The small pennant pattern noted in yesterday’s analysis continues to move price sideways in a narrow range. The breakout direction is expected to be the same.
Summary: The trend is still up. A multi day correction against the trend is unfolding and still looks incomplete. A target for it to end is either 1,297 or just below 1,249.94. In the short term, the volume profile is still more bearish than bullish. A small pennant pattern suggests more downwards movement is likely.
New updates to this analysis are in bold.
Last weekly chart can be found here.
Grand SuperCycle analysis is here.
DAILY ELLIOTT WAVE COUNT I
There are two wave counts today presented in order of probability.
Intermediate wave (2) is a complete expanded flat correction. Price from the low labelled intermediate wave (2) has now moved too far upwards to be reasonably considered a continuation of intermediate wave (2). Intermediate wave (3) is very likely to have begun and would reach 1.618 the length of intermediate wave (1) at 1,582.
Intermediate wave (3) may only subdivide as an impulse.
So far minor waves 1 and 2 may be complete within intermediate wave (3). The middle of intermediate wave (3) may have begun and may also only subdivide as an impulse.
Within minor wave 3, minute wave i is complete. Minute wave ii may be continuing as an expanded flat correction. Expanded flats are very common structures.
Within minute wave ii, minuette wave (a) subdivides as a quick three wave structure. Minuette wave (b) subdivides perfectly as a zigzag and is a 1.34 length of minuette wave (a), within the normal range of 1 to 1.38.
It would be highly likely for minuette wave (c) to make at least a slight new low below the end of minuette wave (a) at 1,305.59 to avoid a truncation and a very rare running flat.
The target is now recalculated at subminuette degree at the hourly chart level. If this target is wrong, it may be a little too high. If price drops through 1,300, then the next target would be at 1,291 – 1,290 where minuette wave (c) would reach 1.618 the length of minuette wave (a), and minute wave ii would end at the 0.618 Fibonacci ratio of minute wave i.
Minuette wave (c) may only subdivide as a five wave structure, either an impulse or ending diagonal. So far it looks like the more common impulse.
Minute wave ii may not move beyond the start of minute wave i below 1,249.94.
HOURLY ELLIOTT WAVE COUNT I
The current upwards movement should be expected to be subminuette wave iv while price remains below 1,340.21. If price moves above 1,340.21, then upwards movement should be expected to be micro wave 2. If price moves above 1,340.21 before new lows are made, then the degree of labelling of subminuette wave iii would be moved down one degree. I would not consider the possibility that the whole structure of minute wave ii is over because minuette wave (c) would be truncated by 41.04. The truncation would be way to large for any serious consideration.
From the high labelled subminuette wave ii to the low labelled subminuete wave iii, a five wave impulse now looks to be complete. This may be subminuette wave iii in its entirety, or the degree of labelling within this impulse may be all moved down one degree and it could be only micro wave 1 within the impulse of subminuette wave iii.
If subminuette wave iii is over at the last low, then it was just 2.14 short of 1.618 the length of subminuette wave i. Subminuette wave iii exhibits stronger momentum than subminuette wave i, and the strongest portion is the middle of the third wave. This labelling is preferred while price remains below 1,340.21 because it has the right look.
Ratios within subminuette wave iii are: there is no Fibonacci ratio between micro waves 3 and 1, and micro wave 5 is 2.32 longer than equality in length with micro wave 1.
Further sideways movement over the last 24 hours has continued the triangle structure which now looks clearer. MACD is hovering close to the zero line supporting the triangle. Within the triangle, so far micro waves A, B and C look to be complete. Micro wave D looks like it will probably move lower and may end at the B-D trend line as it is drawn across the last two lows. Micro wave D may not move below the end of micro wave B at 1,324.09. Thereafter, micro wave E may not move above the end of micro wave C at 1,334.35. The triangle will remain valid while price remains below this point.
The target is again recalculated today. Subminuette wave v downwards out of the triangle may end about the round number pivot of 1,300.
If the triangle is invalidated with a new high above 1,334.35, then subminuette wave iv may be morphing into a combination. Subminuette wave iv will remain valid as long as price does not move above 1,340.21.
Gold’s fifth waves to follow its fourth wave triangles are often surprisingly short and brief. If the triangle remains valid, then a short quick fifth wave down may complete in about one session. The minimum expectation for it to end would be at least slightly below 1,305.59, so that minuette wave (c) avoids a truncation. At 1,297 subminuette wave v would reach equality in length with subminuette wave i.
Draw a channel about this downwards impulse using Elliott’s first technique: draw the first trend line from the ends of subminuette waves i to iii, then place a parallel copy on the end of subminuette wave ii. Subminuette wave v may end about the lower edge of this channel.
Although Gold has a tendency to strong swift fifth waves, typical of commodities, the tendency of Gold to exhibit short and brief fifth waves after a fourth wave triangle is stronger. At this stage, if the triangle remains valid and price breaks out downwards as expected, it would be most likely to be short, brief and maybe relatively weak.
