A small upwards correction was expected for the very short term, which is what is happening as the week comes to a close.
Summary: It is likely that Monday will see a little more upwards movement to 1,181 – 1,184. Thereafter, both bull and bear wave counts need more downwards movement. The bear wave count is more likely; it expects a strong third wave down is nearing its middle.
To see the bigger picture and weekly charts go here.
Changes to last analysis are italicised.
Bear Wave Count
The bear wave count has increased in probability with a new low below 1,162.80. Full confidence may be had in this wave count with a new low below 1,131.09.
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) (to the left of this chart) 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 (to the left of this chart) 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 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) (to the left of this chart) looks too big on the weekly chart.
2. Intermediate wave (2) (to the left of this chart) has breached the channel from the weekly chart which contains cycle wave a.
3. 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.
4. 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.
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.
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 ten days time.
Hourly Bear Wave Count
I am swapping over my main and alternate hourly wave counts because upwards movement for Friday shows on the daily chart as a green candlestick, and it would more likely the movement is part of subminuette wave ii and not micro wave 2 one degree lower (alternate below).
These two hourly charts work in exactly the same way for the bull wave count. The only difference there would be the degree of labelling which would be one degree lower.
Subminuette wave ii may be an incomplete expanded flat correction, subdividing 3-3-5. Micro wave C must be a five wave structure and is extremely likely to make at least a slight new high above the end of micro wave A at 1,179.17 to avoid a truncation and a very rare running flat.
At 1,184 micro wave C would reach 2.618 the length of micro wave A. This would bring subminuette wave ii close to the 0.618 Fibonacci ratio of subminuette wave i at 1,181.
Submicro wave (1) fits as a leading contracting diagonal, but the lower diagonal trend line does not look right. Diagonals normally adhere well to their trend lines. This one is breached and overshot reducing the probability of this part of the wave count, but this problem may resolve itself because this may also be labelled as a series of overlapping first and second waves, which may be followed by a short strong third wave and a series of fourth waves that remain above first wave price territories. Either way, the expected direction is still up for the short term.
Submicro wave (2) may not move beyond the start of submicro wave (1) below 1,157.14.
Mid term targets for the third waves remain the same. At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If minuette wave (iii) lasts a total Fibonacci eight or (more likely) thirteen days, then this target would still be four or nine days away.
At 1,093 minute wave iii would reach 1.618 the length of minute wave i. If minute wave iii lasts a total Fibonacci twenty one or thirty four days, then this target may be a further eleven or twenty three days away.
Alternate Hourly Bear Wave Count
This idea has a big problem of proportion: micro wave 2 is much larger in duration than subminuette wave ii one degree higher. This reduces the probability of this wave count to an alternate today.
Micro wave 2 may be very close to completion, and within it submicro wave (C) is an almost complete ending contracting diagonal. The final fifth wave should make a new high above the end of the third wave at 1,170.36 to avoid a truncation, and it should be shorter than the third wave so it may not move above 1,171.59. A new high above 1,171.59 invalidates this diagonal because the third wave would then be the shortest violating a core Elliott wave rule.
Micro wave 2 may not move beyond the start of micro wave 1 above 1,179.17.
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) (to the left of this chart) looks right for a new bull trend at the weekly chart level.
2. The downwards wave labelled minor wave W 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 (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 substantially reduces its probability.
2. Intermediate wave (5) of primary wave 5 (to the left of this 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.
5. Intermediate wave (B) or (2) may only be continuing as a double combination. Minor wave X is shallow, and X waves within double combinations are normally very deep. This one looks wrong.
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.
Intermediate wave (A) (to the left of this chart) 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.
The only option now for the bull wave count is to see intermediate wave (B) or (2) continuing sideways as a double combination. The first structure in the double is a zigzag labelled minor wave W. The double is joined by a brief three in the opposite direction labelled minor wave X, a zigzag. The second structure in the combination is an expanded flat labelled minor wave Y which is incomplete.
Within minor wave Y, minute wave b is a 1.15 times the length of minute wave a indicating an expanded flat. Both minute waves a and b are three wave structures.
Minute wave c downwards must subdivide as a five, and because the first wave within it is an impulse and not a zigzag minute wave c may only be unfolding as an impulse.
Within minute wave c downwards, the third wave is incomplete for minuette wave (iii). At the hourly chart level, this bull wave count sees the subdivisions in exactly the same way as the bear (the bull sees everything one degree lower) so the hourly charts are the same. For this reason I will publish only hourly charts for the bear because they work in exactly the same way for the bull.
There does not look to be enough room for minute wave c to complete as a five wave impulse and remain above the invalidation point at 1,131.09. This is now the biggest problem with the bull wave count.
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. Price is now breaking below support at the green trend line, which is another bearish indicator.
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.
Despite a quiet day for Friday (due to the USA holiday), the week finishes with stronger volume. If a downwards breakout is beginning, then this is exactly what would be expected.
Daily Chart: While ADX still indicates no clear trend yet, price is making new lows. I will no longer illustrate a range bound trading system, because it is too risky to expect an upwards swing from here to be substantial. The sideways consolidation is now so mature the breakout is imminent; the breakout may be beginning now.
A close 3% or more of market value below the lower blue horizontal trend line would confirm a downwards breakout. That price point would be at 1,142.23.
The very low volume for Friday would be expected due to the USA holiday. It comes on an up day, indicating this upwards movement is likely a correction against a downward trend.
On Balance Volume at the daily chart level agrees with this week’s fall in price; there is no divergence between the last two lows.
I am moving the green trend line on OBV. OBV has broken through support at that trend line, and may show when price finishes the upwards correction when OBV touches the trend line again, which should now provide resistance.
Overall the regular TA picture is more bearish than bullish.
This analysis is published about 05:00 p.m. EST.