Upwards movement was expected.
Summary: The target for this correction to end is at 1,082 – 1,084. It may reach the target in four more days time. Upwards movement is still expected to be a correction against the downwards trend.
New updates to this analysis are in bold.
To see weekly charts and the difference between the two wave counts go here.
MAIN 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 cyan 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 (cyan 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.
Minuette wave (i) is complete.
Minuette wave (ii) may find resistance at the upper dark blue trend line. This may see it end about the 0.382 Fibonacci ratio of minuette wave (i) at 1,104.
Minuette wave (i) lasted 31 days, three short of a Fibonacci 34. It looks like minuette wave (ii) may be more brief and shallow than second wave corrections normally are, at this stage, due to the strong downwards pull from the middle of a third wave. So far it has lasted four days. If it continues now for a further four days, it may total a Fibonacci eight.
Minuette wave (ii) looks like it is most likely unfolding as an expanded flat correction at this stage. When this structure is complete, then we must consider the alternate idea that the expanded flat is only wave A within the correction. An alternate would then be published that moves the degree of labelling within the expanded flat down one degree and expects minuette wave (ii) to continue further as a larger flat correction, double flat or combination.
Minuette wave (ii) may not now be unfolding as a zigzag or zigzag multiple. It may also not be a triangle. The only two possible structures now would be an expanded flat or a combination. The two hourly wave counts below look at both these possibilities in order of probability.
MAIN HOURLY WAVE COUNT
Subminuette wave b moved a little lower to be 1.29 times the length of subminuette wave a, nicely within the normal range of 1 to 1.38.
Thereafter, the small channel drawn about micro wave C was breached by upwards movement confirming an end to micro wave C and the start of a new upwards wave.
So far within subminuette wave c micro wave 1 looks to be complete. Micro wave 2 may correct to either the 0.382 or 0.618 Fibonacci ratios of micro wave 1, with the 0.618 Fibonacci ratio preferred.
Thereafter, a third wave up within this five wave impulse of subminuette wave c should unfold.
If the whole structure lasts another four days, it may complete in a Fibonacci eight days total. For it to continue for four more days, we may see a red candlestick or doji for one or both of micro waves 2 and 4.
A small channel is drawn about micro wave 1. While price remains within the channel it is entirely possible that my labelling of micro wave 1 as complete is wrong, the final fifth wave up may be extending further.
When the channel is breached by a full hourly candlestick below the lower edge and not touching it that shall provide trend channel confirmation that micro wave 1 is over and micro wave 2 downwards is underway.
At 1,082 subminuette wave c would reach 1.618 the length of subminuette wave a. This is close to the 0.236 Fibonacci ratio of minuette wave (i) at 1,084 giving a small $2 target zone. If this target is wrong, it may be too low.
When micro waves 1 through to 4 are complete within this impulse, then the target may be calculated also at micro wave degree. The target may change again at that stage.
Micro wave 2 may not move below the start of micro wave 1 at 1,046.48.
ALTERNATE HOURLY WAVE COUNT
The other structural possibility for minuette wave (ii) at this stage is a combination.
The subdivisions for both hourly wave counts are identical. Here, the zigzag upwards is the first in a double labelled subminuette wave w. The double is joined by a three in the opposite direction, a zigzag labelled subminuette wave x.
The second structure in the double may be a flat or triangle. Because the X wave is so deep a double zigzag for minuette wave (ii) should not be considered; they have much more shallow X waves.
If subminuette wave y is to be a flat or triangle, then micro wave A within it must be a three. With the first wave up now a completed five micro wave A may be unfolding as a zigzag which subdivides 5-3-5. Micro wave B within it may not move below the start of micro wave A at 1,046.48.
When micro wave A is a completed zigzag, then the following correction for micro wave B should be deep and may make a new low below the start of micro wave A at 1,046.48 as in an expanded flat or running triangle.
The purpose of combinations is to take up time and move price sideways. To achieve their purpose they normally have deep X waves and wave Y normally ends close to the same level as wave W. Subminuette wave y should be expected to end about 1,075.
I judge this idea to have a lower probability than the main hourly wave count simply because so far this correction looks like a very typical and very common expanded flat. But all possibilities should be considered.
ALTERNATE ELLIOTT WAVE COUNT
I am aware that this is the wave count which EWI and Danerics have. The implications are important, so I will follow this wave count daily for members here too.
Everything is the same up to the end of the triangle for primary wave 4. Thereafter, primary wave 5 is seen as an ending contracting diagonal.
Within the ending contracting diagonal, it is not possible to see intermediate wave (2) as a zigzag and meet all Elliott wave rules. To see an explanation of why see this video at 10:25.
The same problem exists for the ending diagonal of primary wave 5 itself. Intermediate wave (3) is longer than intermediate wave (1) which would suggest an expanding diagonal, but intermediate wave (4) is shorter than intermediate wave (2) and the trend lines converge which suggests a contracting diagonal.
From “Elliott Wave Principle” by Frost and Prechter, 10th edition, page 88: “In the contracting variety, wave 3 is always shorter than wave 1, wave 4 is always shorter than wave 2, and wave 5 is always shorter than wave 3. In the expanding variety, wave 3 is always longer than wave 1, wave 4 is always longer than wave 2, and wave 5 is always longer than wave 3.”
This structure violates the rules for both a contracting and expanding variety. If the rules in Frost and Prechter are accepted, then this is an invalid wave count.
It may be that the rules need to be rewritten to add “sometimes a third wave may be the longest within a contracting or expanding diagonal”. But I have never seen Robert Prechter publish such a rule, I do not know that it exists.
I cannot reconcile this wave count from EWI with the rules in Frost and Prechter.
If an ending contracting diagonal is unfolding, then the (1) – (3) trend line may be overshot signalling the end of intermediate wave (5). If price behaves thus and turns around and moves strongly higher, then this wave count must be accepted and the rules for diagonals will need to be rewritten.
I will continue to follow this possibility as price moves lower.
Intermediate wave (5) should be shorter than intermediate wave (1). At 977.53 intermediate wave (5) would reach equality in length with intermediate wave (1). A new low below this point would take this possible diagonal structure too far from the rules. At that stage, it really should be finally discarded.
All sub waves within ending diagonals must subdivide as zigzags. Within the zigzag of intermediate wave (5), minor wave B should unfold over several days. At this stage, there is no divergence between this idea and the main Elliott wave count.
Minor wave B may not move beyond the start of minor wave A above 1,191.66.
I am uncomfortable with publishing this wave count and I only do so because it has been published by Elliott Wave International. I am not comfortable with publishing any wave count which violates the rules in Frost and Prechter. However, when looking at primary wave 5 on the weekly chart it does look like a diagonal is unfolding.
Short to mid term there is no divergence in expected direction between this wave count and the main wave count.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A reasonable increase in volume supports the upwards movement in price for today. This supports the idea that more upwards movement should be expected.
Volume for today is still lower than the last strong downwards day of 27th November.
On Balance Volume is breaking above the short pink trend line and finding resistance at the green trend line. If it breaks above the green line in the next day or so, that would be reasonably bullish.
ADX still indicates a downward trend is in place, but this does tend to be a lagging indicator. However, ATR agrees as it is increasing.
The next line of resistance would be the new horizontal purple trend line at 1,072. Thereafter, another line of resistance is at 1,080.
This analysis is published about 07:24 p.m. EST.