The main Elliott wave count was invalidated at the hourly chart level with a new low below 1,269.63. At that stage, both alternates expected more downwards movement.
Summary: More downwards movement should be expected from here. The preferred wave count (about a 60% probability) has a target at 1,250. If price makes a new low below 1,237.97, then more downwards movement should be expected. The target then would be at 1,183.
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DAILY ELLIOTT WAVE COUNT
Intermediate wave (2) may be a shallow 0.19 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.
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 is moving lower as a zigzag with a triangle for minute wave b within it. Minor wave 2 may be a very deep correction. So far it is deeper than 0.618 of minor wave 1. At 1,250 minute wave c would reach equality in length with minute wave a. Draw a small channel (pink) about minor wave 2 using Elliott’s technique for a correction as shown. Copy this over to the hourly chart.
Minute wave a lasted two sessions. Minute wave b triangle lasted nine sessions. Minute wave c may last another one session to total two, or two more sessions so that minor wave 2 totals a Fibonacci thirteen sessions.
Minor wave 2 may not move beyond the start of minor wave 1 below 1.237.97.
Gold often begins new trends slowly. The beginning of intermediate wave (1) saw brief impulses and time consuming deep second wave corrections at minor, minute and minuette wave degrees.
Golds impulses, particularly its third waves, normally accelerate at the middle and explode in a blowoff at the end of the fifth wave.
HOURLY ELLIOTT WAVE COUNT
With minor wave 2 obviously continuing lower, the structure that still makes the most sense and has the best fit is a zigzag with a running contracting triangle for minute wave b.
The triangle is complete. Minute wave c is moving lower. The structure of minute wave c is incomplete.
Minute wave c must subdivide as a five wave structure, either an impulse (more likely) or an ending diagonal (less likely but still possible).
Within minute wave c, the structure may have begun with four overlapping first and second waves. The middle of the third wave may have passed during Wednesday’s session; it shows a strong increase in momentum. Now a series of fourth wave corrections and fifth waves downwards should follow to complete the structure.
A best fit channel is drawn about this downwards movement. Along the way down, corrections may find resistance about the mid line in the first instance, and the upper edge at the most.
Short term submicro wave (4) may not move into submicro wave (1) price territory above 1,268.77.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is still possible that intermediate wave (2) is not over. The probability of this wave count has slightly increased. It would be my judgement that this alternate has about a 40% probability and the main count about a 60% probability.
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.
A new low below 1,237.97 by any amount at any time frame would immediately invalidate the main wave count and confirm this alternate. At that stage, more downwards movement would be expected.
There are two structural options for minor wave C: either an impulse or an ending diagonal. At this stage, with the choppy overlapping movement to start minor wave C, an ending diagonal looks more likely.
Within the diagonal, minute wave i fits as a zigzag as does minute wave ii. Minute wave iii may now be underway. When minute wave iv arrives, it may not move beyond the end of minute wave ii above 1,288.30.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Within an ending diagonal, all sub-waves must subdivide as zigzags. The fourth wave must overlap back into first wave price territory and may not move beyond the end of the second wave. Second and fourth waves are commonly from 0.66 to 0.81 the depth of the first and third waves they correct. Thus ending diagonals are choppy overlapping movements. Contracting diagonals, the more common variety, have their classic technical analysis equivalents as falling or rising wedges.
Minute wave ii is 0.67 the depth of minute wave i which is within normal range of 0.66 to 0.81.
Minute wave iii must subdivide as a zigzag and must make a new low below the end of minute wave i below 1,257.24.
When minute wave iii is complete, then the type of diagonal, contracting or expanding, would be known, so a target range and minimum or maximum for minute wave iv may be calculated.
At 1,243 minuette wave (c) would reach 2.618 the length of minuette wave (a). This target would complete the zigzag of minute wave iii.
When minute wave iii is complete, then the invalidation point must move back up to the end of minute wave i. Minute wave iv should be a deep correction and must overlap back into minute wave i price territory above 1,257.24, but it may not move beyond the end of minute wave ii above 1,288.30.
Click chart to enlarge. Chart courtesy of StockCharts.com.
On Balance Volume is breaking below a reasonably long held and clearly defined consolidation zone. It would be entirely reasonable to expect price to follow by continuing lower for a few weeks. This piece of evidence strongly supports the alternate daily Elliott wave count.
Price has found resistance at the horizontal line about 1,310. The first support line may be about 1,225.
Click chart to enlarge. Chart courtesy of StockCharts.com.
The breakout above resistance on high volume for 29th April now looks like it may have been a false breakout. Price today has returned to close comfortably back down in the prior consolidation zone, delineated by pink trend lines.
If it is accepted that the consolidation began in February, then the day with the strongest volume during this period is the downwards day of 4th March, suggesting a downwards breakout.
However, if it is accepted that the consolidation began after the high of 11th March, then the days with strongest volume are 29th April and 21st April, suggesting an upwards breakout.
It may be more helpful to break the consolidation into separate zones. A new consolidation may be forming delineated by brown lines. The lower edge may not yet be determined, so the lower trend line may need to be moved lower. This smaller consolidation began from the high on 2nd May. So far within it the upwards day of 6th May has strongest volume suggesting an upwards breakout.
ADX is slightly declining today and for several days has been flat to declining, so no clear trend is indicated. ATR overall still agrees; it is still flat to declining.
The green trend line on On Balance Volume as it was drawn yesterday did not work. It was breached suggesting an upwards movement from price, but now OBV has come back down below the line. The green line is today redrawn, as is the blue line.
On Balance Volume is constrained within two contracting lines. A break above the green line would be a bullish signal. A break below the blue line would be a bearish signal.
Both RSI and Stochastics are neutral. There is room for price to rise or fall. Downwards movement may be expected to continue within the consolidation until price reaches support (yet to be determined) and Stochastics reaches oversold at the same time.
There is no divergence between price and either of Stochastics or RSI to indicate weakness at this stage.
This analysis is published @ 08:51 p.m. EST.