Downwards movement is unfolding as expected for both Elliott wave counts.
Summary: Downwards movement should continue to 1,096 for the bull wave count or 1,063 for the bear wave count. On the way down, a new low below 1,072.09 would fully invalidate the bull wave count and provide confidence in the bear. Use the channel on the hourly chart to show where price may find support and resistance on the way down; a strong fifth wave may break below support. At this stage, I will favour neither bull nor bear wave count because both expect price to keep going down short term. Price will tell us which one is correct
Changes to last analysis are bold.
To see weekly charts and the three different options for cycle wave b (bull 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.
Minute wave b is over. Downwards movement clearly breached the channel drawn on yesterday’s hourly chart. That channel has performed its purpose and may now be discarded. Keep drawing a channel about this downwards zigzag of minor wave 2 (pink): draw the first trend line from the start of minor wave 2 (the high labelled minor wave 1 on the daily chart) to the high labelled minute wave b, then place a parallel copy on the low of minute wave a (now off to the left of the chart). For this bull wave count, that channel is a corrective channel; for the bear wave count, that channel is a base channel and drawn in exactly the same way. If the smaller channel I am adding today about this new downwards movement (green) is breached, then look for upwards corrections along the way down to find strong resistance at the upper edge of the pink channel.
There is more than one way to label this downwards movement so far. I will present two different ideas at the hourly chart level. I consider this first idea here to have a higher probability because it has better alternation.
Minute wave c must subdivide as a five wave structure, either an ending diagonal or an impulse. At this early stage, minute wave c looks like a simple impulse.
Within minute wave c, minuette waves (i) and (ii) are likely over as labelled. Minuette wave (iii) is incomplete.
Within minuette wave (iii), there is perfect alternation between subminuette wave ii as a shallow combination and subminuette wave iv as a deeper zigzag. Subminuette wave v looks like it may be extending. If this labelling is correct, then I would expect to see a swift strong end to minuette wave (iii). When subminuette wave v moves into its middle we may see a strong increase in downwards momentum. This may have the power to break through support at the lower edge of the green channel.
Draw an acceleration channel about this downwards movement: draw the first trend line from the lows of minuette wave (i) to the last low, then place a parallel copy on the high of minuette wave (ii). Keep redrawing the channel as price moves lower. When minuette wave (iii) is complete this channel may show where minuette wave (iv) finds resistance.
Minuette wave (iv) may not move into minuette wave (i) price territory above 1,137.23.
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.
On this hourly chart, I am looking at a different way to label this recent downwards movement which could be a complete impulse to the last low for a first wave, which may be followed by a deeper second wave correction.
Within subminuette wave i, there is inadequate alternation between micro waves 2 and 4. Micro wave 2 was a shallow 0.49 expanded flat and micro wave 4 was a more shallow 0.26 double combination. There is some alternation in depth and structure, but flats and combinations are very similar and do not exhibit sufficient alternation for confidence in this idea.
This is possible, but less likely than how I have labelled this movement for the first hourly chart. This means that it is more likely corrections should find resistance at the upper edge of the small channel (green on the hourly bull chart and violet here) than that price will breach the channel.
If price does break above the upper edge of this violet channel, then look for it to find very strong resistance and not break above the upper edge of the green channel.
Subminuette wave ii may reach up to the 0.618 Fibonacci ratio of subminuette wave i at 1,138. Subminuette wave ii may not move beyond the start of subminuette wave i above 1,148.04.
Click chart to enlarge. Chart courtesy of StockCharts.com.
With the daily chart giving conflicting information, maybe a step back to look at the weekly chart can provide a little guidance.
For recent movement, it is clear that the strongest week was a down week as price reached the last swing high at 1,169. This indicates price may break out downwards and that upwards movement was a correction against a prevailing downwards trend which favours the bear wave count.
ADX at the weekly chart level currently indicates no clear trend, so the market is consolidating. ADX is a lagging indicator, and this lack of trend indication may be due to upwards movement being a correction against a downwards trend.
On Balance Volume remains below a trend line which goes back to April, and is now substantially below it. This too is bearish.
Overall the weekly picture is more bearish than bullish.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Today’s red candlestick comes with slightly decreased volume. This puts the Elliott wave counts today in slight doubt. However, looking back at the last downwards trend for gold from 18th June to 24th July, the last and strongest downwards leg began with two days of relatively light and declining volume. Thereafter, volume overall increased as price moved lower, but the increase was not seen every day; small corrective days along the way down showed small decreases in volume. The Elliott wave counts may be in some doubt, but it is very slight.
The market can fall of its own weight, but an increase in volume for a fall in price does add confidence to direction expected. Today volume is not adding confidence to the wave counts.
What is still clear from volume is the last rise in price, which began six days ago, was not supported by a rise in volume. This indicates that rise in price was a small correction against a downwards trend, at least in the short term.
The other thing that is clear from volume is the strongest day most recently was the strong downwards day of 24th August. This may be an indication that Gold should move lower.
ADX continues to indicate the market is not yet in a clear trend while the black ADX line points down.
A shorter held trend line on On Balance Volume has not yet been reached at the daily chart level. When On Balance Volume reaches that line then it may find some support. If it breaks through, then that would be strong bearish indication. OBV is pointing lower today which does provide some support to the fall in price. There is no divergence. OBV agrees with the price direction.
There is still slight hidden bullish divergence between price and Stochastics, but this is a weak signal.
Overall the picture at the daily chart level is mixed and unclear, but very slightly favours the bear wave count over the bull.
This analysis is published about 05:23 p.m. EST.