A downwards breakout was expected for Monday, but did not happen.
Upwards movement invalidated the main Elliott wave count and confirmed the alternate Elliott wave count.
Summary: The new wave count sees this correction as minute wave iv unfolding as a combination. The second structure in the double is a flat correction, and the final C wave up is completing with a target for it to end between 1,118 – 1,123 which may take one or two more days to get there; along the way up another fourth wave correction needs to complete. The trend remains down, but for now Gold is within a correction against the trend, so trading during a correction is not recommended. Trying to pick exactly where and when a correction ends is also not recommended. The safest way to approach this market at this time is to wait for the breakout to be indicated by a red daily candlestick with increased volume.
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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 movement is still ahead of us, and now it may be expected to show up within the next fifth wave down of minute wave v to end minor wave 3. Gold often exhibits very strong fifth waves, and when it does this they usually turn up to end its third wave impulses.
The degree of labelling for this current correction is moved up two degrees. It is possible (just, with an unusual looking expanded flat within it for a second wave) to see minute wave iii as over. The duration of this current correction indicates that despite the problem within its subdivisions minute wave iii must have been over and this current correction is minute wave iv.
Minute wave ii was a deep 0.618 single zigzag lasting nine days. Minute wave iv is a double combination which provides structural alternation. If it ends about the 0.382 Fibonacci ratio of minute wave iii at 1,121, then it would also show alternation in depth.
Minute wave iv may not move into minute wave i price territory above 1,162.80.
The blue channel is a base channel drawn about minor waves 1 and 2: draw the first trend line from the start of minor wave 1 (off to the left of the chart at the high of 1,308) to the end of minor wave 2, then place a parallel copy on the end of minor wave 1. The lower trend line perfectly shows where minute wave iii found support. Minor wave 3 should have the power to break through support at the lower trend line; when its fifth wave arrives, then it should be strong enough to do that.
There is no Fibonacci ratio between minute waves i and iii, which makes it very likely that minute wave v will exhibit a Fibonacci ratio to either of minute waves i or iii. When minute wave iv is over (and a downwards breakout has been confirmed), then I will be able to calculate a target for minute wave v to end minor wave 3. I cannot do that yet.
Along the way down to the final target for primary wave 5 at 954, there will be two more big fourth wave corrections: one for minor wave 4 and another for intermediate wave (4). They may be expected to be less time consuming than their counterpart second wave corrections; they may also be expected to be shallow, but they will both still likely be multi week corrections (at least two weeks in the case of minor wave 4 and longer for intermediate wave (4) ).
At 957 primary wave 5 would reach equality in length with primary wave 1.
The whipsaw we saw last week, which is labelled here subminuette waves a and b, was problematic as the end of a time consuming triangle. I have reanalysed the triangle, and it fits as a nine wave triangle ending earlier.
The structure for this fourth wave correction is still seen as a double combination, but the second structure in the double begins earlier. This is important because it means the B wave is already over, and was a 109% correction of subminuette wave a.
Within the second structure of the double labelled minuette wave (y), subminuette waves a and b are both three wave structures. Subminuette wave c must be a five wave structure.
At 1,118 subminuette wave c would reach 2.618 the length of subminuette wave a. This would take price up to close to the 0.382 Fibonacci ratio of minute wave iii at 1,123 giving a $5 target zone for this upwards movement to end.
Within subminuette wave c, micro waves 1 and 2 are complete. Micro wave 3 may only subdivide as an impulse. At 1,117 micro wave 3 would reach 1.618 the length of micro wave 1, and also at 1,117 submicro wave (5) would reach equality in length with submicro wave (3).
Submicro wave (4) may not move into submicro wave (1) price territory below 1,098.65
When micro wave 3 is a complete five wave impulse, then micro wave 4 should unfold. It is unlikely to show up on the daily chart as a red candlestick because micro wave 2 does not. Micro wave 2 was a relatively deep 0.58 zigzag so micro wave 4 would exhibit alternation if it is a shallow flat, combination or triangle. It may not move into micro wave 1 price territory below 1,099.61.
Draw an acceleration channel about subminuette wave c: draw the first trend line from the end of micro wave 1 to the last high, then place a parallel copy on the end of micro wave 2. This channel shows where corrections along the way up should find support. As new highs are made keep redrawing the channel. When micro wave 4 arrives, then it too should find support at the lower trend line.
ADX is starting to flatten off where previously it had been rising. Unfortunately, ADX is a lagging indicator and now finally indicates that Gold is within a correction, but we had expected that for the last two weeks anyway. When the trend returns, then it is still most likely to be downwards.
Volume during this current correction still has a downwards day which is much stronger than all other days. This indicates that when the breakout comes from this correction it is most likely to be downwards.
The pennant pattern did not work. Monday did not complete with a downwards breakout, so the pattern is now too long in duration to be a pennant.
Redraw the trend lines about this current correction: draw the first trend line to sit along the lower edge and place a parallel copy on the first high within it. Upwards movement may find resistance at the upper edge. If that happens, then the classic technical analysis pattern may be a flag, which is another continuation pattern.
The blue trend channel is the same as that drawn on the daily Elliott wave count chart. The upper edge should provide resistance, but this small pattern would not be expected to be that deep or time consuming. The lower edge may provide some support.
Draw a long term trend line on On Balance Volume as shown. This trend line has been tested three times, and may show where and when upwards movement ends. Look for OBV to touch that trend line. When it does, then that may be it for upwards movement.
While this correction unfolds, there is still declining volume. Today’s upwards day has lighter volume than the prior upwards day. This rise in price is not supported by volume, and a new upwards trend is certainly not indicated; this upwards movement is part of a correction against a downwards trend.
RSI is returning now from oversold. When this correction is over, then there is again room for the market to fall.
From a classic technical analysis perspective, the safest approach to this market, at this stage, would be to wait until a red daily candlestick on higher volume is seen before any confidence may be had that the correction is over and price is breaking out downwards. When the lower edge of the corrective pattern trend line is breached, then a throw back to that line would be highly likely, and that may be a safer entry point than trying to pick a top and trying to pick an end to the correction.
We know that this correction will end. We may still be confident that price will make new lows after it is done, but exactly when and where it will end is much harder to pick.
This analysis is published about 06:12 p.m. EST.