Short term the bear wave count expected upwards movement to 1,143.
Price has moved higher to 1,141.83.
Summary: Both wave counts expect downwards movement from here: the bear for the middle of a big third wave and the bull for a fourth wave correction which should show up on the daily chart. If upwards movement continues, the differentiating line is the upper edge of the blue channel on both daily charts. A breach of that line would very strongly favour the bull over the bear. To the downside, some confirmation is required to have confidence that price will move lower for the short term: first, a breach of the channel on the hourly chart; and second, a new low below 1,127.70.
Changes to last analysis are bold.
To see the bigger picture on weekly charts click here.
BEAR ELLIOTT WAVE COUNT
Gold has been in a bear market since September 2011. There has not yet been confirmation of a change from bear to bull, and so at this stage any bull wave count would be trying to pick a low which is not advised. Price remains below the 200 day moving average and below the blue trend line (copied over from the weekly chart). The bear market should be expected to be intact until we have technical confirmation of a big trend change.
This wave count now sees a series of four overlapping first and second waves: intermediate waves (1) and (2), minor waves 1 and 2, minute waves i and ii, and now minuette waves (i) and (ii). Minute wave iii should show a strong increase in downwards momentum beyond that seen for minute wave i. If price 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. Here the blue channel is a base channel drawn about minor waves 1 and 2. A lower degree second wave correction 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.
Minuette wave (ii) may not move beyond the start of minuette wave (i) 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.
Downwards movement from 1,170.19 will subdivide as a complete five wave impulse on the hourly chart, but on the daily chart it does not have a clear five wave look. Subminuette wave iii has disproportionate second and fourth waves within it giving this movement a three wave look on the daily 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.
Minuette wave (ii) is now a completed zigzag ending very close to the 0.618 Fibonacci ratio of minuette wave (i) at 1,142.
Within minuette wave (ii)’s zigzag, subminuette wave b fits perfectly as an expanding triangle (the rarest of all Elliott wave structures). The expanding triangle is supported by MACD hovering about the zero line while it completed.
I think this is only the third expanding triangle I have seen in seven years of daily Elliott wave analysis. I am fairly confident this part of the wave count is correctly labelled, and if it is correct, then only the bear wave count would work because for the bull this movement cannot be a triangle for a second wave.
Subminuette wave c is 2.17 short of 4.236 the length of subminuette wave a.
Ratios within subminuette wave c are: micro wave 3 is 1.09 short of equality with micro wave 1, and micro wave 5 is 0.74 longer than 0.618 the length of micro wave 1.
At 1,026 minuette wave (iii) would reach 1.618 the length of minuette wave (i). If minuette wave (ii) moves any higher, then this target must also move correspondingly higher.
There is not enough downwards movement to eliminate the possibility that micro wave 5 may extend and continue higher. Only a new low below its start at 1,127.70 would eliminate this possibility. At that stage, downwards movement may not be a second wave correction within micro wave 5, so micro wave 5 would have to be over.
Before this price point is passed a clear breach of the channel containing subminuette wave c would provide trend channel confirmation of a trend change.
While there is zero confirmation that minuette wave (ii) is over the risk that it could continue will remain. Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,170.19.
If price does move higher, then it should find very strong resistance at the upper edge of the blue channel copied over here from the daily chart. That trend line is the line which differentiates bear from bull at this stage.
BULL ELLIOTT WAVE COUNT
The bull wave count sees cycle wave a complete and cycle wave b underway as either an expanded flat, running triangle or 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 for a movement at primary degree. This is so far incomplete. With the first wave up being a complete zigzag the only structure left now for intermediate wave (1) or (A) 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.
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.
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 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.
I added a bright aqua blue trend line to this chart. Price has found support there and is bouncing up.
Minor wave 2 can now be seen as a complete zigzag. It is 0.73 the depth of minor wave 1, nicely within the normal range of between 0.66 to 0.81 for a second wave within a diagonal.
