A small downwards day remains above the invalidation point on the main hourly Elliott wave count.
So far price continues to find support at the lower edge of the channel.
Summary: The bottom line is still that it must be accepted there is no indication yet of an end to this upwards wave while Gold remains within the channel and above the confidence point of 1,195.82. Targets are now 1,234 or 1,288. If price breaks below the lower edge of the gold channel, then a target for a deep correction would be at or below 1,160. There is more bearishness today from classic technical analysis, so any long positions should be closed if price breaks below the channel. If that happens, then look for a back test of resistance at the trend line for an entry point to go short.
Lara’s Two Golden Rules of Risk Management:
1. Always use a stop.
2. Never invest more than 1-5% of equity on any one trade.
New updates to this analysis are in bold.
Last monthly and weekly charts are here. Last historic analysis video is here.
Grand SuperCycle analysis is here.
MAIN ELLIOTT WAVE COUNT
DAILY CHART
Click chart to enlarge.
This main wave count has a better fit for prior movement. To see the difference between this main wave count and the alternate below please refer to last historic analysis linked to above.
This main wave count expects Gold has had a primary degree trend change in December 2016. The new upwards wave is either a primary degree third wave, or a primary degree zigzag to complete a double zigzag.
Intermediate wave (1) has so far lasted 30 days. If it continues for another 4, it may complete in a total Fibonacci 34. This would see intermediate wave (1) end on the 30th of January.
So far price remains within the gold channel. A breach of the gold channel on the daily chart would provide strong indication of a trend change.
While price remains within the gold channel, then it must be accepted that it is likely to continue higher. A breach of the gold channel would indicate intermediate wave (1) is over and intermediate wave (2) has arrived.
The first in a series of second wave corrections for Gold’s new impulses is usually very deep. Intermediate wave (2) is expected to be at least 0.618 the depth of intermediate wave (1), and very likely may be deeper. It may not move beyond the start of intermediate wave (1) below 1,123.08.
Intermediate wave (2) may be at least as long in duration as intermediate wave (1), and fairly likely it may be longer. Corrections are often more time consuming than impulses.
Gold often exhibits swift strong fifth waves, but this does not have to happen for minor wave 5. But it is a common tendency, so traders should look out for it.
SIX HOURLY CHART – DETAIL
Click chart to enlarge.
This chart shows detail of all of intermediate wave (1) so far.
Minor wave 1 is seen as a very short first wave, minor wave 2 is a combination, and minor wave 4 exhibits alternation as a zigzag.
There is no Fibonacci ratio between minor waves 3 and 1. This makes it more likely that minor wave 5 will exhibit a Fibonacci ratio to either of minor waves 3 or 1, and most likely a ratio to minor wave 1.
Fibonacci ratios within minor wave 3 are: minute wave iii is 2.02 longer than 6.854 the length of minute wave i, and minute wave v is 1.30 longer than 2.618 the length of minute wave i.
Fibonacci ratios within minute wave iii are: there is no Fibonacci ratio between minuette waves (i) and (iii), and minuette wave (v) is just 0.27 short of 0.382 the length of minuette wave (iii).
Fibonacci ratios within minuette wave (iii) are: subminuette wave iii is just 0.57 longer than 1.618 the length of subminuette wave i, and subminuette wave v has no Fibonacci ratio to either of subminuette waves i or iii.
Fibonacci ratios within subminuette wave iii are: micro wave 3 is just 0.76 longer than 1.618 the length of micro wave 1, and micro wave 5 is 1.81 longer than 0.618 the length of micro wave 3.
Fibonacci ratios within micro wave 3 are: submicro wave (3) is just 0.37 longer than 1.618 the length of submicro wave (1), and submicro wave (5) has no adequate Fibonacci ratio to either of submicro waves (3) or (1).
All Elliott wave rules are met. Minor wave 1 is short and minor wave 3 is a long extension. Minor wave 5 may also be extended. If the target is wrong for this wave count, it may be too low. A higher target may be for minor wave 5 to reach equality in length with minor wave 3 at 1,288.
The channel is a best fit. Draw the first trend line from the ends of minor waves 1 to 3, then pull a parallel copy lower to the end of subminuette wave ii, so that all movement is contained. The bottom line is still that while price remains within this channel we should expect that the upwards trend is intact. Only when that channel is breached should we consider a trend change.
HOURLY CHART
Click chart to enlarge.
Each time price comes close to the lower edge of the channel it presents another opportunity to join the trend.
If price comes back down to the lower trend line and moves quickly through it, then the probability of this main hourly wave count would substantially reduce. At that stage, consider the alternate below.
Minor wave 1 was short. Minor wave 3 was extended. It is very common for Gold to exhibit swift strong and extended fifth waves, so that is what the targets will expect.
A first wave up within minor wave 5 may be complete. Minute wave ii may not move beyond the start of minute wave i below 1,195.82.
Along the way up, corrections for this wave count should find support at the lower edge of the channel.
