Yesterday’s hourly Elliott wave chart expected an impulse down to end and be followed by another second wave correction to find resistance at the upper edge of a channel.
This is what happened, with the exception of a small fourth wave not moving higher first.
Summary: The main wave count is still bearish and still expects the middle of a strong third wave down to begin from here. The target is slightly recalculated at 1,123.
To see weekly charts click here.
Changes to last analysis are bold.
BEAR ELLIOTT WAVE COUNT
The bear wave count expects that cycle wave a is an incomplete impulse.
Within primary wave 5, the daily chart focuses on the middle of intermediate wave (3). Intermediate wave (3) has yet to show an increase in downwards momentum beyond that seen for intermediate wave (1).
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.
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 the downwards day of 9th April which still has strongest volume.
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 six days time.
Draw a base channel about minuette waves (i) and (ii) as shown (green trend lines). Look for upwards corrections along the way down to continue to find resistance at the upper edge of that channel. When the strongest part of downwards movement arrives, then it may have the power to break through support at the lower edge of the channel. For now this channel is perfectly showing where price is finding support and resistance. This channel is drawn in the same way on the daily and hourly charts, but the daily chart is on a semi-log scale and the hourly is arithmetic. At the daily chart level, the channel perfectly shows where price found resistance today; at the hourly chart level, the channel is overshot and that’s okay.
HOURLY BEAR ELLIOTT WAVE COUNT
This hourly chart, and the alternate hourly below, work in exactly the same way for the bull wave count. The only difference for the bull wave count is the degree of labelling would be one degree lower.
Micro wave 2 may have continued higher as a double zigzag. The second zigzag in the double has deepened the correction, and the structure has a clear slope as it should. Micro wave 2 is now a very deep 0.74 correction of micro wave 1. This is possible, but slightly unusual. At this stage, I have looked for an alternate wave count and have not yet found one which meets all Elliott wave rules. I have considered a leading diagonal down from the end of minute wave ii at 1,205 (thank you to Matt for the idea), but that possibility does not meet all Elliott wave rules because a rule for a contracting diagonal would be violated. My conclusion has to be that this wave count presented here is very likely, despite the deep correction of micro wave 2.
What is still clear on this hourly chart is micro wave 1 is a five wave structure and micro wave 2 is corrective.
The upper edge of the channel is again overshot at the hourly chart level, but not properly breached. Downwards movement must continue from here for this main wave count.
At 1,123 micro wave 3 would now reach 1.618 the length of micro wave 1. Within this third wave, it is very likely that its fifth wave down will be the strongest and swiftest part of downwards movement.
Within micro wave 3, no second wave correction may move beyond the start of its first wave above 1,167.92.
At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If minuette wave (iii) lasts a total Fibonacci thirteen days, then this target would be five days away.
BULL ELLIOTT WAVE COUNT
This bull wave count looks at the possibility that cycle wave a is a complete impulse and that cycle wave b began back at 1,131.09. Within cycle wave b, primary wave A is incomplete and subdividing either as a zigzag or an impulse.
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.
Volume for 8th July shows a strong increase for an up day at 218.9K. It is stronger than all the prior down days since Gold entered the sideways consolidation back on 27th March except for one, that of 9th April at 230.3K.
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 which may now be underway. During this sideways movement, it is still one down day 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 up until two weeks ago volume was declining, typical of a maturing consolidation. Each series of down weeks includes a week with stronger volume than the following series of up weeks. With last week and now this week showing increased volume for a down week, it looks like the consolidation is complete and a downward breakout may be underway.
Daily Chart: ADX continues to trend up and is now comfortably above 15 at 17.36. ADX is indicating it is likely that a new trend is in its early stages. The -DX line (red dashed) is above the +DX line (green solid) indicating the trend is down.
The upper wick of Thursday’s candlestick is much longer than the lower wick. This is a small bearish indicator; there was a close match (not quite a balance, the bulls were overall more active) between bulls and bears, but the bulls couldn’t keep price at the highs for the day and the bears managed to push it significantly lower.
Volume was lighter than the prior upwards day. Overall bulls were more active, but this has occurred on lighter volume. This is again bearish.
It is significant that the upper green trend line is again providing resistance. The more often a trend line is tested and holds, the more technically significant it is.
It is still the most recent day of 2nd July which has strongest volume, a down day with 285.8K. Overall volume still is more bearish.
This analysis is published about 05:41 p.m. EST.