A short, sharp wave down to about 1,170 was expected for Friday’s session. This is what happened. Downwards movement reached 1,172.10 before reversing.

Summary: Gold is in a downwards trend. The main Elliott wave count has little support from classic technical analysis, but it has the best fit and it expects a trend reversal next week with a green daily candlestick for Monday. The target for a six month long wave up is 1,500 and some confidence may be had in this if price makes a new high above 1,192.52, and thereafter further confidence above 1,220.66. The second alternate wave count expects an increase in downwards momentum with the short term target at 1,146. A little confidence may be had in this if price makes a new low below 1,172.10.

New updates to this analysis are in bold.

Grand SuperCycle analysis is here.

Last monthly and weekly charts are here.

DAILY ELLIOTT WAVE COUNT

Click chart to enlarge.

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. This now looks complete.

Minor wave B found resistance at the lower edge of the wide parallel channel about primary wave X. Along the way up, price may find resistance at the lower edge of this channel.

Minor wave C may now be complete at the hourly chart level.

HOURLY ELLIOTT WAVE COUNT

Click chart to enlarge.

Within minor wave C, there is perfect alternation between the double zigzag of minute wave ii and the triangle unfolding for minute wave iv.

Minute wave iii is just 1.48 short of 1.618 the length of minute wave i. Within minute wave iii, the fifth wave is a swift strong extension; this looks very typical for Gold.

Minute wave v is now complete and 1.01 short of 0.618 the length of minute wave i. Minute wave v ended perfectly at the lower edge of the Elliott channel.

Minute wave ii looks likely to be complete. Upwards movement is expected for Monday. If minute wave ii continues any lower, it may not move beyond the start of minute wave i below 1,172.10.

ALTERNATE DAILY ELLIOTT WAVE COUNT

Click chart to enlarge.

This alternate wave count expects that the large upwards zigzag from the low of 1,046 in December 2015 to the last high of 1,374 in July 2016 is a complete correction. The trend is still down; Gold is still in a bear market.

If there has been a cycle degree trend change at the high labelled cycle wave b, then the new wave down must begin with a five wave structure. At this stage, there looks to be too much overlapping for an impulse, so a leading diagonal is considered.

Within leading diagonals, sub-waves 2 and 4 must subdivide as zigzags. Sub-waves 1, 3 and 5 are most commonly zigzags but sometimes may also appear to be impulses.

Within this structure, all sub-waves subdivide as zigzags. This wave count meets all Elliott wave rules. This diagonal looks correct.

This wave count has a lower probability at the daily chart level because leading diagonals are not very common structures for first waves. When first waves do subdivide as leading diagonals, they are most often contracting and not expanding. This wave count does not rely upon a rare structure, but it does rely upon a less common structure.

At the monthly chart level, if the zigzag up labelled cycle wave b is complete, then there are further implications. That means that the prior wave down to the low at 1,046 on December 2015 must be seen as a five wave impulse. This is possible, but it has a fairly low probability.

Primary wave 1 lasted 94 days. Primary wave 2 may initially be expected to last about a Fibonacci 55 or 89 days. It should be a big three wave structure.

At the hourly chart level, this alternate wave count would be essentially the same as the main hourly chart; minor wave C may now be complete.

At this stage, there is no divergence in expected direction between this alternate and the main wave count. The structure of upwards movement, if it is clearly a three or five, may assist to tell us which wave count is correct in coming weeks. For now this alternate must be judged to have a low probability due to the problems outlined. It is published to consider all possibilities.

SECOND ALTERNATE DAILY ELLIOTT WAVE COUNT

Click chart to enlarge.

This alternate wave count also suffers from the same problems at the monthly chart level as the first alternate above. Seeing cycle wave a downwards as a five wave structure has problems of proportion and unusual behaviour with a base channel.

However, all possibilities should be considered.

What if a new bear market is underway for cycle wave c? The most likely structure would be an impulse. At this stage, price may be close to the middle of a third wave within primary wave 1 down.

This wave count has a problem of proportion at the daily chart level also: minute wave ii lasted 23 sessions and intermediate wave (2) three degrees higher lasted just 8 sessions. Lower degree corrections should be more brief than higher degree corrections. This is not always the case, but when the duration is substantially different then it must necessarily reduce the probability of the wave count.

The pink channel here is a base channel about minute waves i and ii. Price should continue to find resistance at the lower edge of the base channel now that it has breached the channel.

Within the middle of the third wave, no second wave correction may move beyond the start of its first wave above 1,220.66.

SECOND ALTERNATE HOURLY ELLIOTT WAVE COUNT

Click chart to enlarge.

If an impulse is developing downwards, then the third wave within it would still be incomplete.

At 1,146 subminuette wave iii would reach 2.618 the length of subminuette wave i.

Micro wave 4 may have completed as an expanded flat. Micro wave 5 may be a long strong extension, which is typical of Gold’s fifth waves to end its third waves.

Within micro wave 5, no second wave correction may move beyond its first wave above 1,192.52.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Another downwards week comes with a further decline in volume. The fall in price is not supported by volume, so it should be suspicious.

On Balance Volume this week breaks below the yellow support line. This is a strong bearish signal that supports the second alternate Elliott wave count.

There is no divergence between price and RSI at the weekly chart level to indicate weakness. RSI is not yet extreme. There is room still for price to fall further.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Another downwards day has a low on the lower edge of Bollinger Bands. A decline in volume for Friday’s session indicates bears are tiring. But volume is still heavier than four of the five prior downwards days, so it is possible still that price could fall further.

New trend lines are drawn now on On Balance Volume. These lines do not yet have good technical significance. There is no divergence between price and OBV to indicate weakness.

The bullish divergence between price and RSI has disappeared. There is no short nor mid term divergence between price and RSI to indicate weakness.

ADX still indicates a downwards trend is in place. ADX is not yet extreme.

ATR may be beginning to agree with ADX. It now has two days in a row of some increase.

Bollinger Bands continue to widen indicating a downwards trend is in place.

There is now double divergence with price and Stochastics, both mid and short term: price for Friday made a new low, but Stochastics moved slightly higher. This oscillator can remain extreme for reasonable periods of time during a trending market; divergence is a warning of weakness and not a signal of a trend change.

This classic technical analysis picture is very bearish. The only warning that this trend may be coming to an end is Stochastics.

This analysis is published @ 07:55 p.m. EST.