Downwards movement was expected.
Price moved sideways to complete a very small red doji.
Summary: For the short term, both wave counts still 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. After a careful analysis of the five minute chart, I expect submicro wave (5) was over already and very quick. Micro wave 4 is probably over too as a double zigzag. Micro wave 5 is incomplete and should make a new low below the end of micro wave 3 at 1,117.84 to avoid a truncation.
I have considered the possibility that this downwards movement could be a complete corrective structure, but it will not subdivide as a complete single, double or even very rare triple zigzag. This downwards movement is obviously not a triangle, combination or flat correction, and will also not subdivide as a complete impulse or diagonal. I have concluded today that this downwards movement is very likely to be incomplete no matter what the structure is.
Price is no longer fitting nicely within the parallel channel. Sometimes fourth waves do not sit within channels. The channel may not be useful for this movement.
There is an outside possibility that micro wave 5 is over, if it was slightly truncated (highly unlikely, but possible). Subminuette wave iv, when it arrives (and this outside possibility sees it here already), may not move into subminuette wave i price territory above 1,145.92.
At this stage, there is no divergence showing between price and MACD. There is at least some divergence normally at the end of a movement at the hourly chart level. This supports a wave count which expects more downwards movement.
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.
The regular technical analysis picture is unclear.
I have changed the SMA today to show the 200 day SMA (lime green). Price has remained below the 200 day SMA since 6th February this year. A break above that line would be very bullish. With price below it and the average pointing down the larger picture looks bearish.
Today there is another red candlestick on sharply decreased volume. This candlestick has a very small red body and did not manage to make a new price low, so it looks like a very small correction within a trend. Volume for today may be lower for that reason. Price has not fallen to a new low, so the decline in volume is not necessarily bullish. But it is not bearish either.
During the prior upwards movement, the rise in price was clearly supported by a rise in volume culminating in a volume spike at the end. This looks bullish.
Overall the strongest volume day comes on a downwards day which supports the idea of a downwards trend, but that day was also a volume spike for the end of a movement, so it is not definitive either.
ADX is clear and tells us there is no trend and the market is range bound. A range bound system would be better employed than a trend following system. Resistance is being provided by the upper blue trend line, a potential support line has been drawn also in blue. Downwards movement would be expected to continue for this approach until Stochastics reaches oversold and price reaches support at the same time. Range bound markets should be avoided by all except the most experienced traders because they offer greater risk of losses. Trading a range bound market must be done with good money management and stops should always be used.
On Balance Volume is still overall bearish. While price is moving lower OBV also moves lower supporting the fall in price. The breach of the upper pink trend line on OBV is also bearish. I have added another trend line to OBV today which may provide some support. If that too is breached, then OBV would be again providing bearish indication.
There is still hidden positive divergence with Stochastics moving lower while price has not made new lows. This is a weak signal, but it is bullish.
At this time, because the picture is unclear from both the Elliott wave counts and regular technical analysis, the best approach would be to expect the market is currently range bound and to act accordingly. This means either stepping aside to wait until a clear trend emerges, or using a range bound system (like the one presented here with support / resistance and Stochastics). When traders insist on trading an unclear range bound market losses must be accepted as part of the risk, which must be carefully managed so that losses are minimized.
The strongest and simplest piece of technical analysis on this chart is the long blue downwards sloping trend line. This is replicated on the daily Elliott wave charts (it’s slightly different because the scales are slightly different). The larger picture is more bearish than bullish while the long blue downwards sloping trend line continues to provide resistance and price is below it. The bullish Elliott wave count must see price break above that line before full confidence may be had in it.
This analysis is published about 05:42 p.m. EST.