Downwards movement was expected, but price has moved mostly sideways to complete a small green candlestick.
Summary: Short term a little upwards movement to about 1,172 is expected to complete a second wave correction. Thereafter, downwards movement is expected to the target at 1,142. If this target is wrong, it may not be low enough. The target should be met within five days, sooner rather than later.
To see weekly charts for bull and bear click here.
New updates to this analysis are in bold.
BULL ELLIOTT WAVE COUNT
DAILY – COMBINATION
If cycle wave b is a combination, then the first structure in the double combination (or double flat) was an expanded flat. The double is joined by a three in the opposite direction labelled primary wave X which was a zigzag.
Downwards movement of the last several days looks now to be too large in price and duration to be part of the prior upwards wave, which now looks like a separate wave. Minor wave 3 may be a complete zigzag of a leading diagonal. Minor wave 3 is shorter than minor wave 1, so the diagonal would be contracting which is the most common type particularly for a leading diagonal. This limits minor wave 4 to no longer than equality in length with minor wave 2. Minor wave 4 may not move below 1,120.32.
A five wave structure would be developing upwards for this wave count as a leading contracting diagonal. Because primary wave Y would be beginning with a five wave structure, this reduces the possible structures to a zigzag. Cycle wave b as a combination would be a flat – X – zigzag.
The normal range for a fourth and second wave within a diagonal is between 0.66 to 0.81 the prior actionary wave. That gives a normal range for minor wave 4 from 1,130 to 1,116. Minor wave 4 must end at the upper edge of the normal range (or above) to remain above the invalidation point.
DAILY – EXPANDED FLAT
Cycle wave b may also be a flat.
If cycle wave b is an expanded flat, then primary wave C must be a five wave structure. The current upwards wave may be unfolding as a leading contracting diagonal, so this would be minor wave (1) within primary wave C.
There are two possible structures for a C wave within a flat correction: an impulse or an ending diagonal. If the first wave is a five and not a zigzag, then an ending diagonal may be ruled out because ending diagonals require all sub waves to be zigzags. Primary wave C may now only be an impulse.
A leading diagonal requires the second and fourth waves to subdivide as zigzags. The first, third and fifth waves are most commonly zigzags, but sometimes may appear to be impulses. So far minor waves 1 and 3 both fit well as zigzags.
Minor wave 2 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.
The hourly chart below works for both these first two daily charts.
Subminuette wave ii looks like it is continuing sideways. The downwards wave which began Tuesday’s session is a three and not a five, so this may not be part of an impulse down but more likely part of a correction.
Subminuette wave ii may be unfolding as a zigzag. Micro wave A within it will subdivide as a five, a leading contracting diagonal. Micro wave B subdivides as a three. Micro wave C upwards must complete as a five wave structure. It is very likely to move at least slightly above the end of micro wave A at 1,169.79 to avoid a truncation.
Micro wave C may end about the 0.618 Fibonacci ratio of micro wave A. I will use this for the target as it may be more reliable than expecting micro waves A and C to exhibit a Fibonacci ratio to each other. This target would also see micro wave C end about the upper edge of the small channel drawn about subminuette wave ii. Price is likely to find resistance at the upper violet trend line.
When subminuette wave ii can be seen as a complete zigzag, subdividing 5-3-5, then a subsequent breach of the violet channel drawn about it by downwards movement would provide trend channel confirmation that submineutte wave ii would be over and subminuette wave iii should be underway.
Subminuette wave ii may not move beyond the start of subminuette wave i above 1,179.50. When the channel about subminuette wave ii is breached by downwards movement, then the invalidation point may move down to the end of subminuette wave ii.
DAILY – TRIANGLE
This daily chart looks at what a triangle would look like for cycle wave b. The triangle would be a running contracting or barrier triangle. Within the triangle, primary wave C up must be a single or multiple zigzag. Primary wave C may not move beyond the end of primary wave A above 1,308.10.
This idea slightly diverges from the other two ideas for cycle wave b as an expanded flat or combination.
