More downwards movement was expected.
Only one wave count is left now.
Summary: Only the bear wave count is left. One by one all bull wave counts have been invalidated. Gold has been in a bear market since September 2011 and there is no technical confirmation of a change from bear to bull. Expect surprises to be to the downside as the middle of a big third wave may be approaching. Short term a new high above 1,122.95 and / or a green daily candlestick on either of Gold or Silver will indicate a correction against the trend has arrived. The upcoming correction may last about three days and possibly longer. The trend is down.
To see weekly charts click here.
New updates to this analysis are in bold.
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 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.
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.
A new high above 1,191.66 would necessarily come with a clear breach of the bear market trend line, and so at that stage a bear wave count should be discarded. Within minute wave iii, no second wave correction may move beyond its start above 1,191.66.
Gold often exhibits swift strong fifth waves, particularly its fifth waves within its third waves. When price moves towards subminuette wave v of minuette wave (iii) it may be explosive. For this wave count look out for surprises to be to the downside.
At 1,080 minuette wave (iii) would reach 4.236 the length of minuette wave (i).
Again, I have the same two hourly charts that look at downwards movement differently. Today the second hourly chart actually has a better fit with the most recent movement in terms of subdivisions. But we should assume the trend remains the same until proven otherwise. Assume the trend is down until a correction is confirmed with either a new high above 1,122.95 or a green daily candlestick on Gold or Silver.
FIRST HOURLY CHART
It is still possible that only subminuette waves i and ii are now complete within minuette wave (iii). Subminuette wave ii may have been remarkably quick and shallow. Sometimes this happens when the middle of a big third wave is approaching; the strong downwards pull can force corrections to be more brief and shallow than normal.
Ratios within subminuette wave i are: micro wave 3 is 0.97 short of equality in length with micro wave 1, and micro wave 5 has no Fibonacci ratio to either of micro waves 1 or 4. There is good alternation between the shallow zigzag of micro wave 2 and the more shallow flat correction of micro wave 4. Micro wave 3 is stronger than micro wave 1, and micro wave 5 is strongest. This looks like a typical impulse for gold.
Subminuette wave ii may have been over very quickly as a very shallow 0.09 correction of subminuette wave i. Although sometimes corrections approaching the middle of a third wave can be brief and shallow, this part of the wave count does not look right. This is why I am considering the second idea below.
If subminuette wave ii is complete, then within subminuette wave iii no second wave correction may move beyond its start above 1,122.95.
The downwards movement from the end of submicro wave (4) will not subdivide as either a complete impulse or ending diagonal. It may be an incomplete ending diagonal, but the many overlapping movements within it look more corrective. This piece of movement fits the second hourly chart better today.
SECOND HOURLY CHART
This idea expects the the five wave impulse downwards ended at Wednesday’s low and a bounce up from there may begin.
The degree of labelling within this impulse may also be moved up one degree (from labelling on the first hourly wave count), because minuette wave (iii) may have just ended. This idea would expect minuette wave (v) to be a strong extension.
The degree of labelling may also be moved back down one degree. The five wave impulse may have been only subminuette wave i.
Ratios within minuette wave (iii) are: subminuette wave iii is 1.3 short of 1.618 the length of subminuette wave i, and subminuette wave v has no Fibonacci ratio to either of subminuette waves i or iii. There is little alternation between subminuette waves ii and iv: subminuette wave ii is a shallow 0.34 zigzag with a long A wave and short C wave and subminuette wave iv is a more shallow 0.13 zigzag with a short A wave and a long C wave.
Although there is not perfect alternation between subminuette waves ii and iv (the biggest problem with this wave count), seeing the correction labelled subminuette wave iv as a fourth wave and not a second wave (as the first wave count does) makes more sense.
At this stage, a new high above 1,122.95 would provide some confidence that downwards movement is likely over for now and a bounce upwards has begun.
The 0.382 or 0.618 Fibonacci ratios would be likely targets for the bounce to end.
Minuette wave (iv) (or subminuette wave ii, if the degree of labelling is moved back down one degree) may be unfolding as a flat correction. Within a flat, the A wave must be a three and the B wave must retrace a minimum 90% of the A wave. So far subminuette wave a may be an incomplete flat correction, a three wave structure.
Micro wave A subdivides as a zigzag within subminuette wave a. Micro wave B fits reasonably well as a double zigzag. Micro wave B so far is 1.37 the length of micro wave A, within the normal range of 1 to 1.38 times the length of A for a B wave within a flat correction. If micro wave B continues lower, then when it reaches twice the length of A at 1,101.15 the idea of a flat correction should be discarded. While there is no rule stating the maximum length of a B wave within a flat, there is an Elliott wave convention which states the probability of a flat unfolding is extremely low when B is more than twice the length of A.
If this is a fourth wave correction for minuette wave (iv), then it may yet morph into a running triangle.
This correction may be a flat as labelled. It may also be a double flat or double combination. This is possible if it is either minuette wave (iv) or subminuette wave ii. If this wave count is correct, then as more structure unfolds the labelling may well change. It is impossible to tell which of the multiple structural possibilities may unfold for this correction at this early stage.
Minuette wave (iv) may not move into minuette wave (i) price territory above 1,167.49. It should find resistance at the upper edge of the channel which is drawn here using Elliott’s first technique.
If this correction is subminuette wave ii, then it may not move beyond the start of subminuette wave i above 1,183.09.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Now that StockCharts data is finalised, this regular technical analysis section was updated at 7:02 p.m. EST after NY has closed.
Daily: Downwards movement comes on a small decrease in volume today. The market has been falling now for seven days, mostly of its own weight, and may well continue to do so. Volume is not required for price to keep falling.
The last big downwards move from Gold began on declining volume. It was not until over halfway through that volume picked up. That could happen again.
Price closed below the lower horizontal trend line two days in a row now. This line has been overshot before, and so a full daily candlestick below that line is required for a clear breakout (today’s candlestick still has its upper shadow above the line). If that happens on a downwards day with an increase in volume, then a downwards breakout would be clearer. While more confidence in a downwards breakout may be had if volume spikes when price breaks below the trend line, this is not necessary.
It was a downwards day which had strongest volume during the consolidation. This indicates a downwards breakout is more likely than upwards. This does not always work, but it works more often than not. It is a useful indicator.
ADX is flat today. If the black ADX line turns upwards from here a new downwards trend would finally be indicated. ADX does tend to be a lagging indicator.
Average True Range is mostly flat. This is more typical of price during a consolidation than a trend.
A downwards breakout has not yet been clearly indicated because ADX and ATR do not clearly indicate a downwards trend as yet, and because price has not properly broken below the lower horizontal trend line. It looks likely price may break out downwards, but it may bounce up from support about here first.
Stochastics now more clearly diverges with price; Stochastics is flat and oversold while price has made new lows for the last three days. An upwards bounce may begin about here to resolve this divergence.
On Balance Volume is a leading indicator. Here it is very bearish. This supports the bear wave count nicely.
This analysis is published about 03:50 p.m. EST.