Price has broken out of a consolidation upwards.
Summary: Short term a third wave may end about 1,113 (if this target is wrong, it may not be high enough). Thereafter, a fourth wave correction should move sideways for a few days and be followed by more upwards movement for a fifth wave which may end about 1,135. At this stage, at least short term, the trend is up.
New updates to this analysis are in bold.
To see the last long term analysis with weekly charts click here.
Note: The data I was using from BarCharts was futures data and not cash data. Neither BarChart nor MotiveWave would / could provide me with the correct symbol for the COMEX cash data (the symbol used in MotiveWave is different to the symbol on the BarChart website). I have now found the correct symbol. The data points are slightly different which changes the invalidation points and targets slightly.
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. The bear market should be expected to be intact until we have technical confirmation of a big trend change.
That technical confirmation would come with a breach of the upper cyan trend line by at least one full daily candlestick above and not touching the line. A new high above 1,191.37 would provide full and final price confirmation.
The final line of resistance (cyan line copied over from weekly charts) is only overshot and not so far properly breached. Simple is best, and the simplest method to confirm a trend change is a trend line.
Minute wave ii is a complete zigzag and deep at 0.73 the length of minute wave i.
At 941 minute wave iii would reach 1.618 the length of minute wave i.
Minuette wave (i) is complete.
Minuette wave (ii) is unlikely to be a double combination with this upwards movement of the last two days. It now looks more like a fairly typical expanded flat correction which may end about the 0.618 Fibonacci ratio at 1,135. I will discard the combination idea.
MAIN HOURLY WAVE COUNT
This third wave up for micro wave 3 may be ending with a typical extended fifth wave.
At 1,113 micro wave 3 would reach 1.618 the length of micro wave 1. If this target is wrong, it may be a little too low.
There is so much overlapping within micro wave 3 so far. Towards the end of this session, the middle of the third wave looks like it has just passed. A series of small fourth wave corrections should unfold along the way up to the short term target at 1,113.
Only when micro wave 3 is a complete five wave impulse should micro wave 4 unfold. Micro wave 2 was a deep 0.66 double zigzag correction. Given the guideline of alternation micro wave 4 should be expected to be shallow (against micro wave 3) and a sideways combination, flat or triangle. Micro wave 2 shows up on the daily chart lasting 6 days. Micro wave 4 should be expected to also show up on the daily chart and last about the same or similar duration, so that the impulse of subminuette wave c has the right look.
The light blue channel drawn about micro wave 3 is a best fit. When it is breached by downwards movement that shall provide a strong indication that micro wave 3 is over and micro wave 4 has begun sideways.
We may expect that price should overall continue higher while price remains within the channel and the structure of micro wave 3 is incomplete.
Micro wave 4 may not move into micro wave 1 price territory below 1,081.57.
ALTERNATE DAILY WAVE COUNT
This was the second alternate yesterday. It is the first alternate today.
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 (see weekly charts for this larger structure). 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.
Intermediate wave (5) should be shorter than intermediate wave (1). At 976.58 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 may now be an incomplete flat correction requiring more upwards movement. Minute wave c must subdivide as a five wave structure in exactly the same way as subminuette wave c on the main daily chart.
Minor wave B may not move beyond the start of minor wave A above 1,189.
SECOND ALTERNATE DAILY WAVE COUNT
It is possible that the diagonal structure is over. It has the right look with a small overshoot of the (1)-(3) trend line.
Intermediate wave (3) is longer than intermediate wave (1), but intermediate wave (4) is shorter than intermediate wave (2) and the trend lines converge. This diagonal should be contracting. If this wave count is confirmed with a new high above 1,191.37, then the rules for diagonals would need to be rewritten to include “sometimes the third wave may be the longest of the actionary waves” for both contracting and expanding diagonals. All other rules should still be met.
If there has been a trend change at cycle degree at the last low, then it must be followed by a clear five up on the daily chart. So far minor waves 1 and 2 are complete. Minor wave 3 would reach 2.618 at 1,159.
Within minor wave 3, minute wave iii would have the same structure as the hourly chart but everything would be moved up three degrees. The target is also the same. At 1,113 minute wave iii would reach 1.618 the length of minute wave i. If price keeps rising through this first target, then the second target would be at the next Fibonacci ratio in the sequence. At 1,147 minute wave iii would reach 2.618 the length of minute wave i.
When minute wave iii is a completed five wave impulse, then minute wave iv should unfold sideways over a few days. It may not move into minute wave i price territory below 1,081.57.
In the short to mid term, this wave count and the main wave count do not diverge. All wave counts now expect overall upwards movement.
This alternate wave count is bullish at cycle degree. It calls for an end to the bull market which has lasted the last four and a half years. This is a huge call to make, and before any confidence can be had in a trend change of that size it absolutely requires price confirmation.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Another strong upwards day comes with an increase in volume. The volume profile continues to be bullish.
ADX and ATR both agree that there is a trend. The trend is up.
On Balance Volume is more clearly bullish today with a break above the short peach trend line.
RSI is not yet overbought and shows no divergence from price. Upwards movement may be expected to continue. There is room for further rises in price.
Stochastics has reached overbought, but in a trending market this oscillator may remain extreme for long periods of time. The best use for this oscillator in a trending market is to look for short term divergence to indicate a potential correction against the trend. Today, there is no divergence between Stochastics and price, so a correction is not yet indicated to turn up.
Price may find some resistance about here at the blue horizontal trend line. If this line is breached, then it may be expected to provide some support for any corrections.
This analysis is published @ 08:36 p.m. EST.