If a triangle is unfolding, then at the weekly chart level primary wave C looks unlikely to be complete and should move higher for the triangle to have the right look. This wave count sees upwards movement as incomplete for minor wave C with a final fifth wave yet to unfold. At 1,220 minute wave v would reach equality in length with minute wave iii. This would see primary wave C end close to 0.618 the length of primary wave B. One of the five sub waves of a triangle is commonly about 0.618 the length of its predecessor.
The second target at 1,256 is where minor wave C would reach 2.618 the length of minor wave A, and at 1,261 primary wave C would reach 0.8 the length of primary wave A.
For the triangle idea, for cycle wave b, a five wave impulsive structure only needs to complete upwards. The next wave down for primary wave D should be fairly time consuming, lasting about 2 to 6 months. Primary wave D may not move beyond the end of primary wave B at 1,072.09 for a contracting triangle. Alternatively, primary wave D may end about the same level as primary wave B at 1,072.09 for a barrier triangle, as long as the B-D trend line remains essentially flat. In practice this means primary wave D can end slightly below 1,072.09 and this wave count remains valid. This is the only Elliott wave rule which is not black and white.
HOURLY – TRIANGLE
A new high now about 1,179.50 would invalidate the first hourly chart and provide some confirmation of this second idea. For the first two daily charts, this idea is also possible; there, the five wave impulse of minute wave c may also be incomplete requiring a final fifth wave upwards.
The subdivisions of recent movement are seen in the same way at the hourly chart level for both wave counts. Here, the leading diagonal may have been a first wave followed by a zigzag downwards for a second wave.
This wave count expects a third wave upwards to develop which should show some increase in upwards momentum. The fifth wave within it may be surprisingly swift and strong.
BEAR ELLIOTT WAVE COUNT
The final line of resistance (bright aqua blue line copied over from weekly charts) is only overshot and not so far properly breached. While this line is not breached the bear wave count will remain possible. Simple is best, and the simplest method to confirm a trend change is a trend line. While price remains below this line, it must be accepted that Gold has been in a bear market since 2011 and we don’t have technical confirmation that the bear market has ended.
The most likely possibility is that minute wave ii is a complete double zigzag and deep at 0.75 the length of minute wave i for the bear wave count. It has breached the dark blue base channel drawn about minor waves 1 and 2, one degree higher. When a lower degree second wave correction does this it reduces the probability of the wave count but does not invalidate it. Base channels most often work to show where following corrections find support or resistance, but not always.
At 932 minute wave iii would reach 1.618 the length of minute wave i.
If minute wave ii were to continue further, it may not move beyond the start of minute wave i above 1,232.49. A new high above that price point would be final price invalidation of any bear wave count. That would fully eliminate the concept that Gold remains in a bear market. No bear wave count should be considered above that point.
The first hourly chart works in exactly the same way for this bear wave count, and that is the only reason why I am not publishing a separate chart for the bear. This bear wave count also expects a third wave to be unfolding downwards. The degree of labelling on the hourly chart would also be the same.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: The technical analysis picture is unclear today for Gold. Volume indicates Gold is consolidating, ADX indicates Gold is trending, and ATR indicates Gold is consolidating. Because ADX is a lagging indicator, at this time I will choose to decide that on balance it looks like Gold is consolidating and the breakout of 14th October was false. The rest of this technical analysis rests on that assumption.
Price is finding resistance at the horizontal trend line now two days in a row. The strength of this line is reinforced. Both the last two daily candlesticks are small, both look corrective. Volume overall continues to decline. It is looking increasingly like the potential upwards breakout of 14th October was false and that the consolidation phase continues for Gold.
During this consolidation which began about 7th August it is still a downwards day which has strongest volume. This favours the bear Elliott wave count.
The black ADX line is pointing upwards and is above 20. With the +DX line above the -DX line the trend should be upwards. This may be a lagging indicator of the last upwards swing which overshot resistance.
ATR is declining indicating the range price is moving in continues to narrow. This is more typical of corrections than a trend.
Stochastics has returned from overbought but has not yet reached oversold. A range bound approach to this market would expect more downwards movement to continue until Stochastics reaches oversold and at the same time price reaches either the sloping light blue line or the lower horizontal line of support.
This analysis is published about 06:15 p.m. EST.