Subminuette wave iv may not move into subminuette wave i price territory above 1,340.21.
DAILY ELLIOTT WAVE COUNT II
My bottom line is that intermediate wave (2) is highly likely to be over, so I must consider all possibilities for how intermediate wave (3) is starting from the low labelled intermediate wave (2).
What if minor wave 2 is not over? It may be continuing as an expanded flat correction. Again, these are very common structures.
The target for intermediate wave (3) is still the same at 1,582.
Minute wave b is a 1.91 length of minute wave a within the expanded flat of minor wave 2. This is longer than the common range for a B wave within a flat of 1 to 1.38, but still within the allowable convention of up to 2 times the length of wave A. However, it is close to the maximum, so this must reduce the probability of this wave count.
Minute wave c of the flat would be very likely to make at least a slight new low below the end of minute wave a at 1,249.94 to avoid a truncation and a very rare running flat. The 0.618 Fibonacci ratio of minor wave 1 at 1,243 would be a reasonable expectation to achieve this.
Minute wave c must subdivide as a five wave structure, either an impulse or an ending diagonal. So far an impulse looks more likely, and it is more common, so it should be expected in the first instance.
Within the impulse of minute wave c, the third wave of minuette wave (iii) looks like it may be extending. Again, this is a very common tendency for third waves, so this should be expected.
The target expects that minor wave 2 may overshoot the lower edge of the base channel about intermediate waves (1) and (2). This is possible, but it does reduce the probability of the target. The base channel is fairly likely to be respected and should offer strong support.
Minor wave 2 may not move beyond the stat of minor wave 1 below 1,200.07.
HOURLY ELLIOTT WAVE COUNT II
Structure and subdivisions at the hourly chart level for wave counts I and II are essentially the same.
This second wave count has different degrees of labelling, but the idea is the same.
So far from the high labelled here minute wave b, there is a 5-3-5 down complete. This may be minuette waves (i), (ii), (iii) with price now in minuette wave (iv). Or it may be minuette waves (i), (ii), and within minuette wave (iii) only subminuette wave i is complete (as per the labelling on yesterday’s second hourly chart).
At this stage, it looks like a triangle is completing, so this looks most likely to be minuette wave (iv). If this sideways movement is now to be considered one degree lower as subminuette wave ii within minuette wave (iii) extending further, then it is not grossly disproportionate to minuette wave (ii) one degree higher. Minuette wave (ii) lasted 10 hours, so this current correction so far has lasted 79 hours. For this reason the degree of labelling for the current correction has been moved up one degree; it is likely to be the fourth wave counterpart to the prior second wave.
Triangles are time consuming sideways structures. The breakout direction should be the same direction as entry, in this case down.
If the triangle is invalidated with a new high above 1,334.35, then minuette wave (iv) may be morphing into a combination. Minuette wave (iv) may not move into minuette wave (i) price territory above 1,340.21.
The target for this second wave count is for minute wave c to move at least slightly below the end of minute wave a at 1,249.94 to avoid a truncation and a very rare running flat.
Last weekly candlestick completes a bearish engulfing candlestick pattern with higher volume. This is a strong bearish signal and strongly supports the wave count in expecting more downwards movement. If targets are wrong, they may be too high.
On Balance Volume has come down to find support at the upper purple trend line. This may offer some support. If OBV moves up and away from this line this week, it would be a reasonable bullish signal. A break below this line would be a reasonable bearish signal. The next line to offer support is not too far away but would still allow for a reasonable fall in price.
There is today a large difference in volume data from StockCharts and COMEX (on the first daily Elliott wave chart above). Volume analysis today will be done on COMEX data, as this comes directly from the Chicago exchange and I expect it should be more reliable.
Volume is overall declining as price is moving sideways in a small pennant pattern for the last three days. Today’s small upwards day is an inside day on lighter volume (COMEX data). A target for the movement out of the small pennant pattern, using the measured rule, would be about $56 below the breakout price point.
On Balance Volume may find resistance at the short upper purple line. If tomorrow moves price higher, it would break above this line and provide a weak bullish signal. A break below the longer purple line would be a strong bearish signal.
RSI is close to neutral. There is plenty of room for price to rise or fall.
ADX is declining, returning from extreme. If a trend returns, it would still be up: the +DX line is still above the -DX line.
ATR is also clearly declining. This current downwards swing should be expected to be a counter trend movement. It should offer a good opportunity to join the longer upwards trend when it finds a low.
The longer Fibonacci 55 day moving average is approaching the support line about 1,300. It would be reasonable to expect downwards movement from price to stop about there. This fits neatly with the Elliott wave count.
Stochastics is not yet oversold. When Stochastics reaches oversold at the same time price finds support, then the downwards swing from price may be expected to end.
This analysis is published @ 07:58 p.m. EST.