Downwards movement was expected for Friday’s session.
Price moved overall lower in a small inside day.
Summary: The trend is up. Corrections present opportunities to join the trend. Minute wave iv is most likely to continue for another two or four days. There is a possibility it could be over already within one day, but this requires confirmation with a clear five wave structure up on the hourly chart.
New updates to this analysis are in bold.
WEEKLY ELLIOTT WAVE COUNT
The cyan trend line is now breached by a full weekly candlestick above and not touching it. This gives substantial confidence that Gold has very likely changed from bear to bull.
This downwards movement subdivides as a double zigzag from the all time high.
Within the first zigzag labelled cycle wave w, primary wave C is 10.13 short of 1.618 the length of primary wave C.
Within the second zigzag labelled cycle wave y, there is no Fibonacci ratio between primary waves A and C. Primary wave C is an ending contracting diagonal which meets all Elliott wave rules.
For this downwards movement this is the only wave count that I have been able to see so far which meets all Elliott wave rules. I remain aware that Elliott Wave International and Danerics have this downwards movement as a five wave impulse which ends with a contracting diagonal for the fifth wave, but that wave count violates the rule for wave lengths within a contracting diagonal. I will keep that wave count in mind, but for now I do not want to publish a wave count which does not meet all Elliott wave rules as laid out in Frost and Prechter.
Grand Super Cycle wave IV may not be a combination because the first wave subdivides as a multiple, and the maximum number of corrective structures within a multiple is three. To label multiples within multiples increases the maximum beyond three, violating the rule.
It may not be a zigzag because Super Cycle wave (a) subdivides as a three and not a five.
This leaves two groups of corrective structures: flats or triangles.
Within an expanded flat or running triangle, Super Cycle wave (b) may make a new high above the start of Super Cycle wave (a) at 1,920.18.
Within a flat, Super Cycle wave (b) must retrace a minimum 90% of Super Cycle wave (a) at 1,833.71.
Super Cycle wave (b) may be any one of 23 possible corrective structures. First, a move of this size should have a clear five up on the daily and weekly charts. That is still to complete. Within the first five up, no second wave correction may move beyond its start below 1,046.27.
DAILY ELLIOTT WAVE COUNT
So far, within the first five up, the middle of the third wave is now most likely complete. The strongest move may still be ahead. Gold typically exhibits swift strong fifth waves to end its third wave impulses. Look out for surprises to the upside for minute wave v and minor wave 5.
At 1,339 minor wave 3 would reach 6.854 the length of minor wave 1. When minute wave iv is complete, then this target may also be calculated at minute degree. At that stage, it may widen to a zone or it may change.
Minute waves i, ii and now iii are complete within minor wave 3.
The fourth wave corrections are so far more brief and shallow than expected within this impulse unfolding upwards. This pattern may continue, which is why I say look out for surprises to the upside. Gold typically exhibits swift strong fifth waves to end its third wave impulses, and this often forces the fourth wave corrections which unfold right before to be over more quickly and be very shallow. It gives Gold’s impulses a curved look at a higher time frame.
The pink channel is a best fit. Draw the first trend line from the highs labeled minute waves i to iii then place a parallel copy lower to contain the whole upwards wave. Minute wave iv should find strong support at the lower edge if it gets that low.
Minute wave ii was a deep 0.68 zigzag. Minute wave iv should be shallow and may be a flat, combination or triangle most likely. Minute wave ii lasted 7 days. Minute wave iv may be over in a Fibonacci 3 or 5 days.
I have three hourly wave counts. These cover the main possibilities but not all that I can see. Other possibilities are noted where appropriate.
HOURLY WAVE COUNT
Minute wave ii was a deep 0.68 zigzag. Minute wave iv would most likely be a flat, combination or triangle. This first hourly wave count looks at the possibility of a flat unfolding.
The first wave subdivides as a three within a flat. Here, minuette wave (a) fits as a zigzag. Minuette wave (b) must retrace a minimum 90% of minuette wave (a) at 1,258.99. The most common type of flat is an expanded flat which would see minuette wave (b) move beyond the start of (a) above 1,258.99.
The maximum convention for a B wave within a flat is twice the length of the A wave. This would be at 1,291.47. A new high above that point would reduce the probability to so low that a flat correction is unfolding, so that at that point it should be discarded. If price moves strongly upwards in a five wave structure above 1,291.47, then minute wave iv would be over and minute wave v would be underway.
