Sideways movement was expected.
Price has moved sideways for an inside day.
Summary: A correction is still unfolding and should continue sideways. The correction may include a new high above 1,279.45. It is most likely a fourth wave at minor degree and may end in a further seven or twelve days.
New updates to this analysis are in bold.
Last published weekly chart is here.
MAIN 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.
Friday’s upwards movement may have completed minor wave 3.
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 2 was a very deep 0.97 double zigzag lasting nine days (one more than a Fibonacci eight). Given the guideline of alternation, minor wave 4 may be expected to be a longer lasting sideways structure such as a flat, combination or triangle. It may last a Fibonacci thirteen days most likely. If it is a triangle, it may take longer, perhaps a Fibonacci twenty one days.
Minor wave 4 may end within the price territory of one lesser degree. Minute wave iv has its range from 1,261.94 to 1,190.9. The most likely target for minor wave 4 would be the 0.236 Fibonacci ratio at 1,207 as it lies within this range.
The triangle trend lines now cross over on 10th March. A trend change may be seen on this date. It does not have to be the end of minor wave 4. It may only be the end of minute wave a or b within it.
So far price is finding strong support at the lilac trend line. This may continue to provide support. If that is the case, then this correction may be very shallow.
Minor wave 4 was expected to begin with a five down at the hourly chart level, but that has not happened. Only a three down can be seen so far. Price is moving sideways in an ever decreasing range so far.
There are several structural possibilities for minor wave 4. It may be a flat, combination or triangle most likely to exhibit alternation with the double zigzag of minor wave 2. The labelling will change as this correction unfolds and as the structure becomes clearer. It is still impossible at this early stage to tell which of 20 possible structures is unfolding.
The labelling for this correction works in the same way for the main and alternate wave counts at the hourly chart level. These are just two possibilities which can be seen at this stage.
The correction may be unfolding as a flat or triangle, and for both of these structures wave A should be a three. Minute wave a may be an incomplete double combination which is classified as a three.
Within the combination, the first structure of minuette wave (w) is a zigzag. The double is joined by a three in the opposite direction, an expanded flat labelled minuette wave (x). The second structure of minuette wave y may be a flat or triangle. If it is a flat correction, then within it subminuette wave b must retrace a minimum 90% of subminuette wave a at 1,271.68. A triangle has no minimum requirement for subminuette wave b.
Combinations may include new price extremes beyond their starts. A new high above 1,279.45 would most likely be part of this correction and not the resumption of the upwards trend at this stage.
The structure of the correction cannot yet be seen as complete.
ALTERNATE ELLIOTT WAVE COUNT
This alternate wave count has a low probability. It is published to consider all possibilities.
By simply moving the degree of labelling within minute wave v down one degree, the upwards movement that ended on Friday may be only the first wave within minute wave v.
Minute wave v may be extending.
At 1,350 minute wave v would reach 0.618 the length of minute wave iii.
Downwards movement for Friday found support at the lilac trend line.
Minor wave 3 may end on 9th March, if it ends when the triangle trend lines cross over.
A flat correction may be unfolding sideways. This idea works in the same way for both this alternate and the main hourly wave counts. For the main hourly wave count, the flat correction would be only minute wave a within a larger more time consuming structure for minor wave 4.
If a flat correction is unfolding, then subminuette wave a is a complete zigzag. Subminuette wave b may be an incomplete double combination which must retrace a minimum 90% of subminuette wave a at 1,277.26. Subminuette wave b may make a new price extreme beyond the start of subminuette wave a at 1,279.45 as in an expanded flat. A new high does not mean the correction is over. At this stage, the correction cannot be seen as complete and upwards movement is subdividing as threes and not fives.
When subminuette wave b may be complete, then the type of flat may be known and a target may be calculated for subminuette wave c. That cannot be done yet.
The most likely point for minuette wave (ii) to end remains the 0.618 Fibonacci ratio at 1,245.66.
Minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,224.70.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Two things on this chart strongly indicate upwards movement is over for now for Gold: the volume spike for Friday and strong divergence between price and RSI.
Gold often ends its fifth waves on a sharp movement with a volume spike. Friday’s volume spike looks typical. That volume is for a downwards day which further reinforces the idea that more downwards movement is now ahead for Gold. The fall in price was supported by volume on Friday.
Monday’s candlestick has a small real body which is green, indicating the bulls were in charge overall for the session. The upper and lower wicks are about even and volume is light. This is not convincing upwards movement and looks typically corrective.
ADX and ATR finally caught up as they now indicate there is an upwards trend. Both these indicators are lagging as they are based on 14 day averages.
RSI shows strong divergence with price: as price made new highs to the high on 4th March, RSI failed to make corresponding new highs. A failure swing by RSI is strong indication of a trend change here.
Stochastic also shows divergence with price. Downwards movement should now be expected to continue until Stochastics reaches oversold and price finds support at the same time. The first horizontal line of support is about 1,190.
I will use the trend lines on On Balance Volume to assist in finding the end of downwards movement. When the Elliott wave structure on the hourly chart may be considered complete, if OBV finds support at the same time, this may be the end of downwards movement.
Price should find support about 1,190, if it gets down that low.
This analysis is published @ 08:25 p.m. EST.