Third waves within leading diagonals are most commonly zigzags, but sometimes they may be impulses. Minor wave 3 should show some increase in upwards momentum beyond that seen for minor wave 1. Minor wave 3 must move above the end of minor wave 1 above 1,170.19. That would provide price confirmation of the bull wave count and invalidation of the bear.
Minor wave 3 is most likely to subdivide as a zigzag. Within a zigzag, minute wave a must subdivide as a five wave structure.
Although it would be technically possible to see minute wave a over as a very short quick five at the high labelled minuette wave (i), that would be far too short for minute wave a. That would look very wrong on the daily chart.
Minute wave a would be an incomplete five wave impulse at this stage.
Minuette wave (ii) shows up on the daily chart and lasted two days. Minuette wave (iv) is most likely to also show up on the daily chart, for the five wave impulse of minute wave a to have the right look on the daily chart, and it may last 1-5 days.
Minuette wave (ii) is seen as an expanded flat for this bull wave count. A triangle may not be the sole corrective structure for a second wave, so the expanding triangle here would be invalid. Within the expanded flat, subminuette wave c does not subdivide well at all as a five wave impulse. The structure will fit on the five minute chart, but on the hourly chart micro wave 3 within it has a three wave look where it should be a five.
The channel drawn here is a best fit, and it is not the same as the smaller channel on the hourly bear chart. For this bull wave count, minuette wave (iv) may end if / when price comes down to touch the lower trend line.
Minuette wave (ii) was a deep time consuming flat correction. Minuette wave (iv) may be a quicker zigzag, so it may last only one day. Alternatively, minuette wave (iv) may also be a combination or triangle; both would provide structural alternation with the flat correction of minuette wave (ii). Combinations and triangles tend to be very time consuming structures, so minuette wave (iv) may last up to five days. Minuette wave (iv) may be expected to be shallow, with the 0.382 Fibonacci ratio the most likely target.
If minuette wave (iv) is an expanded flat, running triangle or combination, then it may include a new price extreme beyond its start above 1,141.83.
Minuette wave (iv) may not move into minuettte wave (i) price territory below 1,108.62.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Note: StockCharts data for Friday’s session is now available. This section is now updated.
Daily: Upwards movement for Friday comes with some small increase in volume. The rise in price for the last three days is supported by volume, which is bullish. However, the picture is not as clear as it could be. Overall it is still four downwards days in most recent movement which have strongest volume and that is somewhat bearish.
We now have a three advancing soldiers candlestick pattern moving up from a horizontal support line. This would indicate a continuation overall of upwards movement and favours the bull wave count.
Overall, from the last swing high at 1,170 on 24th August, as price falls it comes on declining volume. There is some small support for the fall in price: each wave down has increasing volume, but the whole movement from its start has overall declining volume. The picture remains unclear.
ADX is flat indicating there is no clear trend and the market is range bound. If a range bound system is used here, then it would expect an upwards swing because price has reached to the lower horizontal line of support and Stochastics has reached oversold. However, trading a range bound market is more risky than trading a clearly trending market. The final swing never comes; that is when price breaks out of the range and begins a trend. An upwards swing may still possibly be developing at this stage. While the Elliott wave bear count remains valid the risk that a bear market may still be intact must be acknowledged. Good money management on any bullish trades is essential. An upwards swing using this system may be expected to continue until price reaches the horizontal line of resistance and Stochastics indicates overbought.
Stochastics is beginning to enter overbought. A swing system would still not expect the upwards movement to end until price also reaches resistance.
While On Balance Volume remains below its trend line it is bearish. OBV is moving upwards and closing in on that green trend line. If there is any further upwards movement in price from here, then look for it to either end or to be interrupted by a consolidation when OBV comes to touch that green line.
RSI at the daily chart level is neither overbought or oversold. There is room for the market to rise or fall.
Overall the regular technical analysis picture remains unclear. I had hoped for clarity this week, but the markets have not obliged. Maybe we shall get it next week.
This analysis is published about 05:20 p.m. EST.