Upwards movement was expected for Wednesday’s session, which is exactly what happened.
Summary: It is likely that a third wave upwards is in the very early stages. The target remains at 1,477. Risk remains at 1,237.97. The wave count is supported by volume analysis.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
Intermediate wave (2) may be a double combination.
Minor wave W is a zigzag, the first structure in a double. The two structures in the double may be joined by a simple zigzag for minor wave X in the opposite direction.
Minor wave Y may be a running contracting triangle. The triangle is supported by MACD hovering at the zero line here on the daily chart.
Minor wave 2 may not move beyond the start of minor wave 1 below 1,237.97.
The next wave up for intermediate wave (3) should be swift and strong. It must move above the end of intermediate wave (1) at 1,282.68. It must move far enough above this point to allow room for intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.
At 1,477 it would reach equality in length with intermediate wave (1). This target is reasonable because intermediate wave (2) was very shallow.
If intermediate wave (2) is over as labelled, then it may have totalled a Fibonacci 34 sessions.
Minor wave 2 has moved lower and is now 0.71 the depth of minor wave 1. Minor wave 1 lasted two days. Minor wave 2 now has lasted six days. If it is over here, it would have good proportion and look like a clear three wave structure on the daily and hourly charts.
HOURLY ELLIOTT WAVE COUNT
Minor wave 2 fits as a zigzag.
Within minute wave i so far, it looks now like the first five up is complete for minuette wave (i). On the five minute chart, subminuette wave iii has strongest momentum and all subdivisions within this impulse fit neatly.
At this stage, the sideways movement labelled minuette wave (ii) looks like a separate wave to minuette wave (i). This wave count has reasonable proportions.
Minuette wave (ii) must be a corrective structure. So far within it, subminuette wave a will fit as either a three or a five on the five minute chart, so minuette wave (ii) may be either a zigzag or a flat correction. Subminuette wave b has retraced 0.92 the length of subminuette wave a, so the minimum requirement of 0.9 for a flat is met.
Unfortunately, within a flat correction, subminuette wave b may make a new high above the end of subminuette wave a as in an expanded flat. A new high above 1,278.75 does not indicate that the correction for minuette wave (ii) is over. Expanded flats are very common structures, and that would see subminuette wave b a minimum 1.05 length of subminuette wave a at 1,279.11. There is no rule stating a maximum length for a B wave within a flat, but there is an Elliott wave convention that states when the potential B wave is twice the length of the potential A wave a flat should be discarded due to a very low probability. That price point would be at 1,285.26. A new high above 1,285.26 would indicate that minuette wave (ii) was quick, shallow and complete.
It is an outside possibility that minuette wave (ii) is over already as a quick shallow zigzag complete at the low for this last session. But the probability is low; the proportion does not look right and it should last longer.
Subminuette wave c would be likely to make at least a slight new low below the end of subminuette wave a at 1,272.24 to avoid a truncation.
Minuette wave (ii) may end at either the 0.382 or 0.618 Fibonacci ratios.
If subminuette wave c moves deeper than the 0.618 Fibonacci ratio, then it should find strong support at the lower pink trend line.
The invalidation point and risk must remain at 1,237.97 while there is no confirmation of a trend change.
Confidence may be had in a trend change with each of these conditions being met, in order:
1. A five up followed by a three down which does not make a new low. If the wave count unfolds as expected in the next 24 hours, then this first condition may be met.
2. A breach of the upper edge of the pink channel.
3. A new high above 1,295.34.
4. A new high above 1,303.51. This will be final confirmation.
Depending upon risk appetite, members may choose to wait for one or more of these conditions to be met before entering long. Manage risk carefully. The risk of a loss on a long position here must be accepted. The alternate wave count does remain viable, although unlikely. Do not invest more than 3-5% of equity on any one trade, and always use a stop loss to protect your account.
At 1,367 minor wave 3 would reach 1.618 the length of minor wave 1. If this target is wrong, it may be too low. The next possible target would be at 2.618 the length of minor wave 1 at 1,433.
Minor wave 3 may only subdivide as an impulse. Within the impulse, minute wave i may begin about here. When it arrives minute wave ii may also be deep and may also be time consuming.
