The main Elliott wave count expected downwards movement, which is what happened.
The short term target on the hourly chart was 1,228 and a bounce was expected from there. The bounce came at 1,229.17.
Summary: A new low below 1,209.08 would confirm the main wave count and invalidate the alternate. Unfortunately, there is no upper confirmation / invalidation point. The target for this correction to end is still 1,131, which may be reached in about two weeks. The market is still range bound and the main wave count may still change in terms of short term expectations; there are still at least three structural options open for intermediate wave (2). In the short term, a third wave down may be unfolding to either 1,211 or 1,190.
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.
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.
Intermediate wave (2) may be still be a flat correction although today this looks highly unlikely. If upwards movement continues to 1,275.24. At that stage, upwards movement would be 0.9 of the prior zigzag down, so the structure may be relabelled minor waves A-B with C down to unfold. Within flat corrections, the B wave is most commonly from 1 to 1.38 times the length of the A wave, so this gives a normal range for minor wave B of 1,282.68 to 1,311. There is a risk that upwards movement is not over while price remains above 1,209.08.
A new high does not invalidate this main wave count. The most common type of flat is an expanded flat which would require wave B to be 1.05 of wave A or longer. The price point for this would be at 1,286.40.
There is no rule stating a limit for a B wave within a flat nor an X wave within a combination. There is an Elliott wave convention that states when the possible B wave is twice the length of the A wave the probability of a flat unfolding is so low it should be discarded. That price point is at 1,357.04.
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 look at movement from the last high. Movement prior to that is seen subdividing in the same way for both wave counts.
Intermediate wave (2) is incomplete and should still move lower. It may be either a double zigzag (more likely) or a double combination (less likely). This first hourly chart should be used until invalidated. This first hourly chart looks at intermediate wave (2) as a double zigzag.
A double zigzag should have a clear downwards slope and would most likely end about the 0.618 Fibonacci ratio at 1,131. Minor wave Y would be a zigzag which should subdivide 5-3-5.
So far an impulse is complete downwards for minuette wave (i). This was followed by a shallow zigzag for minuette wave (ii).
Draw a base channel about this unfolding impulse: draw the first trend line from the start of the first wave to the end of the second wave, then place a parallel copy on the end of the first wave. The upper edge of this base channel should provide strong resistance for upwards corrections along the way down. If you choose to trade this downwards wave, then each time price touches the upper edge it is an opportunity to join the trend. Remember to carefully manage risk; this wave count could be wrong: intermediate wave (2) could be a combination and minor Y could be a flat or triangle. The hourly chart would be invalidated if that is the case.
If the next correction for subminuette wave ii touches the base channel, then it may correct to the 0.618 Fibonacci ratio of subminuette wave i at 1,236. It does not have to be this deep; it may only reach the 0.382 Fibonacci ratio at 1,232.
When subminuette wave ii is complete, then a low degree third wave within a third wave down should unfold. Downwards momentum should increase.
The final fifth wave to end minuette wave (iii) may be particularly swift and strong. To end its impulses on a sharp movement is common for Gold, particularly its third waves. Look out for surprises to the downside.
Subminuette wave (ii) may not move beyond the start of subminuette wave (i) above 1,243.90.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
A double combination should have a sideways look, so the second structure in the double should end about the same level as the first. Minor wave W ended at 1,208.32. The second structure in a double combination would be either a flat or triangle for minor wave Y.
Because this would see intermediate wave (2) much more shallow than second wave corrections commonly are, particularly the first big second wave correction of a new trend, this possibility has a very low probability. But it is possible, so that is the risk to trying to trade this correction at this stage.
So far there is a 5-3-5 downwards complete. If minor wave Y is to be a flat or triangle, then minute wave a within it should be a three wave structure. It may now be a complete zigzag.
If minor wave Y is to be a flat correction, then minute wave b within it must make a minimum 0.9 retracement of minute wave a and so must reach to 1,258.60 or above. The normal range for a b wave within a flat is from 1 to 1.38 times the length of the a wave, which gives a normal range for minute wave b of 1,262.47 to 1,277.17. A new high would not invalidate this wave count.
If minor wave Y is to be a triangle, then there is no minimum requirement for minute wave b within it. Minute wave b must be a corrective structure, most likely a zigzag.
Minor wave Y would overall be a choppy overlapping sideways movement to last about two weeks, ending close to 1,208.32.
This alternate wave count should only be used in the unlikely even that the main hourly wave count is invalidated.
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).
Minuette wave (ii) may not move beyond the start of minuette wave (i) at 1,209.08.
I adjusted the best fit black channel about this upwards movement. This contains all except the end of minute wave ii within intermediate wave (1). It is very common for the ends of third waves to overshoot channels as they are the strongest movement within a trend.
It is indicative that the lower edge of this channel is now being breached. If a big third wave up has begun, price should be finding support at the lower trend line. For this reason today with a full daily candlestick below the line I will no longer publish an hourly chart. That would give this alternate too much weight. There is not enough bullish indication at this stage to have confidence that a third wave up is underway.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A downwards day with a reasonable increase in volume supports the Elliott wave count short term. There was support for the fall in price. Overall, however, volume is still declining as price moves sideways and the bottom line remains that there has been no breakout from a zone of consolidation.
Price is still range bound between resistance about 1,280 and support about 1,210. A breakout is required for confidence in the resumption of a trend. A downwards breakout would be supported by a day with higher volume, but for a downwards breakout this is not necessary. The market can fall of its own weight.
ADX today is declining indicating the market is still consolidating. The +DX line is still above the -DX line, so this indicator is not yet indicating a trend change.
ATR is declining to flat. It agrees with ADX; there is currently no trend.
On Balance Volume is my favourite early indicator. When used with trend lines it will often breakout and show the direction for price before price breaks out. OBV today is giving a reasonable bearish signal with a break below the yellow line. This signal is reasonable because the break is so strong and the line is horizontal. However, that line is short held and only tested twice. A stronger bearish signal from OBV would come with a break below the blue line.
Also, OBV today gives some support for the main Elliott wave count at the daily and hourly chart levels.
RSI is neutral. There is room for price to rise or fall.
Stochastics touched overbought and is returning. A range bound trading approach may now expect a downwards swing about here; it looks like price was not able to quite reach resistance. Downwards movement may be expected to continue until price finds support and Stochastics is oversold.
Trading a range bound market is much more risky than trading a clearly trending market. If you are not a very experienced trader, then it is the trades you don’t take and the times of uncertainty in the market that you do not enter which will reduce risk and preserve your account. This membership has a wide range of market experience. If there is one lesson I could give, which would be the most valuable to new traders, it would be to manage risk.
This analysis is published @ 08:16 p.m. EST.