If minor wave 5 is a swift strong movement, then price may break above the upper edge of the channel.
ALTERNATE HOURLY CHART
Click chart to enlarge.
This wave count is today changed to see intermediate wave (1) over at the last high. This wave count now differs from the main wave count only in the labelling of minor wave 5. Here, it is moved up one degree to see that it may be over.
The first movement of a new trend at intermediate wave degree should begin with a five wave structure at the hourly chart level, in this case a five down.
The first five down may have begun with two overlapping first and second waves. If this is correct, then price should quickly now break below support at the lower trend line. The power of a third wave down should be able to do this easily.
Intermediate wave (1) may have lasted 30 sessions. Intermediate wave (2) should be expected to be about the same duration or slightly longer. A Fibonacci 34 would be the initial expectation. It is most likely to be a zigzag, but it may be any corrective structure except a triangle.
Intermediate wave (2) should be expected to be very deep, at least to the 0.618 Fibonacci ratio about 1,160. It may not move beyond the start of intermediate wave (1) below 1,123.08.
ALTERNATE ELLIOTT WAVE COUNT
DAILY CHART
Click chart to enlarge.
This alternate wave count expects that Gold is still within a bear market. Targets for new lows can be seen on weekly and monthly charts.
Within the bear market, a primary degree correction is underway.
Primary wave 2 is most likely to subdivide as a zigzag. So far it looks like a five up is either complete now or very close to completion. This may be intermediate wave (A).
Intermediate wave (B) may not move beyond the start of intermediate wave (A) below 1,123.08.
Primary wave 2 may not move beyond the start of primary wave 1 above 1,374.81.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The first three weeks of upwards movement came with a steady increase in volume to support the rise in price, but last week saw a decline in volume. This indicates some weakness for last week.
The long upper wick and small real body of the last weekly candlestick is slightly bearish. This is not a reversal signal at all but only a warning of internal weakness. This upwards trend will either end or see a correction at the weekly chart level; trend changes are often preceded by signs of weakness.
Price may find some resistance about 1,225.
On Balance Volume gave a weak bullish signal last week. The signal is weak because this line has been broken before. The purple resistance line offers stronger technical significance.
At the weekly chart level, RSI is increasing along with price.
ADX is still declining, indicating the market is not yet trending (but this is a lagging indicator). ADX has not yet indicated a trend change from down to up; the -DX line remains above the +DX line.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price remains within the channel and is finding resistance about 1,220. A small downwards day comes with a slight decline in volume. The fall in price is not supported by volume today.
However, On Balance Volume is giving another bearish signal today with a move down and away from the yellow line now providing resistance. The breach and back test of this line is bearish. This is not a strong signal (but reasonably bearish) because the line is only tested three times before being breached and has a strong slope.
There is now some divergence between price and RSI at the last high. This is bearish.
There is multiple bearish divergence between price and Stochastics, and Stochastics is overbought.
ADX is still rising but the ADX line is above both directional lines, so this trend is extreme. There is still room for the trend to continue a little further because ADX is not yet above 35.
ATR is flat while price has been moving higher. This is normal for both a counter trend movement and the early stages of a new trend for Gold. It is impossible at this stage to identify which situation this market is in at this time.
Bollinger Bands are beginning to contract. It looks like this trend is tiring. Volatility is declining.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A new high today from GDX comes on a decline in volume. The rise in price was not supported by volume. The long upper wick on today’s candlestick is bearish. However, price remains above the blue support line. This line needs to be breached before any confidence may be had that GDX has seen a trend change.
ADX is today increasing, indicating an upwards trend is in place again. It is not extreme yet as the ADX line is below the +DX line.
ATR continues to decline as price moves upwards.
On Balance Volume today remains constrained and gives no signal for GDX. The lower trend line is today adjusted because it did not work as it was drawn in last analysis.
RSI exhibits no divergence with price to indicate any bearishness.
Stochastics does exhibit divergence with price, but this may continue to develop further before price turns.
Bollinger Bands are the most bearish indicator today for GDX with a contraction that may signal a pullback may begin here as volatility reduces.
This analysis is published @ 10:43 p.m. EST.
Hi Lara, as a point of education could you perhaps do a short video of how you label the start of intermediate 2. E.G. how do you determine where your micro 1 is because I was initially labelling that as minute 1 but I can see that would probably make the whole correction a bit short.
I find labelling the subdivisions of waves one of the hardest things.
This is what I tried to do with my recent USDCAD video.
Does that help you? Recording the process as I go through it?
TBH I think that’s a really boring video though. I wouldn’t watch it.
I’m discarding the main wave count, the alternate is now going to be the only wave count published today.
Intermediate (1) looks complete with a strong breach of the channel. This came after divergence at highs, bearish signals from On Balance Volume, and ADX moving into extreme territory. That’s enough now to judge the probability of a deep pullback beginning as more likely than price continuing up from here.
