Upwards movement was again expected for the session.
Summary: The target for the main wave count remains at 1,582. Substantial confidence in the main wave count may now be had if price can move above 1,366.87. A new low below 1,310.84 would invalidate the main wave count and confirm an alternate. Prior to that, a new low below 1,334.06 would shift probability from the main to the alternate wave count. A target for downwards movement to end would be 1,279.
New updates to this analysis are in bold.
Last weekly charts, and a more bearish weekly alternate, are here.
Grand SuperCycle analysis is here.
DAILY ELLIOTT WAVE COUNT
Primary wave 2 is a complete expanded flat correction. Price from the low labelled primary wave 2 has now moved too far upwards to be reasonably considered a continuation of primary wave 2. Primary wave 3 is very likely to have begun and would reach 1.618 the length of primary wave 1 at 1,582.
Primary wave 3 may only subdivide as an impulse.
So far intermediate waves (1) and (2) may be complete within primary wave 3. The middle of primary wave 3 may have begun and may also only subdivide as an impulse.
Within intermediate wave (3), the end of minor wave 1 is moved up to the last high. This fits on the hourly chart although it looks odd here on the daily chart. There was a small fourth wave correction up at the end of minor wave 1 and it subdivides on the hourly chart as an impulse. Minor wave 2 may be a complete zigzag, also subdividing as a zigzag on the hourly chart. If minor wave 2 is over, it would be 0.50 the depth of minor wave 1.
With overall sideways movement now for the last seven days, it looks entirely possible that minute wave ii may not be over. Sideways movement may be a corrective structure for an X wave to join two zigzags in a double. Minute wave ii may yet move a little lower to complete as a double zigzag.
Minute wave ii may not move beyond the start of minute wave i below 1,310.84. This is the final risk to any long positions entered here or which members may still be holding.
At 1,437 intermediate wave (3) would reach 1.618 the length of intermediate wave (1). If price keeps going upwards through this first target, or if it gets there and the structure is incomplete, then the next target would be at 1,552 where intermediate wave (3) would reach 2.618 the length of intermediate wave (1).
There may now be four overlapping first and second waves complete: primary, intermediate, minor and now minute. This wave count expects to see an increase in upwards momentum. On the hourly chart, there are now two more first and second waves complete: minuette and subminuette. The increase in upwards momentum should be imminent.
A new high above 1,366.87 would invalidate the alternate wave count below and provide price confirmation of this main wave count.
Primary wave 1 lasted 14 weeks and primary wave 2 lasted 12 weeks. Primary wave 3 should be longer in both price and time as it should be extended. It may be about a Fibonacci 34 weeks. So far it has lasted ten.
HOURLY ELLIOTT WAVE COUNT
At 1,403 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If price keeps rising through this first target, or if when it gets there the structure is incomplete, the second target would be used. At 1,446 minuette wave (iii) would reach 4.236 the length of minuette wave (i).
The target for minor wave 3 remains the same. At 1,513 minor wave 3 would reach 1.618 the length of minor wave 1.
The short term volume profile today looks slightly bearish. Volume increased as price moved up to the high for Tuesday’s session, but as price fell strongly during a two hour fall volume was stronger. Thereafter, for overall sideways movement volume has been declining. This supports the idea of more downwards movement at least short term.
At 1,339 subminuette wave ii would reach the 0.786 ratio (not correctly a Fibonacci ratio but still sometimes useful).
The strong downwards movement labelled here micro wave A subdivides best and fits best as a five on the five minute chart. If that is correct, then subminuette wave ii cannot be over there. Micro wave C would be very likely to move at least slightly below the end of micro wave A at 1,341.45 to avoid a truncation. As soon as price makes a new low below 1,341.45 look out for an end to this downwards movement and the start of a strong wave up.
A channel is drawn about this downwards zigzag for subminuette wave ii. It may show where upwards movement finds resistance along the way down. These channels usually work, but not always. If the upper edge is breached before price has made a new low below 1,341.45, then the channel may need to be redrawn as a best fit.
After a new low below 1,341.45, then a subsequent breach of a channel containing subminuette wave ii would provide trend channel confirmation that the correction is over and a third wave up should be underway.
Placement of stops depends on your trading style. Longer term position holders may set stops just below 1,310.84 or 1,334.06. Short term traders should set stops just below 1,334.06. Stops may be set just below either point, again depending on trading style, when entering long positions at the end of subminuette wave ii
Always use a stop loss. Do not let losses run if the market moves against you. Hoping for a correction to exit a losing position risks greater unconfined losses. Hope is not an investment strategy. Do not invest more than 3-5% of equity on any one trade.
Any members who choose to ignore these two risk management rules do so at their peril and against my explicit repeated advice.
These two risk management rules should always be used. Risk management is the single most important aspect of trading. Good risk management can turn even a poor strategy into a profitable strategy.
THIRD WAVE EXAMPLE – DAILY CHART
In discussing the curved look to Gold’s impulses, particularly for its third waves, here is an example.
Within primary wave 1, the third wave of minor wave 3 had a strong curved look to it. The impulse begins more slowly and has deep and relatively time consuming second wave corrections: Minor wave 2 was 0.68 of minor wave 1, minute wave ii was 0.76 of minute wave i, minuette wave (ii) was 0.56 of minuette wave (i), and subminuette wave ii was 0.64 of subminuette wave i.
