Upwards movement was expected from last analysis. Volume continues to favour the main Elliott wave count.
Summary: Volume supports upwards movement and not downwards movement. The probability of new highs next week looks good. A new high above 1,303.51 would confirm a third wave up is underway. The target is at 1,477. Risk to long positions currently remains at 1,237.97.
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.
At this stage, minor wave 2 is relatively deep at 0.53 of minor wave 1 and has been labelled as a complete zigzag. It is fairly likely but not certain that minor wave 2 is over. If the hourly wave count below is invalidated below 1,278.03 on Monday, then minor wave 2 may be continuing further. This wave count remains valid and preferred while price remains above 1,237.97.
HOURLY ELLIOTT WAVE COUNT
This main wave count must see the downwards wave labelled minor wave 2 as a corrective structure (the alternate must see it as a five). Downwards movement fits better as a correction.
At 1,375 minor wave 3 would reach 1.618 the length of minor wave 1.
Minor wave 2 fits neatly as a double zigzag. Double zigzags are reasonably common structures.
So far to the upside a five wave impulse may be incomplete. Price found some resistance at the short term cyan trend line.
Within the incomplete impulse, if my labelling is correct, then minuette wave (ii) was an expanded flat and minuette wave (iv) is an incomplete zigzag. There is no Fibonacci ratio between minuette waves (i) and (iii).
Minuette wave (iv) should complete fairly quickly, within a few hours. It may not move into minuette wave (i) price territory below 1,278.03. Minuette wave (v) upwards should follow to a new high above minuette wave (iii) to avoid a truncation.
At this stage, a target cannot be calculated for minute wave i to end because the start of the fifth wave of minuette wave (v) is not known.
Draw a best fit channel about this upwards movement as shown. Minuette wave (iv) may find support at the lower edge. If the channel continues to hold, then after new highs above minuette wave (iii) a subsequent breach of the lower edge of the channel would provide indication that the impulse for minute wave i would be over and another correction for minute wave ii would have begun.
Gold often begins its third wave impulses slowly. Look at the example of minor wave 3 within intermediate wave (1) on the daily chart. Its second wave corrections are slow, time consuming and often deep. Towards the end of a third wave impulse the fourth wave corrections are often quick and shallow, with swift strong fifth waves. This is typical behaviour of commodities. It offers relatively easy entry to join the trend at the start, and a blowoff top offers a high probability marker to exit the trend at the end.
Any members who have entered long positions are advised to hold on at this stage. If this wave count is correct, then the trend is just beginning. Stops may be set at break even, or just below 1,237.97 to allow the market room to move. Always manage risk. Do not invest more than 3-5% of equity on any one trade and always use a stop loss order.
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
It is very difficult to see downwards movement for minute wave i as a five wave structure, either an impulse or ending diagonal. It does not look at all like an ending diagonal, so I have labelled it as an impulse.
The only way this will work is to see minuette wave (i) over at the low labelled 1,291.39. This sees minuette wave (ii) as an expanded flat, and subminuette wave a within it also an expanded flat. This is possible, but it looks forced.
Minuette wave ii fits as a deep 0.74 expanded flat correction.
This wave count requires a new low below 1,237.97 for confirmation. While price remains above this point, it is a less likely alternate.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Strong volume for Friday supports the rise in price. So far price has broken out (upwards on rising volume) from a consolidation period and then turned to back test support which was previously resistance. Now price is moving away from support on rising volume. This looks like a perfect set up to join a trend at a good price.
ADX is increasing and the +DX line is above the -DX line. ADX indicates an upward trend is unfolding.
ATR does not agree today as it is flat to declining. Some disagreement between ADX and ATR may occur early in a new trend.
On Balance Volume found support at the blue line as expected. This line is long held, repeatedly tested and shallow in slope. It has strong technical significance. Here, it is assisting to hold up the fall in price. With another test of that line, the strength is reinforced.
Neither RSI nor Stochastics are extreme and neither exhibit divergence with price. There is room yet for the market to rise.
Price may find support about the 13 day moving average while the upwards trend continues.
So far the picture looks on balance quite bullish and a good entry for a long position here.
However, the COT report (updated on Friday 3 p.m.) remains overall bearish. Commercials (usually on the right side of the trade) are overwhelmingly short at 413,560 contracts to 90,099 long. Non commercials (usually on the wrong side of the trade) are long 356,491 contracts to 56,595 short.
This evidence indicates any long positions here should continue to be carefully managed to keep risk acceptable.
This analysis is published @ 04:06 a.m. EST on 7th May, 2016.