Today’s Elliott wave analysis will answer the question of whether or not the correction is over, and also what to look out for with regards to confirmation.
Summary: The downwards trend should resume, which would be confirmed with a clear breach of the best fit bright aqua blue channel on the hourly charts AND a five down at the hourly chart level. Use the lower trend line to see if it provides support to price on the way down, then look for a throwback to that line after it is breached, which is at that time where there may be a nice entry point.
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.
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.
The structure of minute wave b now looks again to be possibly complete as a double combination: flat – X – zigzag. This is a slightly atypical combination in that it has some slope against the prior trend, but the second structure does not end substantially beyond the end of the first, so this is acceptable.
Minute wave b fits nicely in a parallel channel. This is not an Elliott channel, but the fit is good which may provide indication of where price may find support and resistance before the channel is breached. On the way down, if price does find some support at the lower bright aqua blue trend line, then once that line is breached to the downside look for a throwback to it. If that happens, then at that stage there may be a nice entry point.
When the best fit channel is breached then that shall be earliest confirmation of the resumption of the downwards trend. But a clear five down on the hourly chart is absolutely required for confidence that the downwards trend has resumed. While there is no five down it will remain possible that minute wave b may yet move higher.
If minute wave b moves higher, then it may not move beyond the start of minute wave a above 1,170.19.
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. At 1,096 minute wave c would reach equality in length with minute wave a. This target is nicely within the range.
Minute wave c may take about two to four days to unfold.
Draw a channel about the zigzag of minor wave 2. Look for minute wave c to end if price finds support at the lower pink trend line.
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 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 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.
The subdivisions are again seen in the same way for both wave counts at the hourly chart level. The channels are also the same.
Here the channel about minuette waves (i) and (ii) (green) is correctly termed a base channel. Along the way down, upwards corrections should find resistance at the upper edge of the channel. Minuette wave (iii) should have the power to break through support at the lower edge of the channel.
At 1,063 minuette wave (iii) would reach 1.618 the length of minuette wave (i). Minuette wave (iii) should show an increase in downwards momentum beyond that seen for minuette wave (i).
Click chart to enlarge. Chart courtesy of StockCharts.com.
Today’s green candlestick has increased volume over the prior day, but volume is still lower than the first two days of this four day movement. Volume during the last four days is declining, which indicates this movement is more likely a correction than a new trend and more downwards movement for the short term at least.
As price reached the last swing high volume rose. Thereafter, the fall in price came on declining volume. This volume profile indicates there may be a new upwards trend developing and supports the bull wave count better than the bear. However, while price remains below the blue trend line and the 200 day SMA a trend change from bear to bull is not confirmed.
The black ADX line continues to point downwards indicating there is no clear trend to the market. A range bound trading system should be used as opposed to a trend following system.
This analysis is published about 07:33 p.m. EST.