Sideways / downwards movement was expected for both Elliott wave counts.
Price moved lower then retraced almost all of the loss to complete a hanging man candlestick pattern for the session.
Summary: Both wave counts have problems and price has not yet finally confirmed which one is correct. A new high above 1,170.19 would strongly favour the bull. A new low below 1,104.69 would strongly favour the bear.
New updates to this analysis are in bold.
BULL ELLIOTT WAVE COUNT
I will present this bull wave count first because with the bear wave count breaching its trend channel the bull wave count now must increase in probability.
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. To see the bigger picture on weekly charts click here.
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.
To the upside, a new high above 1,156.83 would invalidate the bear wave count and provide strong confirmation for this bull wave count.
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.
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. It is difficult at this stage to see how minute wave b could continue any lower; it is likely to be over now as labelled. No second wave correction may move beyond the start of its first wave below 1,104.69 within minute wave c.
The hourly chart still focusses on the middle of minuette wave (iii) from the low of subminuette wave ii.
Downwards movement for Tuesday’s session moved back into subminuette wave i price territory, so this may not be subminuette wave iv. This means subminuette wave iii must be incomplete.
The degree of labelling within subminuette wave iii is moved down one degree. Only micro wave 1 would be complete. Downwards movement for Tuesday would be micro wave 2. If it continues further, it may not move beyond the start of micro wave 1 below 1,136.74.
Micro wave 2 will subdivide as a deep zigzag on the five minute chart. Micro wave 2 remains above the lower edge of the base channel about subminuette waves i and ii (orange trend lines).
The target for minuette wave (iii) is removed today and will be recalculated when subminuette waves iii and iv are complete. The next interruption to the trend for the bull wave count would be at the end of subminuette wave iii.
At 1,198 subminuette wave iii would reach 2.618 the length of subminuette wave i.
BEAR ELLIOTT WAVE COUNT
I publish the bear weekly chart today to illustrate the channels which need to be breached, and a final line of resistance which also should really be breached, in order to provide technical confirmation of a big trend change from bear to bull.
The wide maroon channel is drawn about this impulse using Elliott’s first technique: the first trend line is drawn from the ends of primary waves 1 to 3, then a parallel copy is placed in the end of primary wave 2. This channel is now breached two times (so far, the current week is incomplete and may not end in a breach) and overshot once. If this week ends with a breach of this channel, then it may be used to confirm a trend change.
A final line of resistance is added from the highs labelled primary wave 2 at 1,796.05 to intermediate wave (2) at 1,308.10. If that bright aqua blue line is breached, then it would provide full and final technical confirmation of a trend change from bull to bear. I may consider publishing a bear wave count as an addendum (with a low probability) while price remains below that trend line, if the Elliott wave count fits and makes sense.
If price breaks above 1,170.19, then another possibility for the bear would be to see minute wave ii continuing higher. That would see minute wave ii huge in duration though; it would look wrong at the daily chart level.
I have considered an ending diagonal for primary wave 5. It will not fit because the wave up labelled minor wave C of intermediate (2) will not fit as a zigzag (see video of 20th August for an explanation of this problem). I know other Ellioticians have wave counts which see this move as a three, but I do not know how they managed to do that and resolve the problem.
The bright aqua blue line is copied over from the weekly chart. When price gets up there, it should find some resistance. If that line is breached at the daily chart level with one full candlestick above it and not touching it, then that would be full and final invalidation of this or any other bear wave count.
This wave count now sees a series of five overlapping first and second waves: intermediate waves (1) and (2), minor waves 1 and 2, minute waves i and ii, minuette waves (i) and (ii), and now subminuette waves i and ii (on the hourly chart). Minute wave iii should show a strong increase in downwards momentum beyond that seen for minute wave i. The upper blue trend line is now breached on the daily chart which substantially reduces the probability of this wave count. Base channels almost always work to show where lower degree corrections find support or resistance, but almost always is not the same as always which means this wave count is still just technically possible. Base channels at this higher degree and higher time frame though really should work better than this. This wave count no longer has the right look.
If minuette wave (ii) continues any higher, then it may not move beyond the start of minuette wave (i) above 1,170.19.
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.
Minuette wave (ii) is a double zigzag, with subminuette wave x an expanded flat correction. The subdivisions fit perfectly at the hourly chart level. However, this is a very deep second wave correction and it would be reasonable to expect the strong downwards pull from the middle of a big third wave to force this second wave correction to be more shallow and brief than this. The probability of this wave count is reduced.
