Yesterday’s analysis was summarised with a warning that the consolidation pattern did not look complete.
Another inside day has essentially moved price sideways within a small range continuing the consolidation.
Summary: The breakout from a bear flag pattern is closer now. A new low below 1,260.95 would offer some reasonable confidence that a downwards breakout may be underway. After that price should break below the lower trend line of the pattern. With indicators pointing to a consolidation and the larger trend down, it is still most likely that price will break out downwards from this pattern.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
The last published monthly chart may be seen here.
To fit daily charts into the bigger picture see last analysis of weekly charts here.
DAILY ELLIOTT WAVE COUNT
The movement up from the low of 1,046 on the 3rd of December, 2015, subdivides 5-3-5. Current downwards movement is too deep to reasonably be considered a second wave correction (that idea has been discarded based upon an exceptionally low probability), so the movement up from 1,046 is seen as a complete zigzag. This may be either the entirety of a correction, or it may be the first zigzag in a double zigzag. This main wave count looks at it as an entire correction.
If there has been a trend change at a large degree at the last high, then what looks like a rather obvious triangle must be ignored. It is possible that a series of three overlapping first and second wave corrections has unfolded, but this does look less likely than a triangle.
The triangle may not be labelled as a second wave because second waves do not take the form of triangles.
This wave count is reverted to see minor wave 3 incomplete and minute wave iv within it now unfolding. There is no Fibonacci ratio between minute waves i and iii.
Minute wave iv may not move into minute wave i price territory above 1,306.70.
At this stage, minute wave iv may be seen as either a regular flat correction or a zigzag, depending upon how the structure of minuette wave (a) is seen. Minuette wave (a) fits best and looks like a five, so minute wave iv may be unfolding as a zigzag. The probability of this wave count is slightly reduced because a zigzag would be the least likely structure for this correction to be. It remains viable because alternation is a guideline not a rule. Minute wave iv still exhibits alternation in depth.
Minute wave ii lasted four sessions. So far minute wave iv may have completed in twelve sessions. If minute wave iv continues, then it would start to be too disproportionate to minute wave ii for this wave count to have the right look.
A small channel is drawn about minute wave iv using Elliott’s technique for a correction. Price is finding resistance about the upper edge. If price breaks through the lower edge, then the correction for minute wave iv would most likely finally be over.
At 1,231 minute wave v would reach equality in length with minute wave i. If price falls through this first target, then the next target would be 1,203 where minute wave v would reach 1.618 the length of minute wave i.
HOURLY ELLIOTT WAVE COUNT
A five down for subminuette wave i will fit perfectly on the five minute chart. Thereafter, subminuette wave ii looks like an incomplete zigzag.
Within subminuette wave ii, the correction for micro wave B is a perfect 100% retracement of micro wave A. This is the maximum limit for a second wave. Micro wave C would be most likely to end at least slightly above the end of micro wave A at 1,272.22 to avoid a truncation.
As soon as price makes a new high above 1,272.22, then expect it to turn downwards, if this wave count is correct.
The next wave down should be a low degree third wave, but it should still exhibit an increase in downwards momentum and it should still have support from volume.
Price may find some support along the way down at the lower edge of the green channel, which is copied over here from the daily chart. If price moves cleanly through this trend line, then look out for a bounce and a test of resistance at the under side of the line. If price behaves like that, it would be offering a good low risk high reward entry for a short. Stops may be set at the invalidation point or a little above the trend line, depending upon risk appetite.
As always, all trades should always have a stop. Never invest more than 3-5% of equity in your account on any one trade.
Subminuette wave ii may not move beyond the start of subminuette wave i above 1,276.15.
ALTERNATE II DAILY ELLIOTT WAVE COUNT
What if the zigzag upwards from the low of 1,046 on the 3rd of December, 2015, is only the first zigzag in a double?
