A correction was expected to continue.
Downwards movement overall was expected.
Summary: The correction is incomplete. It may end in another one, three or six sessions to total a Fibonacci three, five or eight daily candlesticks. It may end within a range of 1,200.76 to 1,181.41. Within this range, the most likely target is 1,184.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY 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.
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. If it is longer lasting, then it may total a Fibonacci 8 days.
MAIN HOURLY WAVE COUNT
Minute wave ii was a deep 0.68 zigzag. So far minute wave iv may be a double or single zigzag. It may exhibit alternation in depth but not much in structure. Alternation is a guideline, not a rule, and sometimes is not perfect.
The first zigzag in the double is joined by a “three” in the opposite direction; minuette wave (x) fits perfectly as a triangle.
Within minuette wave (y), the structure looks to be incomplete. Subminuette wave a may be a complete impulse. Subminuette wave b may be unfolding sideways as a small triangle, but this may yet morph into a flat or combination. Subminuette wave c should move price lower. It may take minute wave iv down to the 0.382 Fibonacci ratio at 1,185.
Minute wave iv may end within the price territory of the fourth wave of one lesser degree. Minuette wave (iv) has its territory from 1,200.76 to 1,181.41. The 0.382 Fibonacci ratio sits within this range at 1,185, so it is a reasonable target. It would see minute wave iv end as a shallow correction, so it would exhibit alternation in depth with minute wave ii.
ALTERNATE HOURLY WAVE COUNT
Downwards movement will also fit as a complete five wave impulse. This may be minuette wave (a) of a zigzag.
Fibonacci ratios within minuette wave (a) are: subminuette wave iii is 1.26 longer than 1.618 the length of subminuette wave i, and subminuette wave v is 0.55 short of 2.618 the length of subminuette wave i.
The channel is drawn about minuette wave (a) using Elliott’s second technique. Draw the first trend line from the ends of subminuette waves ii to iv, then place a parallel copy on the end of subminuette wave iii. When this orange channel is breached by upwards movement, then that shall provide trend channel confirmation that minuette wave (a) is complete and minuette wave (b) is underway. However, it is also possible that minuette wave (b) may be brief and remain contained within the channel.
Minuette wave (b) may not move beyond the start of minuette wave (a) above 1,261.94.
When minuette wave (b) is complete, then minuette wave (c) should move below the end of minuette wave (a) to avoid a truncation. It may end about the 0.382 Fibonacci ratio at 1,184.
If minute wave iv is deep enough, it may find support at the lower edge of the pink channel which is copied over from the daily chart.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Note: StockCharts will not have data for Monday’s session because New York is closed. This chart is unchanged.
Volume from COMEX data indicates that downwards movement for Monday comes with an increase in volume. This strongly suggests that downwards movement is not over and more downwards movement should be expected. This supports the Elliott wave count short term as it expects more downwards movement. It does not support the idea that price is in a correction and indicates that a new downwards trend may be beginning. However, one day’s data is not enough for a conclusion that Gold is now in a downwards trend. If in a few more days volume continues to increase, then the wave count will be in doubt. But if in a few more days volume is declining, then it would support the wave count.
A strong upwards day with a strong volume spike for Thursday looks like a typical blow off 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)
15 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 @ 07:11 p.m. EST.