C would be likely to end when price touches the upper edge of the channel.
Micro wave C would be highly likely to move at least slightly above the end of micro wave A at 1,119.23 to avoid a truncation.
Within micro wave C, minuscule wave 2 may not move beyond the start of minuscule wave 1 below 1,080.14.
If this wave count is confirmed above 1,105.18 and this is how the fourth wave correction ends, then the following fifth wave down should be expected to be long, extended and very strong. Once the fourth wave is over, then a target for the final fifth wave can be calculated at two wave degrees. For now the target may likely be about 1,035 where minuette wave (iii) would reach 4.236 the length of minuette wave (i).
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.
This week’s small doji indicates some indecision, which would be expected for a smaller correction against the trend. It comes with reasonable volume; volume continues to support the fall in price.
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: The small pennant pattern is still overall working well: a new low was seen before the high and the high is not substantially above the upper pennant trend line.
The aqua blue trend line is not working perfectly. It is not breached, but overshot with price closing above it. The lower edge of the green channel is now providing resistance (previously the lower line provided support).
The lower green trend line is more technically significant than the aqua blue trend line: the trend line is shallower and repeatedly tested. That line now should hold, but if it does not, then the alternate Elliott wave count may be correct.
ADX continues to rise during the formation of this consolidation. Despite price drifting sideways the trend continues to strengthen and remains down.
A trend following strategy should be used. Trading with the trend is advised. A mean reverting system which allows trades against the trend should only be used by the most experienced professional traders, and for all others it is strongly advised to never trade against the trend.
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.
Corrections against the trend offer an opportunity to join the trend at a good price.
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 indicates a correction against the trend to unfold, which is what has been happening. This correction should resolve this divergence.
Friday’s candlestick has equal upper and lower wicks representing a balance between bulls and bears, with bulls in favour as the candlestick is green. With lower volume, it looks like this day is the end of a consolidation against the trend and not necessarily the start of a new upwards trend. Overall the trend remains down.
This analysis is published about 05:16 p.m. EST.