This wave count expects to see a five wave structure upwards for subminuette wave c to unfold early next week to complete the zigzag of minuette wave (b). If price moves higher in a five wave structure to 1,258.99 or above, and then turns down an makes a new low below 1,245.94, this wave count would be confirmed. At that stage, downwards movement could not be a fourth wave correction within a new impulse unfolding upwards, because price would be in first wave price territory (which would be the high labelled subminuette wave a).
This first hourly wave count has the highest probability based on structure and alternation. It expects another two or four days of sideways movement to complete the correction.
ALTERNATE HOURLY WAVE COUNT
Minute wave iv may be an incomplete double zigzag. The first zigzag in the double is labelled minuette wave (w). The double may be joined by a “three” in the opposite direction labelled minuette wave (x) (triangles are counted as threes even though they have five subwaves).
The second zigzag in the double may take price lower and may reach down to the 0.236 Fibonacci ratio at 1,214.
This structure so far fits in a best fit channel. Minuette wave (y) may end about the lower edge of the channel.
Minuette wave (x) may also be relabelled as a zigzag with the triangle as wave B within it (for this idea see the main hourly chart for this piece of movement).
This first hourly wave count would see minute wave ii as a single zigzag and minute wave iv as a double zigzag. There would be alternation in depth but only a little alternation in structure. That is okay, alternation is a guideline and not a rule, but it does reduce the probability of this wave count.
SECOND ALTERNATE HOURLY WAVE COUNT
It is possible that minute wave iv was over as a quick shallow triangle on Friday. All subwaves are complete and all rules for a regular contracting triangle are met.
If Monday sees a clear five wave structure up followed by a correction which remains above 1,245.94, then this wave count would be correct.
At 1,326 minute wave v would reach 2.618 the length of minute wave i. I am aware that the target range here is too large to be very useful. When there is more structure within minute wave v and it can be calculated at a third wave degree, then it may be narrowed down.
To the downside, if the triangle is incomplete and if minuette wave (c) is still to complete within it, then it may not move below the end of minuette wave (a) below 1,232.41.
A new low next week below 1,232.41 would provide strong price confirmation that the correction for minute wave iv is incomplete.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A strong upwards day with a strong volume spike for Thursday looks like a typical blowoff top for Gold. Friday’s small red candlestick would most likely be just the first day of a correction to last about two to eight days.
I have taken some time to look back over price data back to December 2010. I have noted wide ranging days (a wide range compared to several days immediately prior) which completed a trend with a spike in volume and looked at how long the following correction lasted. This list is not exhaustive; it is the few that appeared to be clear from a visual identification. (I did not find any wide ranging days with volume spikes at the end of movements for the end of the last bull market from December 2010 to September 2011). Results are listed here:
Past wide ranging days with volume spikes at the end of movements:
Date, Price range, Volume (K), Result (any candlestick pattern?)
26 Sep 2011, $128.07, 150.3, 31 day correction (hammer)
4 Jan 2013, $38.19, 297.1, 12 day correction (hammer)
12 Apr 2013, $83.03, 24.4, low next day, 8 day correction
19 Jul 2013, $26.87, 222.1, 2 day correction
15 Oct 2013, $35.88, 298.9, 9 day correction (hammer)
18 Dec 2013, $28.23, 183.7, 5 day correction
19 Jul 2014, $45.65, 158.5, 5 day correction
My conclusion is that a wide ranging day at the end of a movement which has a volume spike should result in a correction lasting two to eight days. If the wide ranging day is also a single candlestick reversal pattern (a hammer in a downtrend, or a shooting star or hanging man in an uptrend), then the correction that follows it may be more long lasting.
In this instance for 11th February, 2016, the candlestick is not a reversal pattern, so a more brief correction looks most likely.
The decline in volume for Friday supports the Elliott wave count in that it expects this is a correction against the trend and not a new downwards trend. The fall in price was not supported by volume.
ADX is above 45 and rising. This indicates the trend is overextended, so a correction should be expected. This supports the Elliott wave count.
ATR is overall still rising. If the slight dip for Friday turns into a downwards move for ATR, then it would be indicating a correction is unfolding.
RSI is extreme overbought. A correction should be expected.
Stochastics shows divergence with price at the high. This also supports the idea of a correction unfolding here.
On Balance Volume may find support at the dark blue or green lines. If OBV finds support and turns up at either of those lines, then the correction may be over. If OBV breaks below these lines, then the correction may continue and may be deeper than the Elliott wave count expects.
Some horizontal support lines are added by looking back over the last 3 years for prior areas of support and resistance. The support lines in order are about 1,240, 1,230, 1,225, and 1,215. This general area saw a lot of price congestion back from October 2014 to October 2015.
This analysis is published @ 01:40 p.m. EST on 13th February, 2016.