Downwards movement was unexpected for the main Elliott wave count and shifted probability to the alternate.
Summary: One more day of downwards movement to a target at 1,302 is expected before this multi day pull back is complete. There is strong support at 1,310 – 1,305, so if this target is wrong it may be a little too low.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
WEEKLY ELLIOTT WAVE COUNT
This is the new main wave count today.
Cycle wave a is still an incomplete five wave impulse. Within cycle wave a, primary wave 3 is complete and shorter than primary wave 1. Primary wave 3 did show stronger momentum than primary wave 1 and does have stronger volume than primary wave 1 (see weekly technical analysis chart). This is an acceptable third wave.
So that the core Elliott wave rule stating a third wave may not be the shortest is met, primary wave 5 will be limited to no longer than equality in length with primary wave 3. It will be limited to no longer than 174.84.
Primary wave 2 was a shallow 0.35 expanded flat correction. Primary wave 4 is unfolding as a shallow zigzag. There is alternation in structure but not depth.
Primary wave 4 may not move into primary wave 1 price territory below 1,282.68.
The maroon channel is drawn here using Elliott’s first technique: draw the first trend line from the ends of primary waves 1 to 3, then place a parallel copy on the end of primary wave 2. Primary wave 4 may find support about the lower edge if it gets that low.
DAILY ELLIOTT WAVE COUNT
The red trend line is copied over from monthly and weekly charts. This may assist to show where the next wave up for primary wave 5 ends. Strong resistance should be expected at that line.
Primary wave 4 is very close to completion. Intermediate wave (C) has now moved slightly below the end of intermediate wave (A), which has its end at 1,310.84. A truncation is avoided.
The maroon channel is copied over from the weekly chart.
HOURLY ELLIOTT WAVE COUNT
Intermediate wave (C) must subdivide as a five wave structure. So far it looks like a typical looking impulse. Minor wave 3 has strongest momentum and had support from volume. Minor wave 3 is just 0.18 longer than 2.618 the length of minor wave 1.
At 1,302 intermediate wave (C) would reach 0.618 the length of intermediate wave (A).
The blue channel is drawn here using Elliott’s first technique: draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. Minor wave 4 is mostly contained within this channel. Minor wave 5 may end about the lower edge of the channel.
Minor wave 5 must subdivide as a five wave structure. Within minor wave 5, only minute waves i and ii are complete. Minute wave iii needs one more low. Thereafter, minute wave iv may not move into minute wave i price territory above 1,313.41.
For now, because minute wave iii is incomplete, the invalidation point for the short term must be at its start. No second wave correction within minute wave iii may move beyond its start above 1,317.98.
This wave count expects a little more downwards movement with two new lows, and one more small correction along the way. This expected downwards movement may be completed within the next 24 hours.
As soon as the structure of minor wave 5 may be seen as complete, this wave count will expect an end to downwards movement and the start of a new wave upwards.
ALTERNATE WEEKLY ELLIOTT WAVE COUNT
This wave count was up until today the main wave count.
Based on probability, while price remained within the base channel, this wave count had to be judged as more likely because it expects primary wave 3 to be longer than primary wave 1. This is the most common scenario.
The maroon channel is drawn differently on this alternate wave count. This channel is a base channel about primary waves 1 and 2. The first trend line is drawn from the start of primary wave 1 to the end of primary wave 2, a parallel copy is placed on the end of primary wave 1. A lower degree second wave correction should not breach a base channel drawn about a first and second wave one or more degrees lower. The fact that this base channel is today breached by one full daily candlestick has reduced its probability to an alternate.
Within intermediate wave (3), no second wave correction may move beyond the start of its first wave below 1,302.93.
ALTERNATE DAILY ELLIOTT WAVE COUNT
This wave count sees intermediate waves (1) and (2) complete within primary wave 3.
Thereafter, this wave count is changed slightly from the last main wave count. Minor wave 2 may be completing as a deeper longer lasting zigzag. This resolves the problem of a truncated fifth wave and a three, which looks like a five, that the last main wave count had. If minor wave 2 is continuing, then the last wave up should be a three, and it would be minute wave b within minor wave 2. Now current downwards movement should be a five, and it would be minute wave c within minor wave 2.
Minute wave c would be very likely to make at least a slight new low below the end of minute wave a at 1,306.70 to avoid a truncation.
Minor wave 2 may not move beyond the start of minor wave 1 below 1,302.93.
The lower edge of the maroon base channel is now breached by one full daily candlestick fully below and not touching the channel. This reduces the probability of this wave count. Base channels most often work to provide support or resistance, but not always. Occasionally, base channels do not work as expected when second waves are deeper and more time consuming.
This wave count is still viable. It has no limit for the length of the next wave up.
If the next wave up moves beyond the limit for the main wave count, then this alternate would be confirmed.
The short term cyan trend line is overshot slightly today. This line may not be providing strong support.
At 1,585 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
The subdivisions for a five down at the hourly chart level would be the same as the main wave count, only the degree of labelling here would be all one degree lower.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Gold is still range bound and has been for about 14 weeks. Resistance is about 1,375 and support is about 1,310 – 1,305. Volume is declining as price moves sideways. To look at what direction the breakout is most likely to be volume at the daily chart level should be used.
Last week sees a small increase in volume for a downwards week, stronger than the prior week’s upwards week. The fall in price has some support from volume. It suggests downwards movement is not quite over.
On Balance Volume last week gave a bearish signal with a move down and away from the short purple trend line. OBV may be expected to find support at the yellow line.
There is still bullish divergence between price and RSI for the lows two and four weeks ago (short yellow lines). Price has not made a new low yet, so this bullish divergence may still be an indicator of a low in place. This is usually a fairly reliable signal for Gold at the weekly chart level.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Gold is still range bound with resistance about 1,375 and support about 1,310 – 1,305. It is four upwards days that have strongest volume during this range bound period. This strongly suggests an upwards breakout is more likely than downwards as there is more support from volume for upwards movement. This technique usually works well for Gold. Usually is not the same as always; this is an exercise in probability not certainty.
Today’s downwards day comes with much lighter volume than the last five days. The bears are tired. The downwards movement today is not supported by volume. This suggests now that downwards movement may be over here. If the Elliott wave analysis is wrong, it may be in expecting one more downwards day which does not come.
RSI is not extreme and exhibits no short term divergence with price at the daily chart level to indicate weakness.
ADX is increasing today, but is below 15, so no trend is yet indicated. ATR continues to decline, supporting ADX in expecting there is no trend. Bollinger Bands have widened today but not by enough to yet indicate a new trend. Overall, these three indicators are mostly in agreement: this market is not yet trending.
Stochastics may be about to find support at the yellow support line today. This would suggest that downwards movement may be over.
This analysis is published @ 09:14 p.m. EST.