It would not be until the middle that acceleration to the upside may be expected to be clear for minor wave 3. The fourth wave corrections within it may be quick and shallow, and the fifth waves to end minor wave 3 and then the final fifth wave up of minor wave 5 also may be expected to be very strong movements, completing blowoff tops for Gold.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is still possible that intermediate wave (2) is not over.
Normally, the first large second wave correction within a new trend is very deep, often deeper than the 0.618 Fibonacci ratio. The main wave count sees intermediate wave (2) as very shallow at only 0.19 of intermediate wave (1). This is unusual. And so this alternate must be considered.
If any members have long positions on Gold already it is essential that stops are used in case this alternate unfolds.
Intermediate wave (2) may be an expanded flat correction. Minor wave A is a three, minor wave B is a three and a 1.28 length of minor wave A. This is within the normal range of 1 to 1.38.
At 1,183 minor wave C would reach 1.618 the length of minor wave A. This would be the most likely target. If price keeps falling through this first target, then the second target would be at 1,108 where minor wave C would reach 2.618 the length of minor wave A.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Minor wave C must subdivide as a five wave structure. This may be either an impulse (as labelled) or an ending diagonal (not charted but considered in this analysis).
If minor wave C is unfolding as the more common impulse, then within it there would now be overlapping first and second waves for minute waves i and ii, then minuette waves (i) and (ii). Now today subminuette waves i and ii may be complete. With three overlapping first and second waves complete, an increase in downwards momentum should be expected if an impulse is unfolding.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,295.34.
A new high above 1,295.34 would invalidate an impulse unfolding downwards for minor wave C.
At that stage, the other less common structure of an ending diagonal would need to be considered for this alternate.
All subwaves must subdivide as zigzags within an ending diagonal. To the low of 10th May, downwards movement will subdivide as a 5-3-5 structure, so it may be a complete zigzag (as per labelling on the main daily and hourly wave count). That may be the end of a zigzag for minute wave i, the first wave down of an ending diagonal.
The normal depth of second and fourth waves within diagonals is from 0.66 to 0.81 the prior wave. Minute wave ii of a diagonal would have a normal range of 1,288 to 1,295.
If a diagonal is indicated, then the invalidation point is at where it is placed on the daily chart. Minute ii of a diagonal may not move beyond the start of minute wave i at 1,303.51.
Only a new high above 1,303.51 would fully invalidate this alternate idea at this stage.
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is now a Morning Doji Star candlestick pattern complete with today’s green candlestick. This comes after a small decline. This is not the strongest reversal pattern so one more day of upwards movement would add confidence to the reversal implications of it. There is stronger volume on the third candlestick than the first and the body of the third candlestick closes well into the body of the first candlestick. This adds some strength to the pattern. There is an overlap between the body of the first candlestick and the body of the second candlestick which detracts a little from the strength of the pattern.
Today saw reasonable upwards movement on clearly stronger volume. The rise in price is well supported by volume, so it supports the main Elliott wave count.
Price is finding a little resistance about the upper horizontal line at 1,280. A downwards reaction from here may find some support now about the next line at 1,270.
ADX today is slightly declining, indicating the market is not currently trending. It has not indicated a trend change. If a trend returns, it would still be up.
ATR is also declining agreeing with ADX that this market is not currently trending. With a counter trend movement of six days to the last low, and both of these indicators based on 14 day averages, this makes sense at this stage. They are both lagging indicators.
On Balance Volume gave a strong bullish signal when it moved up and away from the blue trend line. That trend line is reasonably shallow, long held and repeatedly tested. It offers strong technical support. A new line is added today to OBV in green. This line may offer some resistance, but it does not have good technical strength. When OBV comes up to that line, it may initiate a small correction in price (but it does not have to). If OBV breaks above the green line, it would offer a weak bullish signal.
RSI is close to neutral. There is room for price to rise or fall. Stochastics is close to neutral also. There is room for price to rise or fall.
Once the trend is established, then the 13 day moving average may show where corrections against the trend find support. This may assist to find entry points to join the trend.
This analysis is published @ 08:14 p.m. EST.