Upwards movement has now breached the final bear market trend line.
With confirmation of a trend change, the main wave count should now be bullish.
Summary: The final bear market trend line is now breached by a full daily candlestick above it and not touching it. This provides simple trend line confirmation of a trend change from bear to bull. Gold should now be in a bull market to last one to several years. The short term target for the next interruption to the upwards trend is now at 1,221. A third wave up should be unfolding, so look out for swift strong fifth waves to show an increase in upwards momentum.
New updates to this analysis are in bold.
Last published weekly charts with the bigger picture are here.
MAIN BULL ELLIOTT WAVE COUNT
The final bear market trend line is drawn on weekly and daily charts on a semi-log scale from the price points as marked. This has now been breached by one full daily candlestick above it and not touching it. If this line is breached by a full weekly candlestick (the earliest that could be would now be next week), then all bear wave counts should be discarded.
For now this bull wave count will be the main wave count and the bear will be an unlikely alternate.
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.
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.
So far, within the first five up, the middle of the third wave is now most likely complete. The strongest move may yet be ahead. Gold typically exhibits swift strong fifth waves to end its third wave impulses. Look out for surprises to the upside for one or more of micro wave 5, subminuette wave v, minuette wave (v), minute wave v, and minor wave 5.
At 1,227 minor wave 3 would reach 4.236 the length of minor wave 1. If this target is wrong, it may not be high enough. Minor wave 3 may not exhibit a Fibonacci ratio to minor wave 1.
Within minor wave 3, minute waves i and ii are complete. Minute wave iii is incomplete.
Within minute wave iii, minuette waves (i) and (ii) are complete. Minuette wave (iii) is incomplete. Minuette wave (ii) was a time consuming and deep double zigzag which lasted 4 sessions. When minuette wave (iii) is complete, then the following correction for minuette wave (iv) should also be a multi day correction showing up clearly on the daily chart. This would be the next expected multi day interruption to the trend.
Within minuette wave (iii), subminuette waves i and ii are complete. Subminuette wave iii is incomplete. Subminuette wave ii lasted just 2 sessions and shows on the daily chart. Subminuette wave iv may be expected to last one to three sessions and also show on the daily chart. It may be more brief though; when Gold’s fifth waves extend they force fourth wave corrections to be more brief than usual.
Within subminuette wave iii micro waves 1 and 2 are complete. Micro wave 3 is most likely complete at today’s high, I have adjusted the labelling within it. At this stage, it looks like the impulse of micro wave 3 ended with a strong extended fifth wave for submicro wave (5).
Micro wave 2 was a quick deep 0.64 zigzag lasting one day (22 hours). Micro wave 4 may be expected to be shallow against micro wave 3, given the guideline of alternation, and to most likely be a flat, combination or triangle. If it is longer lasting than micro wave 2 (as these types of corrections tend to be), then it may last about two sessions. It may not move into micro wave 1 price territory below 1,109.31. The green trend line and the final bear market cyan trend lines should offer strong support for this correction.
The hourly chart will show all movement from the low of submicro wave (4).
Ratios, within the impulse of micro wave 3, are: submicro wave (3) is 2.19 longer than 2.618 the length of submicro wave (1), and submicro wave (5) is 2.13 longer than 1.618 the length of submicro wave (3).
Micro wave 3 is 4.69 short of 2.618 the length of micro wave 1.
Given these good Fibonacci ratios and the typical look of a strong fifth wave, I have confidence that the labelling of this impulse is now correct.
I have confidence that micro wave 4 should unfold lower and should show up on the daily chart as one to three red candlesticks, doji or a mix of the two.
When Gold’s fifth waves extend, then the next correction often ends within the price territory of the fourth wave within the extension. This gives a target zone for micro wave 4 of about 1,145.40 to 1,137.29. If it moves lower than this, then the 0.382 Fibonacci ratio may be a reasonable expectation.
Micro wave 4 may find some support at the lilac trend line. If it breaks through support there, then it should find strong support at the green trend line and also at the cyan final bear market trend line on the daily chart. I would not expect micro wave 4 to break below the green line.
Micro wave 4 may not move into micro wave 4 price territory below 1,109.31.
When the correction for micro wave 4 is complete, then the upwards trend should resume. Micro wave 5 may be a swift strong extension.
Micro wave 4 may be any one of 23 possible corrective structures. Analysis over the next day or so will not be able to tell what pathway price may take while it unfolds as that is impossible to determine. The focus will be on identifying when it is over. If it is an expanded flat, running triangle or combination, then it may include a new price extreme beyond its start above 1,157.27. A new high does not mean micro wave 4 is over but that it may be part of the correction. There is no upper invalidation point for this reason.
ALTERNATE BEAR WAVE COUNT
This is now an alternate wave count. With a full daily candlestick above the final bear market trend line and not touching it, this provides simple trend line confirmation of a trend change from bear to bull for Gold.
This bear wave count would expect to see a strong red candlestick for the next session, and it expects price to move strongly lower for a third wave at four wave degrees.
The probability of this wave count has substantially reduced today. It should not be relied upon. If the final bear market trend line is breached at the weekly chart level, this wave count will be discarded.
This wave count requires a new low below 1,109.31 to have any confidence in it.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Overall, the volume profile remains unclear. Strongest days of recent movement from the last low are for upwards days which indicates an upwards trend is most likely. However, three times during this upward trend price has moved higher on declining volume. Overall, volume to today’s high is still lighter than volume for 7th January. Overall, as price has made a new high, it comes on overall lower volume.
This may be resolved as the upwards trend continues, or it may be a warning that the Elliott wave count is wrong. This is one reason why I will retain the alternate bear wave count for another week at least.
ADX is very clear. There is a trend and it is up. Price has made a series of higher highs and higher lows; price is clearly in an upwards trend.
RSI is just moving into overbought, so a small correction may be expected about here. This supports the Elliott wave count short term.
ATR is also now turning up and finally agreeing with ADX.
Stochastics shows divergence with price: as price has made new highs in the last few days, Stochastics has not. This indicates some weakness in price. A correction of at least a day or so should be expected to resolve this.
This weekly chart shows some trend line possibilities. The final bear market trend line I am using is in cyan.
If a trend line is drawn on this bear market using the approach outlined by Magee in the classic “Technical Analysis of Stock Trends”, then it would not be breached for several months, quite a long way into a new bull market. This final Magee trend line would provide full and final confirmation of a big trend change for Gold, but it is my judgement that it is too far away to be of use. Price should find resistance at that line on the way up, so it will become useful in some months time.
Next to the cyan line is a green line. This green line is today overshot but not breached. If that green line is also breached in the next few days, that would provide further confidence in the bull wave count.
The pink lines are parallel. They do not use the early steeper part of this bear market, so I would not use them for confirmation of a trend change from bear to bull.
This analysis is published @ 09:09 p.m. EST.