Downwards movement was expected for Friday, but this is not what happened.
Upwards movement breached the invalidation point on the main hourly Elliott wave count and was supported by volume.
Summary: A new wave count expects a very slight new high on Monday to be followed by a new trend downwards to be about $62 in length. This main wave count is supported by classic technical analysis.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
The last published monthly chart may be seen here.
WEEKLY ELLIOTT WAVE COUNT
The downwards wave from the all time high at 1,920.18 on the 6th of September, 2011, to the low on 3rd of December, 2015, will fit as either a three or a five. It will fit as either an impulse or a double zigzag.
Thereafter, upwards movement from the 3rd of December, 2015, so far subdivides as 5-3-5. This may be a completed zigzag.
This main wave count will see the zigzag as the first zigzag in a double zigzag structure. The first zigzag is labelled primary wave W.
The double zigzag is joined by a three in the opposite direction labelled primary wave X. Primary wave X is subdividing as a double zigzag, with the X wave within it a triangle. This structure is shown more clearly on the daily chart. Within primary wave X, the second zigzag is already longer than the first and would be most likely to end soon because within double zigzags each single zigzag is most commonly about even in length with the other, so it is unusual to see one much longer than the other.
Although the upwards wave labelled primary wave W will also fit as the start of an impulse with two overlapping first and second waves, the idea is discarded because the last low labelled minor wave A is now too low to be a lower degree second wave. It would substantially breach a base channel which would be drawn about the prior first and second wave one degree higher. This idea will be explained more clearly in today’s video.
DAILY ELLIOTT WAVE COUNT
This wave count is new. Thank you again to our excellent member Dreamer for posting a chart of this idea in comments.
This wave count sees a correction downwards as close to completion.
Within multiple corrections labelled W-X-Y (X-Z), the rule states the maximum number of corrective structures is three. This maximum applies only to the corrective structures of W, Y and Z. Otherwise the maximum would need to be five, not three.
Within multiples, each corrective structure of W, Y and Z may only themselves be labelled as simple corrective structures: A-B-C, or A-B-C-D-E in the case of triangles. They may not themselves be labelled W-X-Y (X-Z). That would increase the maximum beyond three and violate the rule.
This rule does not apply to the joining structures labelled X. They may be any corrective structure including multiples.
The most common mistake for those new to Elliott wave or sometimes those who do not appear to have understood the rule, is to label long movements as W-X-Y-X-Z, with each of W, Y and Z also labelled as multiples. Such labelling of multiples within multiples violates the Elliott wave rule. Such analysis is of no predictive use and should not be seriously considered.
Here, the second zigzag in the double is relatively close to completion. Minor wave C may most likely be about 0.618 the length of minor wave A, which would see it about $62 in length. Minor wave C is highly likely to make at least a slight new low below the end of minor wave A at 1,242.87 to avoid a truncation. When the end of minor wave B is possible again, then a target for minor wave C downward may be calculated.
The small pink channel about minor wave B is drawn using Elliott’s technique for a correction. When this channel is breached to the downside, it will be indicating the correction of minor wave B as over and the next wave down for minor wave C as underway.
Minor wave B may not move beyond the start of minor wave A above 1,343.38.
HOURLY ELLIOTT WAVE COUNT
Minor wave B is subdividing as a zigzag. Minute wave c may be very close to completion, requiring only one final high. Upwards movement is finding resistance close to the upper edge of the Elliott channel, with an overshoot at the end of Friday’s session.
The final fifth wave up labelled minuette wave (v) is a swift strong upwards movement. This is typical of Gold and commodities, to end movements with blowoff tops or selling climaxes for fifth waves.
The last wave of subminuette wave v is required to complete the whole structure. It is highly likely to make at least a slight new high above the end of subminuette wave iii at 1,283.63 to avoid a truncation. Minute wave c has reached 1.618 the length of minute wave a at 1,283, which is very close to the 0.382 Fibonacci ratio of minor wave A at 1,281. While a slight new high is expected to begin Monday’s session, it is not expected to be by very much so that these Fibonacci ratios are maintained for this wave count.
