Price has moved higher.
Summary: Short term both wave counts expect this upwards movement is a small correction against a downwards trend, which may end on Monday about 1,148 – 1,150. Thereafter, for a few days price should move lower. The bull count expects the next wave down to end about 1,105 – 1,091 and to not move below 1,072.09. The bear wave count would then expect an explosive third wave down to make a new low below 1,072.09.
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.
At this time, one reason why I will retain this bull wave count is my expectations for the stock markets. My S&P500 analysis is expecting a primary or super cycle degree bear market which is in its early stages, and this expectation may turn out, at least in the beginning, with a corresponding rise in the price of Gold.
Minor wave 2 should unfold as a zigzag. Zigzags subdivide 5-3-5. So far the first 5 down is complete.
Friday’s upwards movement is showing up on the daily chart, so this is most likely minute wave b. Minute wave b may be unfolding as a flat correction.
Minute wave a will subdivide as a completed five wave structure. Ratios within it are: minuette wave (iii) is 0.66 short of equality with minuette wave (i), and minuette wave (v) is 1.74 short of equality with minuette wave (iii).
Minute wave b may be a flat correction as labelled, but it is also possible to see it as a zigzag with minuette wave (a) ending earlier. Either way, the structure is incomplete.
If minuette wave (a) ends at the point labelled here, then at 1,148 minuette wave (c) would reach 2.618 the length of minuette wave (a). This is close to the 0.618 Fibonacci ratio of minute wave a at 1,150, giving a $2 target zone for this upwards movement to end.
Use the small best fit channel about minuette wave (c) as an indicator of when this upwards correction is over. When that trend line is breached by downwards movement, then that should be the early stage of the next wave down.
Minute wave b within a zigzag 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. Today there is another second wave correction unfolding for minuette wave (ii). If the correction moves higher, then it should find very strong resistance at the blue trend line. If that line is breached, then a bear wave count should be discarded.
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.
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 complete.
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.
Minuette wave (ii) may not move beyond the start of minuette wave (i) 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.
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 the upwards move in price is not well supported by volume. Volume, importantly, remains well below prior downwards days suggesting today’s rise in price is a small correction within a trend which is down at least in the short term. This supports both Elliott wave counts which see this upwards movement as a small correction.
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. Today OBV has come to again touch the upper trend line. This trend line has been breached before and OBV returned below it, so it is no longer highly technically significant. It may provide some resistance again here.
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 05:29 p.m. EST.