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The alternate Elliott wave count proved to be correct in the last 24 hours.

Summary: A fourth wave triangle should end about 1,099 within the next 24 hours, or maybe as soon as about 8 hours. Thereafter, a fifth wave down should unfold to reach at least slightly below 1,072 to avoid a truncation. The target for it to end will be about the same at 1,071 in the first instance, with a less likely possibility about 1,035 – 1,038. Beware: movements out of triangles can be very fast and short lived.

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Changes to last analysis are bold.


Gold Elliott Wave Chart Daily 2015
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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 momentum may appear in a fifth wave somewhere within minor wave 3, maybe the fifth wave to end minuette wave (iii) or minute wave iii, or that to end minor wave 3 itself.

Subminuette wave iii looks like it is over at the daily chart level. Subminuette wave iii has a typical curved look to it at the daily chart level and this wave count has the right look.

Subminuette wave iv may not move into subminuette wave i price territory above 1,157.14.

Subminuette wave iv is a regular contracting triangle. The structure is clear on the daily and hourly charts. Subminuette wave ii was a relatively deep 0.58 zigzag lasting two days, and subminuette wave iv exhibits perfect alternation as a shallow 0.29 triangle lasting eleven days. Zigzags are normally quicker than triangles, so some disproportion would be expected; the disproportion is acceptable.

Draw the channel about minuette wave (iii) using Elliott’s second technique: draw the first trend line from the ends of subminuette waves ii to iv, then place a parallel copy on the end of subminuette wave iii. Subminuette wave v may end midway within this channel so add a mid line. Along the way down, upwards corrections against the trend should find resistance at the upper edge of this channel. The triangle is almost complete, so redraw the channel when it is over.

At this stage targets are approximate. When the triangle is complete it will be known at which point the fifth wave begins, then targets can be calculated more accurately for it to end. It is most likely to reach equality in length with subminuette wave i about 1,071.

If price reaches the first target and the structure is incomplete, or if price just keeps falling through it, then a second target may be at 1,035 – 1,038; at 1,035 minuette wave (iii) would reach 4.236 the length of minuette wave (i) and at 1,038 subminuette wave v would reach 0.618 the length of subminuette wave iii.

Extend the triangle trend lines outwards. The point in time at which they cross may see a trend change. Sometimes this is when the fifth wave to follow ends. Sometimes it is a trend change within the fifth wave.

Once price is below 1,072, look for the structure of subminuette wave v to be a completed five wave impulse on the hourly chart. Once that is clear, a subsequent breach of the upper edge of this orange channel would provide trend channel confirmation that minuette wave (iii) would be over and minuette wave (iv) would have begun.

Minuette wave (iv) should unfold sideways. It may be very shallow because minuette wave (ii) was relatively deep at 0.52. Minuette wave (ii) lasted three days and was an expanded flat. Minuette wave (iv) may exhibit alternation as another triangle or a zigzag most likely, and may last about five to eight days. If it is a zigzag, then it may be quicker and sharp.

At 957 primary wave 5 would reach equality in length with primary wave 1.

Gold Elliott Wave Chart Hourly 2015
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The final wave for micro wave E is unfolding as a zigzag. At 1,099 submicro wave (C) would reach equality in length with submicro wave (A).

Micro wave E of a contracting triangle may not move beyond the end of micro wave C above 1,103.61.

Submicro wave (A) lasted a Fibonacci eight hours and submicro wave (B) lasted nine hours. Submicro wave (C) may complete in a total Fibonacci eight hours, and so may end now in about six hours time.

Micro wave E is most likely to fall short of the A-C trend line (violet line). But if it does not end short, then the other likely way for it to end is to overshoot that line.

Fifth waves following fourth wave triangles for Gold often move very fast and are surprisingly short. When submicro wave (C) can be seen as a complete five wave structure and has moved at least slightly beyond the end of submicro wave (A) at 1,094.98 avoiding a truncation, then look out for a trend change and a quick strong downwards movement.


Gold Chart Daily 2015
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Daily Chart: The small pennant pattern continues to unfold. Pennants are smaller versions of triangles. This classic technical analysis pattern is the most reliable continuation pattern, particularly when it turns up in a clearly defined trend and unfolds on declining volume as this one does. During the unfolding of this pennant pattern, it is a downwards day which clearly has the strongest volume providing further indication that the breakout of this pattern is likely to be downwards. When price breaks below the lower trend line of the pennant, and when volume shows an increase, then a downwards breakout should be expected to be underway.

ADX continues to rise during the formation of this consolidation. Despite price drifting sideways the trend continues to strengthen and remains down.

A trend following strategy should be used. Trading with the trend is advised. A mean reverting system which allows trades against the trend should only be used by the most experienced professional traders, and for all others it is strongly advised to never trade against the trend.

The simplest system for a downwards trend like this is to use resistance lines: each time price touches resistance that represents an opportunity to enter in the direction of the trend. Trades may be held until price either reaches support, a target, or if the trade is held for one day if you are a day trader. Depending upon your trading style, your risk management, and management of the equity in your account, stops as always are essential: they may be money management stops, they may be just above lines of resistance (allow for small overshoots), or they may be Elliott wave invalidation points.

Corrections against the trend offer an opportunity to join the trend at a good price. Corrections do not offer good trading opportunities when they are at low wave degrees; trying to trade the small waves within a correction exposes your account to the potential for big losses.

This approach outlined here is just one trend following method of many.

There is a little positive bullish divergence last week: the low for 23rd July did not move below the prior low of 17th July, but On Balance Volume did make a new low. OBV moved lower while price did not. This bullish divergence indicates a correction against the trend to unfold, which is what has been happening. This correction should resolve this divergence.

The small green doji candlestick for Tuesday represents indecision, a balance between bulls and bears. The doji supports the idea that price is consolidating.

This analysis is published about 05:13 p.m. EST.