In the short term, subminuette wave iv may not move into subminuette wave i price territory below 1,273.30. In the short term, a new low below this point would mean that downwards movement may not be a fourth wave correction within minuette wave (v), so at that stage minuette wave (v) would have to be over. At that stage, the probability that the whole correction for minor wave B would be over would be reasonable.
A breach of the Elliott channel by downwards movement would be a strong indication that the correction of minor wave B would be over.
ALTERNATE DAILY ELLIOTT WAVE COUNT
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 and now volume for Friday’s session offers it some support.
If minute wave ii is not over and moves any lower, it may not move beyond the start of minute wave i below 1,247.67.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Subdivisions at the hourly chart level are seen in the same way for both wave counts. A-B-C of a zigzag subdivides 5-3-5, as does 1-2-1 of an unfolding impulse.
For this alternate, minute wave i may be about to end on Monday.
While Gold often exhibits blowoff tops and selling climaxes within its fifth waves, this tendency most commonly occurs to end its third waves. It may also occur reasonably commonly to end its C waves because C waves and third waves have commonalities in behaviour. It is less common for a fifth wave of a first wave to behave like this. That does slightly reduce the probability of this wave count.
Price has not yet moved far enough above the end of minor wave 1 for minor wave 3 to be close to completion. This impulse up labelled minute wave i should not be moved up one degree.
A final fifth wave up is expected for both wave counts to complete an impulse. Thereafter, how low the following wave goes will indicate which wave count is correct. For this alternate, minute wave ii may not move beyond the start of minute wave i below 1,247.67.
Click chart to enlarge. Chart courtesy of StockCharts.com.
This week closes with an increase in volume. This week’s upwards movement was supported by volume.
On Balance Volume has come up to touch the purple resistance line. This may stop price from rising any or much further next week.
The divergence between price and RSI at the last two major swing lows, indicated by gold lines, is still important. It indicates a reasonable low in place and supports the alternate wave count over the main wave count.
Click chart to enlarge. Chart courtesy of StockCharts.com.
The strong upwards movement for Friday has strong support from volume. However, the long upper and lower wicks on Friday’s candlestick indicate some caution. Price has not been able to close above the upper edge of the flag pattern, so this is not an upwards breakout despite strong upwards movement for Friday.
While Gold often exhibits volume spikes at the end of its waves, this is normally at the end of a trending wave, not a consolidation. The volume spike does support the alternate wave count over the main wave count.
However, this is not definitive. Notice the strong upwards day of the 6th of September, which was reversed the next day and price has trended lower since that date. And so the volume spike for Friday may be interpreted as bullish but only slightly so.
On Balance Volume has come up to find resistance right at the purple trend line on the daily chart. This line is not the same as that on the weekly chart. With OBV finding resistance at both time frames, it is likely that this will halt the rise in price here. A downwards reaction would be a reasonable expectation.
This flag pattern has brought RSI from oversold well up into neutral territory. It is very close to neutral now, so there is again plenty of room for price to fall. There is also plenty of room for price to rise.
ADX still does not indicate an upwards trend is in place despite price trending overall upwards for the last 15 days. ADX is based upon a 14 day average. So with 15 days now of overall upwards movement, it is important that ADX still indicates the market is not trending. It has not yet indicated that there has been a trend change: for Friday’s session the -DX line has come down to touch the +DX line, but they have not yet crossed over.
ATR showed a small uptick on Friday, but one day is not enough to indicate a new trend. Overall, ATR has been clearly declining while price has moved slowly upwards. This movement still looks more like a consolidation and not a healthy new trend.
Bollinger Bands continue to contract strongly. This too still indicates that upwards movement is not a normal healthy trend.
Bollinger Bands, ATR and ADX still support the main Elliott wave count over the alternate.
While price moved higher for Friday, Stochastics moved lower. This small divergence gives cause for concern over Friday’s movement, and it supports the main Elliott wave count slightly.
This analysis is published @ 05:05 p.m. EST on 29th October, 2016.