A new high above 1,243.19 invalidated the main hourly Elliott wave count and confirmed the alternate.
At that stage, the target was at 1,256. So far price has reached up to 1,259.
Summary: The main wave count must see downwards movement about here, and it is supported by lighter volume for today’s upwards movement. A new low below 1,236.56 would confirm the main wave count and the target would be 1,131. If price continues higher for another day, the alternate would increase in probability.
New updates to this analysis are in bold.
Last published weekly chart is here.
MAIN DAILY ELLIOTT WAVE COUNT
Intermediate wave (1) is a complete impulse. Intermediate wave (2) has begun and is most likely incomplete.
The first movement down within intermediate wave (2) fits as a zigzag. So far movement to follow it is sideways.
At this stage, it looks like intermediate wave (2) may be unfolding as a double zigzag. Minor wave X may be a zigzag within the double.
Within double zigzags, the second zigzag exists to deepen the correction when the first zigzag does not move price deep enough. Here, minor wave W ends just below the 0.236 Fibonacci ratio fitting the description of “not deep enough” for a second wave correction. The second zigzag in the double should be expected to deepen the correction; minor wave Y may end about the 0.618 Fibonacci ratio at 1,131.
To achieve the purpose for the second zigzag to deepen the correction the X waves of double zigzags are normally shallow.
The dark blue channel is a best fit. If price returns to within the channel, then it should again show where upwards corrections find resistance.
It is possible that minor wave X may continue higher and be deeper. There is no upper invalidation point for minor wave X; X waves may make new price extremes beyond the start of the first structure in the double. If minor wave X continues higher, then intermediate wave (2) would more likely be a combination than a double zigzag. They are very different structures.
While double zigzags should have a slope against the prior trend, combinations should not. They are sideways structures. To achieve this the second structure in the double normally ends close to the same level as the first structure. In this instance, that would see intermediate wave (2) a very shallow correction failing to reach the 0.382 Fibonacci ratio. This is possible, but it has a low probability. This is the risk to the wave count today.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
MAIN HOURLY ELLIOTT WAVE COUNT
Both hourly charts will show price movement from the low of 1,208.33 on 27th March. For this main wave count, that low was the end of a zigzag for minor wave W.
Minor wave X may now be a complete zigzag. Within the zigzag, minute wave c has no Fibonacci ratio to minute wave a.
Minute wave c may now be a complete ending expanding diagonal. If price continues higher, then minute wave c may complete as an impulse. Unfortunately, there is no invalidation point which differentiates this main wave count from the alternate to the upside. Volume and momentum should guide us to which one is correct.
For this main wave count, minute wave c shows weaker momentum than minute wave a; this is acceptable. The divergence with price and MACD indicates this upwards movement may be weakening.
Minor wave Y would most likely end about 1,131 where intermediate wave (2) would correct to the 0.618 Fibonacci ratio of intermediate wave (1).
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is technically possible but highly unlikely that intermediate wave (2) is over. This wave count requires confirmation with a five up on the hourly chart for confidence. A new high is not confirmation of this wave count.
If intermediate wave (2) is over, then it is a very brief and shallow 0.31 zigzag lasting only eleven days (intermediate wave (1) lasted 69 days). The probability of this is very low.
At 1,591 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
Within intermediate wave (3), minor wave 2 may not move below the start of minor wave 1 at 1,208.32.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
The subdivisions of minute waves i and ii are the same as the main hourly wave count: 5-3.
This alternate wave count would now see a series of four overlapping first and second waves, now being resolved by the ends of the third waves and following fourth wave corrections.
Micro wave 3 may have just ended. It has no Fibonacci ratio to micro wave 1. Micro wave 4 may not move into micro wave 1 price territory below 1,236.56.
Micro wave 3 shows only a very slight increase in momentum beyond that seen for micro wave 1. So far minute wave iii may have passed its middle yet it has not shown an increase in momentum beyond that seen for minute wave i.
This wave count requires a strong increase in upwards momentum to have the right look. Often fifth waves to end Gold’s third wave impulses are swift and strong. If upwards movement continues and momentum increases, this wave count would increase in probability.
At 1,301 minute wave iii would reach 2.618 the length of minute wave i.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Upwards movement for Monday’s session is not supported by volume. If the alternate Elliott wave count is correct, then Gold should be within a third wave up that should show stronger momentum and stronger volume. That has not happened. Only a strong upwards day with stronger momentum and stronger volume would see the alternate wave count increase in probability over the main wave count. While that has not happened, the main wave count will remain more likely.
The bottom line is Gold has not yet broken out of a consolidation; price is still range bound.
Gold remains range bound between 1,280 and 1,210. During this sideways movement, it is a downwards day which has strongest volume indicating a downwards breakout as most likely.
Volume continues to decline as price moves sideways. This is typical of a consolidation. Gold needs to break above 1,280 on a day with obviously higher volume for the alternate wave count to be favoured. That would constitute a classic breakout, so at that stage the main wave count would be discarded. The main wave count will be preferred while price remains within the range and volume continues to decline.
ADX is today flat; the market is not yet trending. ATR agrees; it is declining.
On Balance Volume today has broken above the green trend line, a weak bullish signal. OBV must break above the orange line, which has strong technical significance, for OBV to be giving a clear bullish signal. The lower green line is removed and replaced today by the yellow line which is showing where OBV is currently finding support. A break below the yellow line would be a weak bearish signal (weak, but stronger than the bullish signal from the green line because the yellow line is horizontal). A break below the blue line would be a strong bearish signal.
RSI is not yet overbought. There is room for price to rise.
Stochastics is not yet overbought. A range bound approach to this market would be expecting the upwards swing to continue a little further until Stochastics is overbought and price finds resistance.
Only the most experienced of traders should be trading a range bound market. The risk of losses on a traders account is amplified in a range bound market. If you choose to trade this, it is essential you use good risk management techniques. The rest of us should wait until the breakout direction is clear and then join the trend.
This analysis is published @ 07:55 p.m. EST.