A small fourth wave correction unfolded as expected, reaching down to 1,145.2, into the target zone which was 1,145.4 – 1,137.29.
Thereafter, upwards movement continued as expected.
Summary: The trend is up. In the short term, another fourth wave correction may begin Monday to last one to three days and end about 1,139. However, expect surprises to the upside as there are a number of fifth waves approaching, and for Gold these are often swift and strong. Use the lilac trend line as the first line of support. Corrections present opportunities to join a trend.
New updates to this analysis are in bold.
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 two full daily candlesticks 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.
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.
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 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. At 1,212 it would reach 2.618 the length of minuette wave (i).
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, ii and now also iii are more likely all complete. There is no Fibonacci ratio between subminuette waves i and iii.
Ratios within subminuette wave iii are: micro wave 3 is 4.69 short of 2.618 the length of micro wave 1, and micro wave 5 is 2.63 longer than equality in length with micro wave 1.
Subminuette wave ii was a relatively deep 0.56 zigzag which lasted two sessions. Given the guideline of alternation subminuette wave iv may be expected to be more shallow and either a flat, combination or triangle. The 0.382 Fibonacci ratio of subminuette wave iii would be the most likely target, and within or close to the fourth wave of one lesser degree would also be a likely place to it to end.
If subminuette wave iv lasts one to three sessions, then the wave count at the daily chart level will have the right look. The right look for an impulse is based upon the proportion of the second and fourth wave corrections within it.
However, Gold has a tendency to exhibit swift strong fifth waves. This sometimes forces the fourth wave correction before it to be more brief and shallow than otherwise. Look out for this tendency over the next couple of weeks.
Subminuette wave iii may now be over with a swift fifth wave to end it. This would be typical behaviour for Gold.
Micro wave 4 unfolded as expected as a flat correction, ending within the price territory of minuscule wave 4. Within the expanded flat, submicro wave (B) is 2.13 times the length of submicro wave (A). This is longer than the maximum common length of 1.38 and longer than the convention of 2, but there is no Elliott wave rule stating the maximum length of a B wave within a flat.
Within the expanded flat, submicro wave (C) is 0.94 short of 4.236 the length of submicro wave (A).
Either way, no matter how the end of micro waves 3 and 4 are seen, it is highly likely that both are over now.
Along the way up to the target for minor wave 3 at 1,227, there should be three more fourth wave corrections. The next one may begin on Monday and should show up on the daily chart as one to three red candlesticks or doji, or a mixture of the two.
There are two possible areas where subminuette wave iv may end. It may end within the price territory of the fourth wave of one lesser degree, from 1,162.01 to 1,145.2. Or it may end a little lower to reach down to the 0.382 Fibonacci ratio of subminuette wave iii at 1,139.
If subminuette wave iv is an expanded flat or running triangle, then it may include a new high above its start at 1,174.40. There is no upper invalidation point for this correction, and a new high does not mean it is over.
Subminuette wave iv should find support at the lilac trend line, if it manages to get down that low.
The target for minuette wave (iii) remains the same at 1,212 where it would reach 2.618 the length of minuette wave (i). When subminuette wave iv is complete, then this target may be calculated at a second wave degree. At that stage, it may widen to a small zone or it may change.
Subminuette wave iv may not move into subminuette wave i price territory below 1,097.16, but it should not get near that point. If it moves reasonably lower, it should find very strong support and not break below the final bear market trend line (cyan on the daily chart).
ALTERNATE BEAR WAVE COUNT
This is now an alternate wave count. With two full daily candlesticks 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 strong red candlesticks next week, and it expects price to move strongly lower for a third wave at four wave degrees.
The probability of this wave count has reduced further 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.
This section of the analysis is updated Sunday 7th Feb, 3:55pm EST.
Friday’s upwards movement came with an increase in volume to support the rise in price.
ADX and ATR agree that there is a trend and it is up.
RSI is overbought. This may remain extreme for some time while a trend continues, I will be looking for short term divergence between price and RSI to indicate a correction to begin. There is no divergence today.
There is slight divergence with price and Stochastics. As price has made new highs for the last two sessions Stochastics has failed to make corresponding highs. This divergence is now more persistent, it warns a correction within this upwards trend may be coming. This supports the Elliott wave count.
If price continues higher then it may be interrupted when On Balance Volume finds resistance at the dark blue line.
This analysis is published @ 06:43 p.m. EST.