Both hourly charts yesterday expected downwards movement short term which is what happened.
Summary: The correction is still most likely incomplete. Some upwards movement for the next day or so may be a B or X wave which could make a new high. Thereafter, downwards movement should complete the correction. Look out for a trend change at the end of the session for 10th March.
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. Today’s low for part of minor wave 4 is now 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 b within it.
Wednesday’s candlestick broke below support at the lilac line to find support at the upper (b)-(d) triangle trend line. This line may continue to provide support and may be where minor wave 4 eventually ends in a few days time.
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.
For each of a flat, combination or triangle the first wave for minute wave a or w must be a three wave structure. So far downwards movement labelled minute wave a or w subdivides as a regular flat correction.
I have taken some time today to check the structure of minuette wave (c) on the five minute chart. It will subdivide perfectly as a five wave impulse. Within micro wave 3, there was a typically swift strong fifth wave for submicro wave (5), which forced submicro wave (4) to be brief and shallow. The subdivisions fit perfectly on the five minute chart, but on the hourly chart micro wave 3 has a curved three wave look to it.
Minute wave b or x may be any corrective structure. Of all Elliott waves, it is B waves which are the worst to trade and analyse, so it is best to avoid them.
If minor wave 4 is unfolding as a flat correction, then within it minute wave b must retrace a minimum 0.9 length of minute wave a at 1,275.81. An expanded flat is a very common structure. That would see minute wave b end at 1.05 the length of minute wave a or above; this is at 1,281.27.
If minor wave 4 is unfolding as a combination or double flat, there is no minimum requirement for minute wave x within it. Minute wave x may make a new high above the start of minute wave w.
If minor wave 4 is unfolding as a triangle, there is no minimum requirement for minute wave b within it. Minute wave b may make a new high above the start of minute wave a as in a running triangle.
When the structure of minute wave b or x is a completed three, then downwards or sideways movement would be expected for minute wave c or y.
So far minor wave 4 has lasted just three days. It should continue longer to have good proportions on the daily chart. It may be expected to be a Fibonacci eight or thirteen days most likely. If it is a flat correction, it may be more brief than minute wave iv which lasted fourteen days, because triangles are more time consuming structures than flats.
ALTERNATE ELLIOTT WAVE COUNT
This alternate wave count has a low probability. It is published to consider all possibilities. This wave count is still viable but today the probability is reduced. Both wave counts expect upwards movement from here, so there is no divergence in expected direction. The structure of upwards movement should indicate which wave count is correct.
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 10th March, if it ends when the triangle trend lines cross over.
Minuette wave (ii) may be a completed flat correction ending just below the 0.618 Fibonacci ratio of minuette wave (i). This wave count now expects to see a five wave impulse unfold upwards which should show a strong increase in upwards momentum.
If the next wave up looks like a five and shows an increase in momentum beyond the last high labelled subminuette wave b, then this wave count may be correct. This wave count expects to see a strong surprise to the upside.
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 4th of March and strong divergence between price and RSI.
Gold often ends its fifth waves on a sharp movement with a volume spike. The 4th of March 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.
Some increase in volume for Wednesday’s session supports the fall in price. Overall, volume remains light, but it is slightly concerning that Wednesday saw some increase. The alternate wave count should be expected to have a very low probability for this reason. Volume is telling us there is support for downward movement, not upwards.
Price has come down to find support at the upper green line of the triangle pattern. This looks like typical throwback.
ADX is declining today indicating the market is consolidating. ATR agrees. With these two indicators now in agreement, more confidence can be had in the main wave count.
On Balance Volume found resistance at the pink trend line. OBV has come down today to touch the dark blue line which is highly technically significant. A bounce up from here by OBV would be most likely.
Stochastics has returned from overbought as has RSI.
This analysis is published @ 07:47 p.m. EST.