The curved look comes from the disproportion between second and fourth wave corrections within the impulse. Here, minute wave ii lasted 4 days and shows clearly on the daily chart yet minute wave iv was over within one day and does not show up with any red candlesticks or doji on the daily chart.
Momentum builds towards the middle of the impulse, continuing to build further during the fifth wave and ending in a blowoff top. This is typical of Gold and all commodities.
This tendency to blowoff tops and curved impulses is particularly prevalent for Gold’s third waves.
ALTERNATE DAILY ELLIOTT WAVE COUNT
This wave count is identical to the main wave count up to the end of primary wave 2. Thereafter, what if only intermediate wave (1) ended at the last high?
This movement will fit as a five wave impulse, although it does not have a very good look on the daily chart. This reduces the probability of this wave count.
If intermediate wave (1) was over at the last high, then it may have lasted 27 days. So far intermediate wave (2) may have taken 29 days and would still be incomplete. The proportions of this part of the wave count look slightly better than the main wave count.
There is a problem now with structure on the hourly chart within minor wave C. Minute wave i would have to be complete. It will fit on the hourly chart, but it does not have a good look as a five and looks better as a three on the hourly and daily chart levels. This slightly reduces the probability of this wave count.
Within minor wave C, minute wave ii may not move beyond the start of minute wave i above 1,366.87.
Minor wave C must be a five wave structure. So far within it minute waves i and ii would be complete. Minute wave iii downwards should be underway.
At 1,279 minor wave C would reach 1.618 the length of minor wave A. Price may end downwards movement when it finds support at the lower edge of the maroon base channel drawn about primary waves 1 and 2.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,200.07.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
In order to make a reasonable judgement of each Elliott wave count, it is at this stage important to see how each wave count sees recent structure at the hourly chart level.
The new high for Tuesday’s session resolves the problem of a truncated C wave within minute wave ii. Minuette wave (c) now ends slightly above the end of minuette wave (a) avoiding a truncation. The structure subdivides 5-3-5 in the same way now as the main wave count.
Within minute wave iii, no second wave correction may move beyond its start above 1,356.85. A new high above this point at this stage would invalidate this alternate at the hourly chart level, but not the daily chart level. That would add confidence to the main wave count.
Minor wave C must subdivide as a five wave structure. If price makes a new low below 1,334.06, then the probability of this alternate would increase. It would be confirmed with a new low below 1,310.84.
If price moves below 1,310.84, then expect more downwards movement for a deeper pullback to end about 1,279. Look also for price to find support at the maroon channel on the daily chart. The target at 1,279 may be a little too low; the maroon trend line may stop price before it reaches the target.
Last week completes a lower high and a lower low. The week closed slightly above the open and the candlestick is green but not by much. Overall, last week looks corrective. A slight increase for a green week gives slight support to a bullish wave count.
If the lower purple line on On Balance Volume is drawn carefully across 7th of March and 18th of April, then it was touched at the end of last week. This trend line has been weakened with OBV breaking below and then returning above it, but it still has some technical significance. A break below the purple line would be a bearish signal but a relatively weak one. A break above the green line would be a bullish signal.
RSI is not extreme. There is room for price to rise or fall.
StockCharts and COMEX data now mostly agree, with the exception of volume data from COMEX for 16th August.
With the retrospective change in COMEX volume data for 10th and 15th of August, until I have a response from BarChart with a reason for the retrospective change days after publication, I will rely on StockCharts data at this time for volume analysis.
Overall, price is still consolidating since about 7th of July. Volume is overall declining as price is moving sideways, typical of a consolidating market. ATR has been declining during this time, also typical of a consolidating market. During this time, it is still the upwards day of 8th July which has strongest volume indicating an upwards breakout is more likely than downwards. This trick usually works well with Gold. Usually is not the same as always.
For recent movement, volume increases as price rises. Volume also increased as price fell for 11th and 12th of August. Now volume again increases as price rises for two days. Overall, the fall in price for 12th August has strongest recent volume supporting the idea of more downwards movement short term. This supports the alternate Elliott wave count over the main Elliott wave count.
Today’s candlestick completes a strong bullish engulfing pattern, but this has not come after a clear downward trend and it is within a sideways consolidation. It cannot be read as a bullish reversal signal for this reason. Reversal signals need a trend to reverse.
On Balance Volume did find support at the yellow trend line, so the strength of this line is reinforced. OBV is bullish with a bounce off this line.
RSI is still just above neutral. There is room for price to rise or fall.
ADX today is increasing, indicating the possible resumption of an upwards trend. ATR today is also increasing in agreement with ADX. For this signal to be stronger, another day or so of increases would add confidence. For now it is a tentative support for the main Elliot wave count.
Stochastics is close to neutral. If the market is trending again, then Stochastics should be used to indicate weakness when it diverges with price.
Bollinger Bands are still narrow after a period of contracting. This supports the idea that the market has been consolidating since 12th July. It should be expected that price will start to strongly trend again after a period of contraction. Volume is used to indicate the most likely direction.
A breakout above resistance at 1,375 or below support at 1,305 – 1,310 on a day with high volume is required to confirm an end to this consolidation and the start of a new trend. That has not happened yet.
The cyan trend line is not working. After what looked like a break below and a back test, price has now closed back above this line. With the line broken and price moving back beyond, if the strength of the line is weakened, it should now be removed. Price has found some support about the mid line of the Bollinger Bands.
This analysis is published @ 08:05 p.m. EST.