A small correction unfolded more quickly than expected.
This was followed by upwards movement.
Summary: The trend is up. In the short term, price should find support at the orange trend line on the hourly chart. Expect further upwards movement while price remains above that line. A break below the orange line and a new low below 1,176.9 would indicate a multi day correction may have arrived.
New updates to this analysis are in bold.
Last published weekly charts with the bigger picture are here, with video here.
MAIN BULL ELLIOTT WAVE COUNT
A new high above 1,191.37 has invalidated the bear wave count and confirmed that Gold is now in a bull market.
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) may still be incomplete (main hourly wave count) or it may today possibly be complete (alternate hourly wave count). 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 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 iv was over within one session, lasting just 12 hours and very shallow. This is a typical tendency of Gold when fifth waves are swift and strong. When this happens fourth wave corrections are forced to be more brief and shallow, giving an impulse a slightly three wave look and ending with a sharp spike. Look out for this tendency again as minor wave 3 comes to an end in the next couple of weeks or so.
MAIN HOURLY WAVE COUNT
Subminuette wave iv was a quick shallow zigzag. There is no alternation in structure between subminuette waves ii and iv, both are zigzags, but there is alternation in depth: subminuette wave ii was relatively deep at 0.56 and subminuette wave iv is very shallow at 0.11. This is entirely acceptable as it is typical behaviour for Gold when its fifth waves are swift and strong.
The structure may be incomplete within subminuette wave v.
There is no Fibonacci ratio between micro waves 3 and 1.
Ratios within micro wave 3 are: submicro wave (3) is 1.51 longer than 1.618 the length of submicro wave (1), and submicro wave (5) is 0.69 longer than 0.382 the length of submicro wave (3).
Micro wave 2 was a quick shallow 0.41 zigzag. Micro wave 4 would most likely be a flat, combination or triangle. It should find support at the orange trend line which is drawn across the two lows of the last two sessions. It may end about the 0.618 Fibonacci ratio at 1,183.
Micro wave 4 may not move into micro wave 1 price territory below 1,176.9.
The target for minuette wave (iii) remains the same. At 1,212 it would reach 2.618 the length of minuette wave (i).
ALTERNATE HOURLY WAVE COUNT
It is possible today that minuette wave (iii) is over. It would be 11.36 short of 2.618 the length of minuette wave (i). This is a reasonably large amount but still less than 10% the length of minuette wave (iii).
Ratios within minuette wave (iii) are: there is no Fibonacci ratio between subminuette waves i and iii, and subminuette wave v is 1.42 longer than 0.382 the length of subminuette wave iii.
There are no Fibonacci ratios between micro waves 1, 3 and 5 within subminuette wave v.
Minuette wave (iv) should exhibit alternation with minuette wave (ii). Minuette wave (ii) was a deep 0.76 double zigzag lasting four sessions. Minuette wave (iv) should be shallow. It is most likely to be a flat, combination or triangle. These structures tend to be more time consuming than zigzags.
There are two competing tendencies regarding the duration of minuette wave (iv). It may be forced to be more brief and shallow than otherwise, if the following fifth wave of minuette wave (v) is to be a typically swift strong fifth wave. But it may be longer lasting than minuette wave (ii) because sideways corrections tend to be quicker than zigzags.
At this stage, it is impossible to say how long it would last. It should be expected to last at least one session, and most likely a Fibonacci three or five.
Minuette wvae (iv) may end within the price territory of the fourth wave of one lesser degree. Subminuette wave iv has its price territory from 1,174 to 1,164.
If minuette wave (iv) is a little deeper, it may end about the 0.382 Fibonacci ratio at 1,151.
Minuette wave (iv) may not move into minuette wave (i) price territory below 1,112.19.
If this alternate hourly wave count is confirmed, then draw an Elliott channel about this movement on the hourly chart on an arithmetic scale. Draw the first trend line from the ends of minuette waves (i) to (iii) then place a parallel copy on the low of minuette wave (ii). Minuette wave (iv) may find support about the lower edge of this channel.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Upwards movement for the last several days comes with an increase in volume. The rise in price was supported by volume.
ADX still indicates there is a trend and it is up. ATR agrees that this market is trending.
Corrections should be expected to find support about the 9 day exponential moving average.
On Balance Volume has come up to touch the dark blue trend line. This may force price to stop here and a correction to unfold about here.
RSI is overbought, but this indicator can remain extreme for some time in a trending market. It does not exhibit any divergence with price, so it is not indicating today that a correction should unfold here.
Slow Stochastics may be more useful than fast. There is no divergence today between price and Stochastics, so a correction is not indicated today.
On balance I would give more weight to On Balance Volume in today’s analysis. It is somewhat likely that price may move lower for a day to a few days for a correction against the upwards trend.
This analysis is published @ 06:28 p.m. EST.
Why Gold Is the Only Place to Hide
By ROGER ARNOLD Follow | FEB 09, 2016 | 4:00 PM ES
GDX 1,000% increase over the next decade
Janet Yellen talks 10:00 am EST Wed and Thursday.
