A small inside day leaves both Elliott wave counts valid.
Summary: It is more likely that a second wave correction will unfold upwards from here to about 1,118 or 1,145 (less likely). This would be confirmed with a new high above 1,095.89.
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New updates to this analysis are in bold.
MAIN ELLIOTT WAVE COUNT
Gold has been in a bear market since September 2011. There has been no confirmation of a change from bear to bull. Price remains below the 200 day moving average and below the final bear market 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. At this stage, all bull wave counts have been invalidated.
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.
Minute wave ii is a complete double zigzag and deep at 0.75 the length of minute wave i. 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 minuette wave (v) has begun as per the main hourly wave count below, then at 938 minuette wave (v) would reach 1.618 the length of minuette wave (iii). It is expected that minuette wave (v) will be a long strong extension. Minute wave iii should show an increase in downwards momentum beyond that seen for minute wave i.
Gold often exhibits swift strong fifth waves, particularly its fifth waves within its third waves. Minuette wave (v) may be explosive. For this wave count look out for surprises to be to the downside.
Draw a channel about this downwards movement using Elliott’s first technique: draw the first trend line from the end of minuette wave (i) to minuette wave (iii), then place a parallel copy on the high of minuette wave (ii).
No second wave correction may move beyond its start above 1,094.27 within minuette wave (v).
Based upon structure, I judge this wave count to have a slightly lower probability than the alternate although this is labelled the main wave count today.
This wave count is changed slightly today to resolve the problems with yesterday’s main hourly wave count.
Minuette wave (ii) was a deep 0.65 expanded flat correction lasting six days. Minuette wave (iv) exhibits perfect alternation, if it is seen as a shallow 0.11 zigzag lasting one day. Both show up on the daily chart giving this impulse the right look.
Minuette wave (v) may have begun with a leading expanding diagonal, to be followed by a deep second wave correction.
Because leading expanding diagonals are not very common (the contracting variety, particularly for a leading diagonal, is more common), that reduces the probability of this wave count slightly to below that of the alternate today.
Subminuette wave ii may not move beyond the start of subminuette wave i above 1,095.89.
ALTERNATE ELLIOTT WAVE COUNT
Everything is identical up to the high labelled minute wave ii. Thereafter, the five wave impulse downwards has been moved down one degree. All subdivisions within recent downwards movement are the same for both wave counts today.
If minuette wave (i) within minute wave iii has just ended, then minuette wave (ii) should show up on the daily chart and may last a total Fibonacci five or eight days. It may be longer lasting, but at this early stage a quicker end should be expected. The middle of a big third wave is still approaching which may force corrections to be more brief and shallow than otherwise.
Minuette wave (ii) should first breach the orange channel containing minuette wave (i). If it ends at resistance at the dark blue line, it may reach only up to the 0.382 Fibonacci ratio of minuette wave (i) at 1,118. Final resistance would be at the final bear market trend line.
This may resolve RSI being oversold.
Because subdivisions are all seen in exactly the same way now, only the degree of labelling differs, the only difference in probability for the two wave counts today comes from the diagonal to the last low.
Ending expanding diagonals are more common than leading expanding diagonals. This wave count also has more short term support from regular technical analysis today.
I must remove the invalidation point at 1,074.22. Minuette wave (ii) is most likely to be a zigzag and most likely not to make a new low below 1,074.22. But it does not have to be a zigzag, so if it unfolds as a flat or combination it may make a new low below 1,074.22 for a B or X wave.
If minuette wave (ii) is a flat or combination, then subminuette wave a or w may be a three wave structure. This may be a flat or combination itself, so micro wave B may move below the start of micro wave A at 1,074.22.
If there is a new low below 1,074.22 and downwards movement to the low is a clear three wave structure, then this alternate wave count would still be favoured. However, if a new low comes with a five wave structure, particularly if it shows an increase in momentum, then the main wave count would be favoured.
What is most likely though is that minuette wave (ii) would unfold as a zigzag and not include a new low below 1,074.22. If a five upwards develops, it would be subminuette wave a, and subminuette wave b to follow may not then move beyond the start of subminuette wave a.
This correction may be expected to be quite likely to exhibit a Fibonacci duration. At this early stage, I would expect it to last a Fibonacci eight or thirteen days in total. Minuette wave (1) lasted 20 days, one short of a Fibonacci 21.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,191.66.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: A small red doji on light volume indicates a correction is most likely unfolding during Friday’s session which fits both wave counts.
ADX still indicates a downwards trend is in place. ATR disagrees, the range price is moving in is on average declining.
On Balance Volume still shows bullish divergence (yellow lines) with price. With RSI currently oversold, the alternate Elliott wave count is better supported by this regular technical analysis. Some upwards movement to resolve RSI may occur about here.
This analysis is published about 08:23 p.m. EST.