One of the remaining two hourly Elliott wave counts was invalidated.
I will continue to consider all possibilities. I have a new idea today.
Summary: The correction is incomplete. If it totals a Fibonacci thirteen when complete, then it may end in another five sessions. The upwards trend should resume when the correction is complete.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
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 confirmed as over, then this target may be calculated at a second degree. At that stage, it may widen to a zone, it may change, or a second target may be added.
Minute waves i, ii and now iii are complete within minor wave 3.
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 may find support at the lower pink line. If price touches that line, it should offer a low risk entry point to join the upwards trend.
Minute wave iv may not move into minute wave i price territory below 1,081.57.
MAIN HOURLY WAVE COUNT
This main hourly wave count expects to see alternation in structure between the zigzag of minute wave ii and the triangle of minute wave iv. This is the main wave count for this reason only.
If minute wave iv is a triangle, then it may be a regular contracting or barrier triangle. So far minuette waves (a), (b) and (c) may be complete.
Minuette wave (d) may not move beyond the end of minuette wave (b), above 1,239.74, within a regular contracting triangle.
Minuette wave (d) may not move reasonably beyond the end of minuette wave (b), above 1,239.74, within a regular barrier triangle. A barrier triangle may be correct as long as the (b)-(d) trend line remains essentially flat. In practice this means the minuette wave (d) may move slightly above 1,239.74. This is the only Elliott wave rule which is not black and white.
Minuette wave (e) may not move beyond the end of minuette wave (c) below 1,201.95 for both a regular contracting and regular barrier triangle. Minuette wave (e) is most likely to fall short of the (a)-(c) trend line. If it does not end short of that line, then it may end with an overshoot of the line.
If MACD begins to hover about zero on the hourly chart, then this main wave count would be supported. This is not always seen while a triangle unfolds, but it is often seen. Sometimes MACD does not sit on zero until the triangle is ending.
So far minute wave iv has lasted eight daily candlesticks. If minute wave iv is a triangle and completes with a Fibonacci duration, then it may continue now for a further six days to total a Fibonacci thirteen.
If it takes that long, then it may end when price comes to touch the lower edge of the pink channel.
ALTERNATE HOURLY WAVE COUNT
I have learned to always consider alternates when a triangle looks like it is unfolding. It is easy to mistake the beginning point of the triangle. Price should break out of the triangle in the same direction it entered, and so it is important to consider alternate possibilities with a triangle beginning at a different point.
What if minute wave iv is a zigzag and the triangle is wave B within it?
Minuette wave (a) for this idea is seen as a five wave impulse, in the same way as yesterday’s alternate saw it.
Minuette wave (b) may be an unfolding regular contracting or barrier triangle. Within both types of triangle, subminuette wave c may not move beyond the end of subminuette wave a above 1,239.74. This invalidation point is black and white for this wave count.
The rule for subminuette wave d is the same as described for minuette wave (d) on the main hourly wave count. Here, subminuette wave d may not move beyond the end of subminuette wave b below 1,201.95. This wave count will remain valid as long as the b-d trend line remains essentially flat.
Thereafter, subminuette wave e may not move beyond the end of subminuette wave c.
If the triangle completes for minuette wave (b), then a final five wave structure downwards for minuette wave (c) should unfold to complete a zigzag for minute wave iv. Minuette wave (c) would be extremely likely to move beyond the end of minuette wave (a) below 1,190.9 to avoid a truncation. At this stage, that would require a breach of the lower edge of the pink channel.
Minuette wave (c) may end about 1,184, so that minute wave iv corrects to the 0.382 Fibonacci ratio.
This wave count expects to see no alternation in structure between minute waves ii and iv. It is an alternate for that reason, so it must have a lower probability.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A slight increase in volume for upwards movement during Tuesday’s session may be some support for the idea that price may break out of this correction upwards.
The strong volume for 16th February may be an anomaly. Volume for this daily candlestick may include after hours trading for Monday 15th February which was a holiday in the USA. If this candlestick is ignored, then strongest volume during this consolidation may be for an upwards day. This suggests price may break out upwards; this supports the Elliott wave count.
If strong volume for the candlestick of 16th February is not ignored, then strongest volume during this consolidation is for a downwards day. This indicates price should break out of the consolidation downwards; this does not support the Elliott wave count.
So far during this consolidation price is finding support at the 9 day Exponential Moving Average.
ADX is declining indicating the market is not trending. ATR agrees as it too is flat.
On Balance Volume is constrained within three trend lines. A break above or below these lines may be an early indication of the direction for price to break out of the consolidation.
The trend lines on price to delineate this consolidation zone are adjusted today. The lower edge is at 1,191. This red horizontal line has previously provided resistance and now provides support. The upper edge of this consolidation is delineated by a shorter olive green line. This is about 1,250. A break above 1,250 or below 1,191 on a day with an increase in volume would be a classic breakout of a consolidation. At that stage, price should be expected to continue in the same direction of the breakout. The Elliott wave count expects the breakout to be upwards.
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 the correction has now lasted eight days and is incomplete.
This analysis is published @ 09:24 p.m. EST.