Upwards movement was expected, but this is not what has happened.
Price has moved mostly sideways to complete a small red doji and remains above the invalidation point on the hourly chart.
Summary: 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 1,204.05, and thereafter further confidence above 1,232.48. The second alternate wave count expects an increase in downwards momentum with the short term target at 1,169. A little confidence may be had in this if price makes a new low below 1,172.10. Classic technical analysis is still more bearish than bullish. One possible approach to this market at this time would be to enter long above 1,232.48 and short below 1,172.10. Always use a stop and never invest more than 3-5% of equity on any one trade.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
Last monthly and weekly charts are here.
DAILY ELLIOTT WAVE COUNT
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
Primary wave Y is expected to be a zigzag. Within a zigzag, intermediate wave (A) should subdivide as a five wave structure. Within the five wave structure, minor wave 2 may not move beyond the start of minor wave 1 below 1,172.10.
So far there may be two overlapping first and second waves complete. This is labelled minute waves i and ii, followed by minuette waves (i) and (ii). This wave count expects to see some increase in upwards momentum over the next 24 hours.
Along the way up, the next confidence point is now at 1,204.05.
The pink base channel did not work because price has broken below it. That channel is not showing where price is finding support, so it has been removed. The breach of that base channel on yesterday’s hourly chart is a warning that something may be wrong with this wave count, but it does not invalidate the count.
Minuette wave (ii) should now be over. It is longer in duration than minute wave ii one degree higher, so this disproportion further slightly reduces the probability of this wave count.
A new base channel is drawn about minuette waves (i) and (ii). The lower edge now should provide support.
There is another possibility which is not charted here today, that a leading diagonal may be unfolding upwards. The first, third and fifth waves are most commonly zigzags within leading diagonals. A zigzag up for a first wave of a leading diagonal may be complete. It would now also be followed by a complete zigzag down. I am very wary of diagonals for first waves because they are not very common. When the wave count that expects a trend change begins by expecting an impulse and then must revert to considering a diagonal, then it mostly turns out to be wrong.
A new high above 1,232.48 would provide a reasonable level of confidence in this wave count.
At 1,500 primary wave Y would reach equality in length with primary wave W. Primary wave Y may be expected to last a Fibonacci five or eight months.
ALTERNATE DAILY ELLIOTT WAVE COUNT
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
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.
When subminuette wave i is complete, then subminuett wave ii upwards may not move beyond the start of subminuette wave i above 1,232.48.
SECOND ALTERNATE HOURLY ELLIOTT WAVE COUNT
If an impulse is developing downwards, then the third wave within it would still be incomplete.
Micro wave 4 may not move into micro wave 2 price territory above 1,204.05.
At 1,169 micro wave 5 would reach equality in length with micro wave 1.
The violent channel is redrawn today using Elliott’s second technique: the first trend line from the ends of micro waves 2 to 4, then a parallel copy on the end of micro wave 3. The upper edge is still not working to show where price is finding resistance; the channels for neither wave count are working well at the hourly chart level.
Micro wave 4 is seen as a complete combination: zigzag – X – flat. There is a problem within sub-micro wave (Y) though: minuscule wave B is over 2 times the length of minuscule wave A; it is a 2.8 length of minuscule wave A. This is longer than the conventional allowable limit of 2, but there is no rule stating a limit. So this is possible, but it reduces the probability of this portion of the wave count. But the subdivisions all fit well, so that is how it is labelled.
This alternate wave count now expects to see some increase in downwards momentum.
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 last 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.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Today’s candlestick has a higher high and a higher low (the definition of upwards movement) even though it closed red. On Balance Volume indicates the balance of volume was upwards within the session. Volume was slightly higher than yesterday, so there is some small support from volume for this upwards movement from price today. However, volume is still very light which is concerning for the main Elliott wave count.
ADX still indicates there is a downwards trend in place. A reasonable response would be to use this upwards / sideways movement as an opportunity to join the downwards trend. ADX is not yet extreme, so there is room still for this trend to run.
However, Stochastics and RSI are extreme, and Stochastics shows some divergence with price at lows. This is a warning that this trend may be over now or very soon.
Bollinger Bands continue to widen and are now extreme. Some consolidation to contract these bands would be a reasonable expectation soon.
ATR is declining for the last two sessions. This may be the start of a consolidation to bring RSI and Stochastics back from extreme.
This classic analysis is fairly bearish, supporting the alternate Elliott wave count more than the main Elliott wave count.
This analysis is published @ 09:05 p.m. EST.