Movement below 1,119.23 has invalidated how the bull wave count was labelled for most recent movement and reduced the probability overall of that count.
At this stage, I now have a bull and bear count which have about an even probability. Price should tell us which one is correct.
Summary: For the short term, both wave counts expect downwards movement. The bull count expects a zigzag down to end most likely within a range of 1,105 – 1,091. The bear count expects a strong third wave down should be underway. A new low below 1,072.09 would finally and fully eliminate the bull count and provide confidence in the target at 957.
Changes to last analysis are bold.
To see weekly charts and the three different options for cycle wave b (main wave count) click here.
BULL WAVE COUNT – DAILY
The bigger picture at super cycle degree is still bearish. A large zigzag is unfolding downwards. Along the way down, within the zigzag, cycle wave b must unfold as a corrective structure.
At this stage, there are three possible structures for cycle wave b: an expanded flat, a running triangle, or a combination.
This daily chart works for all three ideas at the weekly chart level.
For all three ideas, a five up should unfold at the daily chart level. This is so far incomplete. With the first wave up being a complete zigzag the only structure left now for intermediate wave (1) would be a leading diagonal. While leading diagonals are not rare they are not very common either. This reduces the probability of this bull wave count now to about even with the bear wave count.
A leading diagonal requires the second and fourth waves to subdivide as zigzags. The first, third and fifth waves are most commonly zigzags,, the but sometimes may appear to be impulses. So far minor wave 1 fits well as a zigzag.
The common depth of second and fourth waves within diagonals is between 0.66 to 0.81 the prior wave. This gives a target range for minor wave 2 from 1,105 to 1,091.
Minor wave 2 may not move beyond the start of minor wave 1 below 1,072.09. If this invalidation point is breached, then it would be very difficult to see how primary wave B could continue yet lower. It would still be technically possible that primary wave B could be continuing as a double zigzag, but it is already 1.88 times the length of primary wave A (longer than the maximum common length of 1.38 times), so if it were to continue to be even deeper, then that idea has a very low probability. If 1,072.09 is breached, then I may cease to publish any bullish wave count because it would be fairly clear that Gold would be in a bear market for cycle wave a to complete.
To the upside, a new high above 1,170.19 would invalidate the bear wave count below and provide strong confirmation for this bull wave count.
Upwards movement is finding resistance at the upper edge of the blue channel and may continue to do so. Use that trend line for resistance, and if it is breached, then expect a throwback to find support there.
Minor wave 2 should unfold as a zigzag. Zigzags subdivide 5-3-5. So far the first 5 down is incomplete.
Within minute wave a, the middle of its third wave looks to have passed. Submicro wave (5) should make a new low to complete the impulse for micro wave 3. When that is done micro wave 4 may not move into micro wave 1 price territory above 1,170.19.
Downwards movement is so far sitting nicely within the bright aqua blue best fit channel. Along the way down, while minute wave a completes, this channel may continue to show where price is finding resistance and support. When that channel is breached by upwards movement, then that may be the first indication that minute wave a should be complete and minute wave b upwards may have begun.
Minute wave b upwards should show up on the daily chart, so it should produce at least one green candlestick and probably more. It may not move beyond the start of minute wave a above 1,170.19.
BEAR ELLIOTT WAVE COUNT
At this stage, the reduction of probability for the bull wave count sees this bear wave count about even now in probability.
This wave count now sees a series of three overlapping first and second waves: intermediate waves (1) and (2), minor waves 1 and 2, and now minute waves i and ii. Minute wave iii should show a strong increase in downwards momentum beyond that seen for minute wave i. Before that comes though, we may yet have another second wave correction and if it unfolds before price makes a new low below 1,072.09, then we may not have clarity between these two wave counts for some time yet.
The blue channel is drawn in the same way on both wave counts. The upper edge will be critical. Both wave counts expect some downwards movement from here to bounce down from resistance about the upper blue trend line. Here the blue channel is a base channel drawn about minor waves 1 and 2. A lower degree second wave correction for minute wave ii should not breach a base channel drawn about a first and second wave one or more degrees higher. If this blue line is breached by one full daily candlestick above it and not touching it, then this wave count will substantially reduce in probability.
With the base channel providing strong resistance and price now moving strongly lower, I will move the invalidation point down. Within minute wave iii, no second wave correction may move beyond the start of its first wave above 1,170.19. A breach of that price point should see this wave count discarded as it would also now necessitate a clear breach of the blue channel and the maroon channel from the weekly chart.
Full and final confirmation of this wave count would come with a new low below 1,072.09.
If primary wave 5 reaches equality with primary wave 1, then it would end at 957. With three big overlapping first and second waves, now this target may not be low enough.
This wave count expects an impulse to be beginning downwards. An impulse subdivides 5-3-5-3-5. So far the first 5 down is incomplete.
The beginning of an impulse and the whole of a zigzag have exactly the same subdivisions. There is no divergence between the labelling of the subdivisions at the hourly chart level (apart from the degree here being one lower) between bull and bear wave counts. The expectation of how downwards movement will unfold for the next few days will be the same.
When the first five down is complete, then the following second wave correction may not move beyond the start above 1,170.19. The rule for a second wave is the same as the rule for a B wave within a zigzag. There is no divergence between invalidation points either.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Wednesday’s downwards day comes on slightly increased volume. The strongest volume day for recent movement is the spike for 24th of August at 255,624, a downwards day. This favours the bear wave count, especially as this fall in price is so far supported by rising volume.
On Balance Volume today also favours the bear wave count. The breach of the trend line on OBV is bearish.
ADX indicates there is as yet no clear trend to the market, with the black ADX line pointing lower. ADX does tend to be a lagging indicator.
There is still hidden bullish divergence between price and Stochastics: price has made higher lows so far while Stochastics is making lower lows. This indicates price has strength, which is normal for a correction within a bull market. This piece of information supports a bull wave count, which is in opposition today to volume which supports a bear wave count.
Overall, today, volume favours a bear wave count. Volume is a stronger indicator than an oscillator. But the strongest and simplest of analysis tools are trend lines. With the blue trend line on the TA chart and the EW charts still holding that gives the market a bearish bias.
This analysis is published about 08:37 p.m. EST.