Upwards movement above 1,141.84 was unexpected.
Both Elliott wave counts still remain valid.
Summary: The bear wave count now expects a third wave down from here. The bull wave count now expects a B wave down. A new low below 1,098.85 would invalidate the bull and confirm the bear. If upwards movement continues, a new high above 1,170.19 would invalidate the bear and confirm the bull. Today the regular technical analysis supports both wave counts in expecting a red candlestick for Friday.
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.
Sometimes Gold’s impulse waves start out slowly. There is a good example on this daily chart for minute wave i. When the fifth wave approaches that is when momentum sharply increases, and it often ends on a price shock with a volume spike. This is an even more common tendency for Gold’s third wave impulses. The strongest downwards movement is ahead, and it should be expected to arrive when subminuette wave v within minuette wave (iii) begins.
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.
The downwards movement labelled subminuette wave x has proved extremely difficult to analyse. It has a cursory look as a five wave structure, but a new price extreme beyond its start indicates it was not a five but a corrective movement. It will subdivide nicely as a double zigzag. The subdivisions within this double zigzag are exactly the same as yesterday’s leading expanding diagonal.
Minuette wave (ii) may have continued higher as a double zigzag. Within a multiple, each of waves W, Y (and Z if there is one) may only themselves subdivide as simple A-B-C corrective structures (or A-B-C-D-E in the case of triangles). They may not themselves be multiples because the maximum number of corrective structures within a multiple is three. To label multiples within multiples would increase the maximum beyond three, and so is invalid.
But X waves within multiples may be any corrective structure. X waves are joining structures within multiples and they are not included in the total count of how many corrective structures are within a multiple.
Here subminuette wave x may have been a double zigzag.
Minuette wave (ii) has a reasonable look as a double zigzag. The purpose of the second zigzag in a double is to deepen the correction when the first did not move price deep enough, and so double zigzags normally have a clear slope against the trend.
At 1,041 minuette wave (iii) would reach 1.618 the length of minuette wave (i).
At this stage, there is not enough downwards movement to confirm that subminuette wave y is over. I have drawn a best fit channel about subminuette wave y. When price breaks below the lower edge of that channel it shall provide some confirmation of a trend change. A new low below the start of micro wave C at 1,134.94 would provide further confirmation of a trend change.
While there is no confirmation that minuette wave (ii) is over the risk that it may continue higher must be accepted. It may not move beyond the start of minuette wave (i) above 1,170.19.
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.
There now looks like a five up on the daily chart within minor wave 3. This may be minute wave a within a zigzag, or it may also be minute wave i within an impulse. The five up may be seen as complete at this stage, so a three down would be expected for this bull wave count. Minute wave b may not move beyond the start of minute wave a below 1,098.85. Minute wave b may find support at the lower bright aqua blue trend line, if it gets down that low.
Minuette wave (iv) did not continue lower as expected. It was already over as a double zigzag. This provides alternation with minuette wave (ii): minuette wave (ii) was a deep 0.68 expanded flat and minuette wave (iv) is now complete as a slightly more shallow 0.52 double zigzag.
Minute wave a is now a complete five wave structure with a typically swift strong fifth wave.
Minute wave b should unfold over the next few days and should show up on the daily chart. It should begin with a downwards day for Friday. Minute wave b may be choppy and overlapping if it unfolds as a flat, combination or triangle. It may also be a swift sharp zigzag. There are 23 possible corrective structures it may take; at the start it is impossible to tell which one it shall be.
If minute wave b is an expanded flat, running triangle or combination, then it may include a new price extreme beyond its start. It may have a new high above 1,156.83 as part of the correction. There is no upper invalidation point for minute wave b.
Both wave counts expect downwards movement for at least a few days. The structure of the next wave down may indicate which wave count is more likely.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: A strong upwards day comes on a strong increase in volume. The rise in price for Thursday’s session was well supported by volume. This is the most bullish indication that Gold has given for some time. Volume for Thursday is stronger than all prior downwards days with the sole exception of the volume spike of 24th August to end the prior wave up.
During the current sideways consolidation it is still one downwards day which has strongest volume. The picture is less clear than it appeared to be yesterday, but this still indicates a downwards breakout may be more likely than upwards.
Price remains within both the purple horizontal lines and the blue sloping lines of resistance and support. The breakout has still not happened. However, today’s upwards day on a strong increase in volume may possibly be the start of an upwards breakout.
ADX remains flat indicating the market remains range bound. A range bound trading system using lines for price to find resistance and support, in conjunction with Stochastics to show overbought and oversold, would now expect the end of this upwards swing and the beginning of a downwards swing. Today price has reached resistance and Stochastics is overbought.
On Balance Volume has again come up to touch the green trend line. This may help to indicate that upwards movement may end here; some downwards movement would be expected from this indicator.
Overall the technical analysis today supports the Elliott wave counts for the short term; some downwards movement would be expected. Friday should produce a red candlestick.
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 as to which wave count, bull or bear, is correct.
This analysis is published about 07:14 p.m. EST.