Downwards movement was expected for the main hourly Elliott wave count, but this is not what happened. However, price remains below the invalidation point, so all three hourly wave counts remain valid.
Summary: It still looks more likely today that a correction will move price lower to 1,291 – 1,289. However, with a big third wave up approaching, look out for surprises to the upside. Any traders holding long positions which are profitable are advised to hold onto them. Also, understand there is a risk that any long positions entered here may be underwater for a few days. Risk is at 1,249.94. The trend is up, so downwards movement is a counter trend movement.
New updates to this analysis are in bold.
To see last weekly charts click here.
DAILY ELLIOTT WAVE COUNT
Intermediate wave (2) is a complete expanded flat correction. It is a shallow 0.350 correction of intermediate wave (1) lasting 56 days, just one more than a Fibonacci 55. There is no Fibonacci ratio between minor waves A and C. Minor wave C is a complete impulse.
I have looked back at the last two big cycle degree up movements within the last bull market: the first move from the low at 255.05 in April 2001, and the next move from the low at 682.75 in October 2008. Within the first move, the beginning series of corrections were 0.76, 0.6 and 0.96 in depth. Within the second move, the beginning series of corrections were 0.82, 0.68, 0.57 and 0.45. Early corrections within a new trend are most often deep.
Minor wave 2 may have been a quick, deep 0.57 zigzag over in just six sessions. If minor wave 3 has begun there, then at 1,437 it would reach 1.618 the length of minor wave 1.
Add a base channel (black lines) to intermediate waves (1) and (2). Draw the first trend line from the low at 1,046.27 on 3rd December, 2015, to the low labelled intermediate wave (2), then place a parallel copy on the high of intermediate wave (1). Along the way up, downwards corrections should find support at the lower edge of the base channel, if they get that low. At this stage, it looks like corrections are shallow and may not reach back down to the base channel.
Minute wave ii may not move beyond the start of minute wave i below 1,249.94.
At 1,582 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
Prior analysis had an alternate wave count which looked at the possibility that minor wave 2 may not be over and may continue lower as an expanded flat correction. This is still possible, but the probability today is judged to be too low for publication. It will be followed and published again if it shows itself to be correct.
MAIN HOURLY ELLIOTT WAVE COUNT
At this stage, this wave count still looks most likely of the three presented today. Minute wave ii may be an incomplete double zigzag. The first zigzag in the double was shallow, labelled minuette wave (w). The double is now joined by a three in the opposite direction, a zigzag labelled minuette wave (x) which is relatively shallow.
A second zigzag in the double may take price down to about the 0.618 Fibonacci ratio of minute wave i at 1,291.
When the second zigzag of subminuette wave b is over as labelled, then at 1,289 subminuette wave c would reach 2.618 the length of subminuette wave a. This gives a $2 target zone with a reasonable probability.
Minute wave ii so far has lasted four days. If it continues for one more, it may complete in a total Fibonacci five days and would be a more typically deep second wave correction.
The structure of upwards movement labelled minuette wave (x) fits best as a single zigzag. This slightly increases the probability of this wave count today and is one reason for swapping the wave counts over.
Within minuette wave (y), as a zigzag, no second wave (nor B wave) may move beyond its start above 1,327.29.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Minute wave ii may still be unfolding as a flat correction.
If minute wave ii is unfolding as a flat correction, then within it minuette wave (a) is a completed three, a zigzag. Minuette wave (b) must subdivide as a three and must be a minimum 0.9 length of minuette wave (a) at 1,352.32.
Minuette wave (b) may be unfolding as a double zigzag.
The normal range for minuette wave (b) within a flat is 1 to 1.38 the length of minuette wave (a) giving a range of 1,357.51 to 1,377.24. A new high above 1,357.51 may still be part of minute wave ii as in an expanded flat, which are very common structures.
If a new high is seen, then careful attention to volume and RSI will indicate the probability of this wave count vs. the second alternate hourly wave count.
SECOND ALTERNATE HOURLY WAVE COUNT
This wave count today sees minute wave ii over as a complete zigzag ending just below the 0.382 Fibonacci ratio as a relatively shallow 0.48 correction.
If this is correct, then a third wave up may be underway. The target for minor wave 3 remains the same. At 1,437 minor wave 3 would reach 1.618 the length of minor wave 1.
If minute wave ii was very quick as labelled, then minute wave iv may be quicker still. A target is not given for minute wave iii because the following correction for minute wave iv may be too quick to show up on the daily chart.
Within minute wave iii, no second wave correction may move beyond the start of its first wave below 1,305.59.
I am concerned with the subdivisions of minuette wave (i) as a leading contracting diagonal. This structure meets all Elliott wave rules, but for it to fit micro wave C within subminuette wave ii is truncated. This reduces the probability of this wave count to an alternate (along with a concern about volume).
At this stage, volume is light and the range is low although price is moving higher. At this stage, price behaviour does not look typical of a third wave, although they can begin stealthily.
This wave count today illustrates the risk to not having a long position at this time. It is possible that price may move surprisingly fast up to new highs as a big third wave gets underway. It is up to each member to manage risk and make your own judgements on how to approach this market at this time.
When minor wave 3 is complete, then the invalidation point will move up to the high of minor wave 1 at 1,315.35. The following correction for minor wave 4 may not move back into minor wave 1 price territory.
Click chart to enlarge. Chart courtesy of StockCharts.com.
There was some small increase in volume for the small upwards day of Thursday, but volume remains relatively light.
The strong upwards day of 24th of June still looks like a classic breakout from a consolidation zone, and it is strongly supported by volume. Price broke above the horizontal trend line at 1,308 and then turned down to find support. Price may be coming back down to this area for a second test. On throwbacks price usually ends at a support / resistance line but not always. Price may move below 1,308 to back into the consolidation zone before the correction is over.
ADX remains clear. There is a trend and it is up. ATR today is clearer; it disagrees with ADX as it is declining. It looks like there is most likely an upwards trend and the last four days are a smaller counter trend movement.
If this market is trending as ADX suggests, then price may find support about the 13 day moving average. This is now at 1,298 which closely fits with the target for the Elliott wave count and the Fibonacci ratio of the last wave upwards.
On Balance Volume has come up to test the dark blue line. This line has reasonable technical significance as it is reasonably long held, relatively shallow and repeatedly tested. If the main hourly wave count is correct, then this trend line on OBV may serve to halt the rise in price here. A break above the dark blue line would be a reasonably strong bullish indicator from OBV. If OBV turns down from here, then it should find support at the pink trend line.
The lower limit for OBV is the lower yellow line. That should provide support, particularly if the larger picture for the Elliott wave count is correct and Gold is in an upwards trend.
RSI is not extreme. There is room for price to rise or fall. RSI and price showed bearish divergence (yellow lines) at the last high. Four days may or may not be enough to resolve that divergence, but it should be resolved soon.
Stochastics is relatively close to neutral. There is room for price to rise or fall.
This analysis is published @ 08:26 p.m. EST.