Gold has the most textbook looking structures and waves of all the markets I have analysed over the years, probably due to the high volume of this global market. And so I am quite concerned with the look of minuette wave (i). Sometimes Gold has movements which don’t look perfect on the daily chart, but this is uncommon.
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.
This bear wave count expects Gold is within a third wave at five wave degrees. Expect any surprises to be to the downside for this wave count. Because of the implications of this potential third wave, although this wave count now has a greatly reduced probability, I still want to publish it as a “just in case” while it remains technically viable (in terms of price). If downwards movement begins to unfold and shows a strong momentum and volume, then this would remain a viable explanation at this stage.
Within minuette wave (iii), subminuette wave ii now shows up very clearly on the daily chart. This was expected, and will give minuette wave (iii) the right look. Minuette wave (iii) may only subdivide as an impulse.
Full and final confirmation of this wave count would come now with a new low below 1,104.69.
I will remove the final target for primary wave 5 at this stage. If it were to reach only equality with primary wave 1 , then this wave count would end about 985. But it has begun with three big overlapping first and second waves, so the target no longer looks low enough. I will calculate a target for primary wave 5 to end at intermediate degree when intermediate waves (3) and (4) are complete. Primary wave 5 may not exhibit a Fibonacci ratio at primary degree.
I checked the subdivisions of subminuette wave i on the five minute chart. I have found a solution where it will subdivide well as a five wave impulse. This downwards wave is ambiguous; it will subdivide as either a three wave zigzag or a five wave impulse. Both possibilities must be considered.
If subminuette wave i is a five wave impulse, then subminuette wave ii may not move beyond its start above 1,169.15.
The target for minuette wave (iii) remains the same. At 982 it would reach 2.618 the length of minuette wave (i). I am using this Fibonacci ratio for the target because of the depth of minuette wave (ii).
If price breaks above 1,169.15, then rather than seeing minuette wave (ii) continue as a very rare triple zigzag I would see minute wave ii continuing as a double zigzag. The invalidation point for that idea is at 1,232.49, but the final line of resistance would be used to confirm or invalidate a bear wave count at that stage.
ALTERNATE BEAR ELLIOTT WAVE COUNT
If price breaks above 1,170.19, then this would be the bear wave count I would use. It has a reasonably low probability. Minute wave ii would substantially breach the dark blue base channel about minor waves 1 and 2. Minute wave ii would be much longer in duration than a minute degree correction normally is. These are the two reasons which reduce the probability of this alternate idea.
The subdivisions of minute wave ii are a better fit than how this movement is seen for the main bear wave count.
A new high above 1,170.19 would indicate an impulse is most likely unfolding upwards, and would require more upwards movement to complete the structure. At that stage, for both bull and bear wave counts, I would expect price to keep moving higher.
The target for this idea is probably too high as it would see a break above the final line of resistance. At 1,198 subminuette wave c would reach 2.618 the length of subminuette wave a.
Minute wave ii may not move beyond the start of minute wave i above 1,232.49.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: Monday’s candlestick has a long upper wick and now Tuesday’s candlestick looks like a hanging man, a bearish reversal pattern. The candlestick patterns are bearish. Price is still finding strong resistance at the horizontal trend line. The more often that line is tested the more technically significant it becomes.
There is some support for this upwards movement. Volume for Tuesday is higher than the last two upwards days (although not by much). Overall volume is lower than at the start of this consolidation, no breakout is yet indicated.
Price remains range bound between horizontal lines of resistance and support. ADX is starting to indicate the development of a new upwards trend with the black ADX line pointing upwards and the +DX green line above the -DX red line. Although ADX indicates a new trend, price remains within the consolidation band and volume is declining. Volume indicates the consolidation is incomplete. The breakout has not yet occurred. ADX indicates the breakout may be upwards, but volume indicates it may be downwards. The picture is unclear, so it must be left to price as the final determinator.
On Balance Volume has now come up to almost touch the pink trend line and may find resistance there. This line is reasonably shallow but not long held and has only been tested twice. It is only somewhat technically significant. If OBV turns down from this trend line, the strength will be reinforced and may then be expected to provide future resistance.
The slight divergence between the last two swing highs in price and RSI is no longer so slight; RSI now has moved a little above its point about 14 days ago while price has also made a higher high. RSI is weaker than price indicating a little weakness for this upwards wave, but not as much.
Overall, the regular technical analysis picture is unclear but slightly more bearish than bullish. We need to wait for price to break out of the horizontal trend lines and if that happens on a day with increased volume, then I would expect the breakout is underway.
This analysis is published about 06:32 p.m. EST.