A little downwards movement was expected from yesterday’s hourly Elliott wave count to end about either 1,270.53 or 1,265.46.
So far price has moved lower to 1,263.
Summary: It is still 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. Downwards corrections present an opportunity to join the trend at a good price.
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.
Minuette wave (ii) has moved lower and subdivides as a deep double combination or double zigzag (it will fit as both). The second structure in the double labelled subminuette wave y has ended just below the 0.618 Fibonacci ratio, falling a little short of the lower edge of the pink channel.
What looks fairly clear on this hourly chart is the upwards movement for minuette wave (i) looks like a five, and the downwards / sideways movement for minuette wave (ii) so far looks like a three. With a five up and now a three down, a little more confidence may be had that minor wave 3 has begun. It is still not confirmed by price, and price is the ultimate determinator.
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. This first condition is now met.
2. A breach of the upper edge of the pink channel.
3. A new high above 1,279.99.
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 looks likely to have begun. 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. It is my judgement that this alternate is unlikely. If asked to put a number on it, I would give it about a 10% probability. This judgement is based upon classic technical analysis, not Elliott wave.
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
The main purpose in publishing an hourly chart for this alternate is to determine what price points need to be passed to reduce the probability of this alternate and increase the probability of the main wave count.
A secondary purpose is to remain open to considering what this alternate looks like at a lower time frame. Alternates should always be considered; what if the main wave count is wrong? Alternates provide a road map for what should happen next if the main wave count is wrong.
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). Minuette wave (ii) fits as a sideways double flat correction; the second flat in the double ends very slightly beyond the end of the first flat.
Double flats and combinations are fairly common. Triples are very rare. If this structure of minuette wave (ii) is correct, then it is extremely likely to be over. For it to continue as a very rare triple has a very low probability. Within minuette wave (iii), the fist impulse down of subminuette wave i is incomplete. When subminuette wave i is complete, then the following upwards correction for submineutte wave ii may not move beyond the start of subminuette wave i above 1,279.99.
A new high above 1,279.99 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.
Although today completes a strong bearish engulfing candlestick pattern with StockCharts data at the daily chart level, this pattern has not come at the end of an upwards trend. From Nison’s “Japanese Candlestick Charting Techniques” page 43: “the market has to be in a clearly definable uptrend (for a bearish engulfing pattern)… even if the trend is short term.” It is my judgement that the small green doji before this pattern is not a clearly definable uptrend, not even short term. This pattern comes within an overall sideways movement; price has been moving overall sideways for the last ten days.
In the last several days, it is upwards days which still have strongest volume. As price rises it is supported by rising volume. Today falling price has slightly lighter volume than the prior upwards day. The volume profile for Gold remains predominantly bullish supporting the main Elliott wave count.
ADX is still flat indicating the market is not currently trending. The +DX line remains above the -DX line; ADX is not indicating a trend change. If a trend returns at this stage, it would be upwards.
ATR is still overall flat, in agreement with ADX.
On Balance Volume is constrained between the blue and green trend lines. A break above the green line would be a strong bullish signal. A break below the blue line would be a strong bearish signal. OBV will be watched closely; it often breaks out before price.
RSI is neutral. There is room for price to rise or fall.
Stochastics is also neutral. A range bound approach would expect more downwards movement from here.
Overall, it still looks like Gold completed a consolidation which began late February / early March and ended with an upwards breakout on high volume on 20th April. Following downwards movement looks like a typical throwback to support of the prior consolidation, even though price is reaching slightly back into the consolidation zone. This still looks like fairly typical behaviour after a consolidation. Price may be expected to most likely begin to move up and away from the zone very soon.
This analysis is published @ 07:56 p.m. EST.