A new low below 1,242.87 has invalidated the main Elliott wave count and confirmed the more bearish alternate.
There is only one wave count now.
Summary: The classic technical analysis is very bearish. Corrections are an opportunity to join the trend. A correction to about 1,247 may unfold on Monday. Use the parallel channel on the hourly chart for support and resistance. To manage risk carefully do not invest more than 3-5% of equity on any one trade and always use a stop.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
MONTHLY ELLIOTT WAVE COUNT
The large wave down labelled Super Cycle wave (a) may be seen either as a three or a five. It fits best as a three. At this stage, it does not make a difference to the short or mid term expectations.
If Super Cycle wave (a) is a three, then Super Cycle wave (b) may make a new high above its start at 1,920.18.
The larger structure is seen as Grand Super Cycle wave IV. When a fourth wave begins with a three wave structure for its A wave, then a flat, combination or triangle is indicated. In this case, with Super Cycle wave (a) a double zigzag, a combination for Grand Super Cycle wave IV may be eliminated because multiples may not subdivide into multiples. This leaves two possible structures for Grand Super Cycle wave IV: a flat or a triangle.
If Grand Super Cycle wave IV is unfolding as a flat correction, then within it Super Cycle wave (b) must retrace a minimum 0.9 length of Super Cycle wave (a) at 1,832.78.
If Grand Super Cycle wave IV is unfolding as a triangle, then there is no minimum requirement for Super Cycle wave (b) within it.
Super Cycle wave (b) must subdivide as a three wave structure.
WEEKLY ELLIOTT WAVE COUNT
The wave up from the low on the 3rd of December, 2015, fits best as a three and looks like a zigzag. It is possible (just) that it may be a five and this idea is outlined in an alternate below.
If cycle wave a is subdividing as a three, it may be an incomplete double zigzag. The first zigzag in the double is labelled primary wave W and the double is joined by an incomplete three in the opposite direction labelled primary wave X.
The maximum number of corrections within multiple corrective structures is three. To label multiples within multiples increases the maximum beyond three violating the rule. Within each of W, Y and Z, they may only be labelled simple corrective structure A-B-C (or A-B-C-D-E in the case of triangles). X waves however are not included in the maximum; they are joining structures in the opposite direction and may subdivide as any corrective structure including multiples.
The new low for Friday confirms the wave down labelled primary wave X is incomplete.
DAILY ELLIOTT WAVE COUNT
The structure of primary wave X is still seen as a multiple and still seen as incomplete, but the labelling within it today is changed. This labelling has better proportions, so it has a better overall look.
The most important implication today with this change is the larger structure of primary wave X may be either a double zigzag or a double combination. The second structure in this double for primary wave Y may be either a zigzag (for a double zigzag) or a flat or a triangle (for a double combination).
It is my judgement at this stage that it is more likely primary wave X will be a double zigzag due to the relatively shallow correction of intermediate wave (X). Although intermediate wave (X) is deep at 0.71 the length of intermediate wave (W), this is comfortably less than the 0.9 minimum requirement for a flat correction. Within combinations the X wave is most often very deep and looks like a B wave within a flat.
However, there is no minimum nor maximum requirement for X waves within combinations, so both a double zigzag and double combination must be understood to be possible. A double zigzag is more likely and that is how this analysis shall proceed.
Within the second structure, minor wave A should be a five wave structure. When it is done, then minor wave B may not move beyond the start of minor wave A above 1,336.14.
Now that minor wave A has closed below the channel about primary wave X, in the first instance minor wave B may find resistance there. If price closes back above this trend line, then Fibonacci ratios will be used for targets for minor wave B.
When minor wave B is complete, then a new target for minor wave C downwards may be calculated. The target may then change.
At this stage, at 1,204 intermediate wave (Y) would reach equality in length with intermediate wave (W). If this target is wrong, it may not be low enough.
HOURLY ELLIOTT WAVE COUNT
At the hourly chart level, this wave count fits perfectly within an Elliott channel. That offers some confidence to the short term expectation of where price may find resistance and support along the way down.
If minor wave A is unfolding as a five wave structure, then within it minute waves iv and v still need to complete.
Minute wave iii is longer than minute wave i but exhibits no Fibonacci ratio to minute wave i. Minute wave v would most likely be about equal in length with minute wave i, which was $65.87.
Minute wave iv should unfold upwards / sideways and may offer an opportunity to join the downwards trend. It may not move into minute wave i price territory above 1,270.27. If it ends about the 0.382 Fibonacci ratio at 1,247, then it may end at the upper edge of the channel.
Minute wave v could possibly be a strong downwards movement typical of fifth waves for commodities, but it does not have to be.
ALTERNATE WEEKLY ELLIOTT WAVE COUNT
It is also possible to see the last wave up as a five wave structure. That would mean that the current correction down may be a second wave correction, not an X wave.
Cycle wave a would be subdividing as a five wave impulse rather than a three wave structure.
While this idea fits the larger picture better, the subdivisions within minor wave 5 of intermediate wave (3) are problematic. It is almost impossible to see this upwards wave as a five wave structure. That does reduce the probability of this alternate wave count.
Primary wave 2 may end close to the 0.618 Fibonacci ratio at 1,161.
Primary wave 2 may not move beyond the start of primary wave 1 below 1,046.47.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A strong downwards week comes with a very strong increase in volume. The fall in price is well supported.
The long upper wick on this weekly candlestick is very bearish.
On Balance Volume gives a bearish signal this week with a break below support at the purple trend line.
RSI is not extreme. There is plenty of room for price to fall. Also, there is no divergence between price and RSI this week to indicate weakness.
The larger picture this week is very bearish.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Another very strong downwards day has broken below support at 1,255 and made a new swing low. This comes with strong volume, slightly higher than the prior day. The fall in price is well supported by volume.
On Balance Volume is still very bearish. There is no longer any divergence between price and OBV.
ADX has only just indicated a trend change, but it does not yet confirm a new trend as the ADX line is still declining.
ATR is strongly increasing and Bollinger Bands are widening. These strongly indicate the market is trending. The trend is down.
Price has closed below the lower edge of Bollinger Bands. During a strong trend for Gold, this can continue for another week or two before the trend ends. Look back at the last strong upwards trend: on the 3rd of February, 2016, price closed above the upper Bollinger Band range yet price continued to rise a further $120.9 reaching a high six sessions later on the 11th of February. A close outside the extreme range of Bollinger Bands for Gold should be read as a strong trend and not the end of a trend.
RSI is not yet extreme. There is divergence today between the new low here and the last swing low on the 7th of October: price has made a new low, but RSI has not. This indicates weakness in price. This may be a warning of an end to downwards movement very soon, or the divergence may disappear. Divergence is a warning; it is not certain.
Stochastics is only just now entering oversold. Only when Stochastics is oversold and then exhibits short term divergence with price may it indicate exhaustion for bears.
This analysis is published @ 09:58 p.m. EST.