More downwards movement was expected to end within 1,200.76 to 1,181.41. The target was 1,184 within this zone.
Price moved lower as expected to reach 1,192.68.
Summary: A new high above 1,205.17 would provide a little confidence that the correction is over. A clear five up on the hourly chart would provide further confidence. It is most likely that minute wave iv is complete and minute wave v upwards has begun, but it is also possible that minute wave iv may continue sideways and lower for a few days yet before the upwards trend resumes. It is very concerning that volume is strong for the downwards red daily candlestick of 16th February. This volume profile is bearish. For this reason any members entering long positions here are advised strongly to manage risk carefully. The risk is that this correction may yet continue lower and or sideways for a few more days yet.
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. At this stage, if minute wave iv is complete, the target will remain the same. There is no Fibonacci ratio at minute degree which would provide a target calculation close to 1,339.
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. If it continues any lower, then minute wave iv should find strong support at the lower edge.
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 now be over as a double zigzag in a Fibonacci three days. If it continues further as a flat or triangle, then it may continue to total a Fibonacci five or eight days.
MAIN HOURLY WAVE COUNT
Minute wave ii was a deep 0.68 zigzag. Minute wave iv may be a complete shallow 0.35 double zigzag. There is alternation in depth and a little in structure, but both are of the zigzag family.
The first wave up from the end of minute wave iv subdivides best on the five minute chart as a five wave impulse. So far to the downside a three wave structure is either complete or nearly complete for subminuette wave ii.
A new high above 1,205.17 would provide confidence that subminuette wave i is a five and subminuette wave ii is a three. At that stage, upwards movement could not be a fourth wave correction within a new impulse unfolding downwards, as price would be back in first wave territory.
Subminuette wave ii may not move beyond the start of subminuette wave i below 1,190.90.
The next wave up of minute wave v may show a strong increase in upwards momentum. Gold often exhibits swift strong fifth waves to end its third wave impulses, and this would be a fifth wave to end minor wave 3.
ALTERNATE HOURLY WAVE COUNT
If the degree of labelling within minute wave iv is moved down one degree, then this double zigzag may be only wave A of a larger flat or triangle.
If minute wave iv is a flat correction, then within it minuette wave (b) must retrace a minimum 90% of minuette wave (a) at 1,254.84.
If minute wave iv is an expanded flat correction, the most common type of flat, then minuette wave (b) may move beyond the start of minuette wave (a) at 1,261.94. An expanded flat requires the B wave to be 105% of the A wave, or longer. This would be achieved at 1,265.49.
If minute wave iv is a triangle, then there is no minimum nor maximum requirement for minuette wave (b). A regular triangle would see minuette wave (b) end before 1,261.94 and a running triangle would see minuette wave (b) end above 1,261.94. Regular triangles are more common.
A flat correction may see minute wave iv continue sideways in an ever increasing range, and ending reasonably lower, over several more days. It may take a further two or five sessions to total a Fibonacci five or eight.
A triangle may see minute wave iv continue sideways in an ever decreasing range. Triangles are time consuming structures. A triangle for minute wave iv may take a further five sessions (and possibly longer) to complete in a total Fibonacci eight.
Click chart to enlarge. Chart courtesy of StockCharts.com.
It is very concerning for the main hourly wave count that today’s strong downwards day comes with a strong increase in volume. The fall in price was well supported by volume. This indicates that more downwards movement should be expected, but it does not support the main hourly Elliott wave count.
ADX is flat indicating today that the upwards trend is no longer continuing. ADX does not indicate a trend change, only a consolidation.
ATR is still increasing indicating the market is still trending.
RSI has returned from overbought. There is room again for price to rise.
On Balance Volume has found support at the green line. This line is steep, only tested twice before and not long held. It offers only weak technical significance. This may be enough to stop price, but equally it may not. A breach of this line by OBV would be a weak bearish signal.
If the green line is breached by OBV, then the next line to offer support is a fair distance away. The light blue line is reasonably shallow, repeatedly tested and reasonably long held. It offers reasonable technical significance. If the green line is breached, then OBV should stop at the light blue line.
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 @ 08:30 p.m. EST.