There is no rule stating a limit for X waves within double zigzags or double combinations. To achieve the purpose of a double zigzag, which is to deepen a correction, their X waves should be relatively brief and shallow. It would be highly unusual and defeat the purpose if primary wave X moved beyond the start of intermediate wave (C) of primary wave W below 1,200.07. This wave count should be discarded below that point.
Primary wave X is seen as a zigzag. Within primary wave X, intermediate wave (B) fits neatly as a triangle. This is supported by MACD hovering about zero as it unfolded. Any wave count which sees a triangle in this position should have a higher probability than a wave count which does not.
The zigzag downwards for primary wave X may be complete, at all time frames. A target for primary wave Y upwards would be about 1,569 where primary wave Y would be about even in length with primary wave W.
So far, within the five up for intermediate wave (A), minor waves 1 and 2 may be complete. Within minor wave 3, minute waves i and now ii may also be complete.
Gold’s impulses often begin rather slowly. This wave count is still possible although so far volume does not support it. A strong upwards day would increase the probability of this alternate, especially if upwards movement shows support from volume. So far that has still not happened.
ALTERNATE II HOURLY ELLIOTT WAVE COUNT
The pink channel copied over here from the daily chart is a base channel about minute waves i and ii. Downwards movement over the last session is strongly overshooting the lower edge of this channel, which is further concern for this bullish wave count. This reduces its probability further.
Lower degree second wave corrections should not breach base channels drawn about first and second waves one or more degrees higher. Base channels do not always work perfectly though. Sometimes they are overshot or breached early on during a new impulse. However, they work more often than they do not. So when they are substantially overshot the probability of an unfolding impulse is reduced.
The mid term target for minor wave 3 remains the same. At 1,305 it would reach 1.618 the length of minor wave 1.
At 1,569 primary wave Y would reach equality in length with primary wave W.
In the short term, if minuette wave (ii) is not over and if it continues further, it may not move beyond the start of minuette wave (i) below 1,260.95.
Click chart to enlarge. Chart courtesy of StockCharts.com.
An upwards week shows a further decline in volume. This supports the main bearish Elliott wave count.
Two small range weeks in a row have moved price sideways and slightly higher. This looks like a small consolidation at this stage and not necessarily a new upwards trend.
On Balance Volume remains constrained within support and resistance lines.
The divergence noted with yellow lines between price and RSI at the last two swing lows is bullish. It indicates weakness in price. This supports the alternate Elliott wave count.
Click chart to enlarge. Chart courtesy of StockCharts.com.
It still looks very much like a flag pattern is continuing. Price is moving slowly higher within a small range, neatly bound by sloping resistance and support lines. The last two days have both been inside days. Today comes with lighter volume; overall, volume is light and declining and this supports the flag pattern.
Flags and pennants are reliable continuation patterns, especially when they unfold with declining volume.
The angle of entry into the pattern is downwards so the angle of exit should be downwards. The flag pole is 104.60 in length, so a target using the measure rule would be about 1,150. This target is lower than both the Elliott wave targets. So if the Elliott wave targets are wrong, they may not be low enough.
On Balance Volume remains constrained within support and resistance lines. It has not yet given a signal for the next direction for price.
ADX is declining, indicating the market is not trending; it is consolidating. This view is strongly supported by declining ATR and contracting Bollinger Bands.
Stochastics is approaching overbought. There is now some bearish divergence between the high of the 26th of September and today’s high of 27th of October (red lines): Stochastics has made a new high, but price has made a substantially lower high. This is hidden bearish divergence and indicates weakness in price.
RSI is closer to neutral. This consolidation has brought it well up from oversold. There is again room for price to fall.
While the mid term Fibonacci 55 day moving average is still pointing down, the short term Fibonacci 13 day average is flattening off as price consolidates. Price has been moving overall upwards and sideways for 14 days now, yet the short term average is not clearly increasing. That is concerning for the bullish alternate Elliott wave count.
This analysis is published @ 09:50 p.m. EST.