Overall sideways movement fits the main Elliott wave count nicely.
Summary: A fourth wave correction is most likely incomplete. It may end about 1,233. This would be confirmed if price makes a new high above 1,225.71 short term. Alternatively, if downwards movement continues, it may be a fifth wave with a target at 1,195.
New updates to this analysis are in bold.
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DAILY ELLIOTT WAVE COUNT
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.
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.
For this wave count, it is extremely likely that minor wave C would move at least slightly below the end of minor wave A at 1,208.32 to avoid a truncation and a very rare running flat.
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.
There are two structural options for minor wave C: either an impulse or an ending diagonal. Minor wave C does not look at this stage like an ending diagonal. It looks like the more common impulse.
Within the impulse, minute waves i and ii would be complete. Minute wave iii may only subdivide as an impulse. Within minute wave iii, minuette waves (i) and (ii) and now (iii) may be complete as labelled. The question today is whether or not minuette wave (iv) is complete. If it is complete, then it does show on the daily chart, just. This is just acceptable. The main hourly wave count considers minuette wave (iv) incomplete. The alternate looks at the less likely possibility that it is complete.
When minuette wave (iv) is complete, then the next wave down for Gold would be minuette wave (v) to complete minute wave iii. Gold’s fifth waves to complete its third wave impulses can be swift and strong. This next one may be swift and strong.
At 1,205 minute wave iii would reach 2.618 the length of minute wave i.
Draw a channel about minute wave iii using Elliott’s first technique: draw the first trend line from the ends of minuette waves (i) to (iii), then place a parallel copy on the end of minuette wave (ii). Copy this channel over to the hourly chart. The lower edge may provide support for minuette wave (v). Add a mid line. This may show where minuette wave (iv) finds resistance. Minuette wave (iv) may also find some resistance about the lilac trend line which is copied over from the weekly chart.
HOURLY ELLIOTT WAVE COUNT
The orange channel is drawn using Elliott’s second technique: the first trend line from the ends of subminuette waves ii to iv (these points can be seen on the daily chart now), then a parallel copy on the end of subminuette wave iii. When this orange channel is breached by upwards / sideways movement, then it shall provide confirmation that minuette wave (iii) is over and minuette wave (iv) has begun.
Because minuette wave (ii) shows up on the daily chart as four daily candlesticks, it would be reasonable to expect minuette wave (iv) to also show up on the daily chart as at least one green daily candlestick or doji. It would most likely last two to three sessions. This would give minute wave iii a clear five wave impulse look at the daily chart level.
Minuette wave (iv) may not move into minuette wave (i) price territory above 1,257.24.
Minuette wave (ii) was a very deep 0.82 zigzag. Given the guideline of alternation, minuette wave (iv) may be expected to be shallow and a sideways type of correction such as a combination, flat or triangle. If it is time consuming enough, it may find resistance at the upper edge of the green channel.
If minuette wave (iv) unfolds as an expanded flat, running triangle or combination, then it may include a new low below its start at 1,217.67. If within the next few hours Gold makes a new low, then look at how MACD is behaving. If there is divergence between price and MACD, then the new low may be part of minuette wave (iv): an X or B wave within it. If there is no divergence and downwards movement shows an increase in momentum, then it would more likely be a strong fifth wave extending lower. At this stage, price has made a slight new low and MACD shows downwards movement is very weak compared to the end of minuette wave (iii). MACD today is indicating that this current downwards movement is more likely part of minuette wave (iv).
At this stage, there is another fifth wave to end a third coming up. Minuette wave (v) to end minute wave iii may be a swift strong extension. Look out for surprises to the downside for this market at this time.
This main hourly wave count has a higher probability than the alternate. I would judge it today to be about 80% likely. It is again supported by classic technical analysis.
In the short term, a new high above 1,225.71 would invalidate the alternate below and provide some price confirmation of this main wave count.
If subminuette wave b does not move any lower, then the target for subminuette wave c will be at 1,233 for it to reach equality in length with subminuette wave a.
If submineutte wave b is over now, then it is a 1.01 correction of submineutte wave a. Minuette wave (iv) may be either a running contracting triangle or a regular flat correction.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Because there may be a swift strong fifth wave down waiting in the wings, this alternate must be considered. It is still possible although I judge it to have a low probability (20%). Low probability does not mean no probability.
If minuette wave (iv) is over already, then it just shows up on the daily chart. This is just acceptable.
If minuette wave (iv) is over already, then there is no alternation between the structure of minuette waves (ii) and (iv); they would both be zigzags. Alternation is a guideline, not a rule. There is alternation in depth: minuette wave (ii) was a very deep 0.82 and minuette wave (iv) would be a very shallow 0.22.
At 1,195 minuette wave (v) would reach equality in length with minuette wave (i).
Within minuette wave (v), subminuette wave iv may not move into subminuette wave i price territory above 1,225.71.
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 Elliott wave count.
Price has found resistance at the horizontal line about 1,310. The first support line may be about 1,225. Now that price has closed below this point it may provide resistance.
At the end of last week, overall, volume has been increasing on downwards movement from price for three weeks. This also supports the Elliott wave count.
Last weekly candlestick completes a Three Black Crows reversal pattern. Because the pattern is supported by overall increasing volume and it is on the weekly chart, this is a reasonably strong reversal pattern.
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last two red daily candlesticks come on declining volume. The fall in price is not being supported by volume. Both candlesticks have small real bodies. A pause in downwards movement looks like it is unfolding here. Volume indicates that we may see a red candlestick or doji to resolve this weakness, before price is ready again to continue much lower.
ADX today is flat to slightly rising. It may be indicating a new downwards trend. ATR disagrees; it is declining. Some disagreement between these two indicators in the early stages of a new trend is to be expected. If they begin to agree, then it would be clearer that the market is trending. For now that is not so clear.
On Balance Volume is very clear at both the weekly and daily chart levels. It indicates downwards movement is underway.
RSI is not yet oversold. There is still room for price to fall. Stochastics is oversold, but this oscillator may remain extreme during a trending market for reasonable periods of time.
Along the way down, corrections may find resistance about the 13 day moving average. Look for price to find some support about 1,210 in the next instance. If price breaks below support at that line, then it may throwback to find resistance there.
This analysis is published @ 06:59 p.m. EST.