WEDNESDAY, FEB. 10
10 am Janet Yellen testimony
2 pm Federal budget Jan. — -$18 bln
THURSDAY, FEB. 11
8:30 am Weekly jobless claims 2/6 280,000 285,000
10 am Janet Yellen testimony
And it looks like todays candlestick will be very small and red. That is enough for me to discard the main hourly wave count, it wouldn’t have the right look on the daily chart.
And so minuette (iii) is over and minuette (iv) is underway.
For those of us not positioned this should offer a great opportunity to join the trend when it is over.
Lara may this correction still be similar to yesterdays for the alternate?
Between 1 and 5 sessions and target for minuette wave (iv) may end within the price territory of the fourth wave of one lesser degree. Subminuette wave iv has its price territory from 1,174 to 1,164.
If minuette wave (iv) is a little deeper, it may end about the 0.382 Fibonacci ratio at 1,151.
Analysis will have to be done earlier today. Regular technical analysis will be updated later after StockCharts data is finalised.
This sideways movement looks to be too large on the hourly chart to be micro 4.
I expect it is more likely minuette (iv) beginning as per the alternate hourly. The orange trend line is breached. It may now provide resistance.
If this is minuette (iv) then it looks like it is beginning as a sideways type of correction; a flat, combination or triangle.
Gold looks like the 8:54 am high this morning was a 2nd wave retrace from yesterday’s high of 1,200.99 at 2:00 pm.
Since 8:54 am it appears gold may be heading for Lara’s 1183 target area for micro 4 since it only reached down to a 1185.73 low since yesterday’s high.
We will see if 1,183 holds and bounces up heading for 1,212 to complete minuette (iii) or drops lower watching closely that if it drops below 1,176.90 then the alternate hourly is validated and gold goes on at least one, and most likely a 3 or 5 session correction with a target range of 1,174 – 1,164 or 1,151.
I’ve been following the gold market for many years and couldn’t remember such a steep and relentless rise as now in recent history.
In order to quantify it, I looked at previous instances when gold’s daily rsi was at such over bought levels. The most recent was April 2012 and the one before that was August 2011. Incredibly, in both cases, gold continued to rise for 1-2 weeks before entering steep corrections. The latter case was the penultimate high before the bear market and the former case was the grand finale high before gold got serious on the downside.
I would draw 2 conclusions. 1) Don’t sell too soon and 2) Rises of this nature are potentially unhealthy for bulls longer term.
Just my 2 pennies worth.
Footnote. There were some earlier instances in the bull market where gold did continue its uptrend after 2-3 week corrections.
Parabolic moves always result in equally steep reversals too.
The 1212 level, which this analysis points to, is actually the next very significant number to note. For one, it is the area of a longer term trendline and will likely provide insurmountable resistance at this time. I say this – not only because it is a strong trendline – but since gold is so terribly overbought at the same time.
I would add that EW may see this as a new bull market, but other indicators that I track do not…..at least not yet.
If I were to make an educated guess, I would say that gold may hit the 1212 area within the next 24 hours. Thereafter, gold may make a strong reversal. Janet Yellen testifies tomorrow (and Thursday) and may well give some hints about Fed policy going forward. This, in turn, will shake up the markets. A number of markets are ripe for reversals, including gold.
If the wave count is correct in that we have had a trend change of cycle or super cycle degree then comparisons with what is happening now should be made with price action before September 2011 and not after.
I would expect that the best comparison would be October 2008 to February 2009. That was a first wave at primary degree, it was an impulse.
In the daily chart the last 7 candles, before today, are green and the waves 4 purple and orange are not showed, while the relative waves 2 are showed. Is it possible that this movement ( 8 candles) is wave (5) blu extended
( including today candle if it will be green)?
In the hourly chart seems fit well…. if not…. why?
This actually looks very typical for Gold when it has strong fifth waves. That forces the fourth wave corrections to be more brief and shallow and not show up on higher time frames.
I have learned the hard way that it makes Gold’s impulses have a bit of a three wave look to them with a steep finish.
No, I don’t think this is submicro (5) extended.
Yes, it is possible.
This is my judgement based on experience.
Hi Lara. (And to other members of the board. I haven’t posted in a while but still following and trading, hope all is well for everyone). I have an e-wave question – is it possible to have a WXY that’s a double zigzag but with an X wave that goes beyond the start of the W wave? By extension, would that mean you can have a 3 3 3, but that starts off looking like an expanded flat but ends up being a double zigzag?
(P.S. this is not in relation to gold or related but another chart i’m trying to figure out)
Technically possible, it doesn’t break any rules.
But it does not meet the purpose of a double zigzag.
Second (and third) zigzags in multiple zigzags exist to deepen a correction when the first (and second) does not move price deep enough. That is the purpose.
To meet that purpose the X waves are usually brief and shallow.
An X wave that makes a new price extreme beyond the start of the first (or second) zigzag, and looks like a B wave of an expanded flat, is counter to the purpose of the whole structure.
Multiple zigzags should not be sideways movements, they should have a clear slope against the main trend.
TBH I think it should be a rule that the X wave within zigzag multiples may not move beyond the start of the zigzag that preceded it, the same as the rule for a B wave within a zigzag.
Thanks very much Lara. Agreed that makes perfect sense