Upwards movement was expected but did not happen.
Downwards movement has invalidated one Elliott wave count.
Summary: It looks like price has broken out of a range to the downside. The main wave count will expect intermediate wave (2) downwards is underway. A clear break below the blue channel on the daily chart would add confidence and see this the only wave count. A new high above 1,240.65 would put this idea in doubt, and a new high above 1,270.85 would invalidate it. If that happens, then an alternate wave count expects a fifth wave up to 1,284.
New updates to this analysis are in bold.
Last published weekly chart is here.
MAIN DAILY ELLIOTT WAVE COUNT
Intermediate wave (1) may be a complete impulse. Intermediate wave (2) may have begun. COT supports this wave count; the majority of commercial traders are currently short. While this does not pinpoint when price should turn, it does support a larger downwards trend about here.
This wave count is identical to the alternate wave count up to the end of minor wave 3 . Thereafter, this main wave count sees minor wave 4 over earlier as a regular flat correction. There is still alternation between minor waves 2 and 4: minor wave 2 is a deep 0.97 double zigzag and minor wave 4 is a shallow 0.18 regular flat. The proportions are not as good though: minor wave 2 lasted nine days and minor wave 4 only four days. This slightly reduces the probability of this wave count; the alternate will be published until it no longer has the right look.
Ratios within intermediate wave (1) are: there is no Fibonacci ratio between minor waves 1 and 3, and minor wave 5 is 2.95 points longer than equality with minor wave 1. This good Fibonacci ratio adds a little support for this wave count.
A movement at intermediate wave degree should begin with a five down on the daily chart. That is incomplete. The invalidation point may be moved lower today. Within minute wave iii, no second wave correction may move beyond the start of its first wave above 1,270.85.
MAIN HOURLY ELLIOTT WAVE COUNT
Minute wave iii should be underway for this wave count; it has made a new low below the end of minute wave i. MACD shows momentum so far within minute wave iii is slightly stronger than momentum within minute wave i. Minute wave v downwards may be stronger still, which is typical of commodities.
At 1,211 minuette wave (iii) would reach 1.618 the length of minuette wave (i).
If the lower edge of the blue channel copied over from the daily chart is clearly breached by at least one full hourly candlestick below and not touching it, and if that candlestick is a strong red candlestick, then this wave count would increase in probability.
If the blue channel is breached at the daily chart level, then this would be the only wave count.
Within minuette wave (iii), subminuette wave iii is just 1.06 short of 4.236 the length of subminuette wave i.
One more wave down for subminuette wave v would be required for this wave count to complete minuette wave (iii). The subdivisions of this downwards movement are seen differently for each wave count, and both ways work on the five minute chart.
In the short term, the volume profile fits this wave count better. The volume spike may have been to end subminuette wave iii (third waves should have strong volume). Upwards movement from the low for subminuette wave iv comes on a decline in volume. In the short term, this indicates upwards movement is most likely a counter trend movement.
The small orange channel is drawn using Elliott’s second technique: draw the first trend line from the ends of subminuette waves ii to iv, then place a parallel copy on the end of subminuette wave iii. Subminuette wave v may find support at the lower edge of the channel. Along the way down, upwards corrections should find resistance at the upper edge of the channel.
For this wave count, because minuette wave (ii) shows on the daily chart as one small green candlestick, when minuette wave (iv) arrives it may also show on the daily chart as one or more green candlesticks or doji. Minuette wave (ii) lasted one day and was a deep 0.625 zigzag. Minuette wave (iv) may be a little longer lasting and may be a shallow sideways flat, combination or triangle to exhibit alternation.
Minuette wave (iv) may not move into minuette wave (i) price territory above 1,240.65.
ALTERNATE DAILY ELLIOTT WAVE COUNT
The strongest move may still be ahead. Gold often exhibits swift strong fifth waves typical of commodities.
Ratios within minor wave 3 are: there is no Fibonacci ratio between minute waves iii and i, and minute wave v is just 0.07 short of 1.618 the length of minute wave i.
Minor wave 4 may be complete as a double combination: expanded flat – X – zigzag. The structure is now complete and price has found support at the lower edge of the blue best fit channel. Downwards movement must end here for this wave count.
Minute wave y has ended slightly below minute wave w; the structure still has a mostly sideways look to it. But it must end here if it is to retain the right look.
At 1,284 minor wave 5 would reach 1.618 the length of minor wave 1.
Although the invalidation point must technically be placed at the high of minor wave 1, this wave count would be discarded if price breaches the lower edge of the blue channel at the daily chart level. Minor wave 4 may not move into minor wave 1 price territory below 1,088.79.
There is perfect alternation and good proportion between minor waves 2 and 4. Minor wave 2 is a deep double zigzag lasting nine days (one more than a Fibonacci eight), and minor wave 4 is a shallow combination lasting a Fibonacci thirteen days.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
My analysis yesterday of the downwards wave labelled minuette wave (a) was wrong.
This movement does not work with the larger picture anymore if seen as a three. It must be a five and will fit as an impulse, if subminuette wave ii is seen as an expanded flat with a very long B wave, which is over twice the length of the A wave. Although this has a low probability, all Elliott wave rules are met, and this low probability labelling has now been proven correct by subsequent price movement.
Downwards movement for minuette wave (c) will subdivide as a completed five wave impulse on the hourly and five minute charts. There is no Fibonacci ratio between minuette waves (a) and (c).
Minuette wave (c) may have ended with a volume spike for the final fifth wave. However, it is concerning for this wave count in the very short term that subsequent upwards movement is not supported by volume.
Some confidence may be had in this wave count with any movement above 1,240.65. At that stage, the main wave count would be invalidated at the hourly chart level. This wave count would be confirmed with movement above 1,270.85.
If the target is wrong, it may be too low. If this wave count is confirmed, then higher targets may also be added.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A strong downwards day with a clear increase in volume has closed below the lower support line. This looks like a downwards breakout.
On Balance Volume has turned down from the orange trend line, reinforcing the strength of this trend line. This is a further bearish signal. That line is horizontal and now tested four times, so it has reasonable technical significance.
ADX is declining indicating the market is not trending. ATR today is increasing which may be the earliest signal of a trend returning. Less confidence may be had that a new trend is beginning while these two indicators disagree.
RSI and Stochastics are moving lower and neither is yet extreme. Stochastics may remain extreme for reasonable periods of time during a trending market. If RSI reaches oversold and then exhibits divergence, then an interruption to a downwards trend should be expected. For now there is room for price to fall.
This analysis is published @ 07:57 p.m. EST.