I’ll hold my short position until the first five down is complete. The middle of a third wave may have passed in the last 24 hours. Now a series of two more fourth wave corrections with fifth waves down needs to complete. That may take another 24 hours.
I agree Lara. I took another look at SLV after your comment on the Silver channel last night and sure enough it also is trading at the top of a descending channel that has firmly contained bumps up against it in the past. I am still surprised that SLV has not already slipped below that earlier open gap at 15.87 but I think it is only a matter of time. I am short the metals via JDST with a small position in the actual shares. I will probably also exit at the end of five down and wait for a minute two bounce to roll profits into a few carefully selected put options.
Nice 🙂 Let’s make some money!
That trend line on Silver is holding. I expect the trend line on USD to also hold.
As you mention, I’m not going to hold shorts here on Gold for too long. This is a pullback, a counter trend movement. It’s not a long term opportunity. A couple to a very few days at most is what I’ll be holding my short for.
Yes indeed! I was wondering if the 1160 target was for the entirety of intermediate two or just minor A down.
Hi Verne,
It’s the 0.618 fib so the minimum for the whole of Int 2 would be my take (albeit 2nd waves have been known to be very deep in gold).
Once the structure and depth of minor A is known we should have a much better idea whats going on imho.
I’ve lightened up on PMs a bit in anticipation of a pullback but still heavily invested (mostly) in physical.
Hope all’s well BTW – I’m still lurking and watching 🙂
Awesome to hear from you, hi Olga 🙂
Wow! Boy are you a sight for sore eyes Olga!
Nice to know you are there, albeit in the shadows and thanks for the reply. You have been missed! 🙂
Thanks Lara, Verne 🙂
Both Gold and the dollar printing red today. Unusual. I don’t expect synchronicity to persist so it will be interesting to see which one continues South. Any thoughts?
Dollar has come down to a low volume support zone so it could see a bounce here off support. Trump thinks currency manipulation is the #1 barrier to US trade and wants the dollar down. Like his politics or not, so far, it is clear Trump is man of action so my guess is, his administration will do what they can to get the dollar down to help trade.
I know that this is an unpopular view, but I don’t think governments can influence the major trend of a market.
As evidence remember what happened when the Chinese stock market crashed. The CCP tried everything they could to hold up price, and their powers in China are much greater than any other government anywhere else. And they couldn’t stop price from falling.
The market will do what the market will do. Big players can push a trend a little further, or halt it a little earlier, but they cannot change direction.
I have USD at a support line, as David sees a support zone.
Minute iv is just within minuette (iv) price territory still.
I’d be expecting a bounce up from here for USD while Gold moves down. And the S&P keeps on up.
For members who like to trade USD, draw this channel and look for an entry to go long. Stops may be set close by, just below the channel. Allow this market room to move, the trend line may be overshot.
Always use a stop! Do not invest more than 1-5% of equity on any one trade. Less experienced traders don’t invest more than 1-3%.
May be a move back to test broken trend-line…?
Minor 4 in the Main Count was invalidated by the low of 1194.15. The only possibility is that Minor 4 had morphed into a WXY combination terminating at 1194.15 (namely, 1218.43 – 1195.82 – 1219.11 – 1194.15). What this means is that we ought to see some semblance of a rally for Minor 5, failing which my money is with the Alternate Hourly count.
It could, true. But I’m going to discard that wave count based on the strong channel breach.
Gold has a correlation to many items over time and most recently, it appears to have a strong correlation to the US Stock market.
The DOW broke 20,000 on an intraday basis and gold fell below 1194. The 20,000 figure is psychological to retail investors.
The VIX (Volatility) is trading at a very low level at around 10.
Could this be the blow off top for the US stock market? Should the DOW close above 20,000, some tech’s indicate another bullish push. If true, this could move gold lower. However, if the DOW should fall from here, Gold could push higher.
Everybody is bullish. VIX approaching single digits and at a new 52 week low. Volatility has all but disappeared from the markets. Is it possible we are in a new sentiment paradigm where extremes persist ad infinitum?
If we at the start of a brand new impulse higher, one would have to conclude that to be the case. Lara discarded the triangle idea for a fourth wave in SPX but the price action certainly fits that profile in the sharp upwards thrust from the sideways action, which would ordinarily be a terminal wave when coming out of a triangle. Let’s see if DJI 20K sticks!
On the bright side this correction, however long, will give everyone another opportunity to reload long. The commercials did not cover on this move up. Therefore we probably have some more good upside. If the next move up is wave 3 then it should be sizable. Wave 1 saw Jnug go from about 4 to 9. Wave 3, 5 to 15.? Whatever it is it should be sizable. There is always the possibility that the move up in the stock market is a flash in the pan and gold will have a quick correction. We need to stalk this bottom carefully like the previous one. Lara did a great job on that. Be looking towards the COT report on Friday for clues. So far the commercials are net short about 120k contracts. At the end of 1 up they were about 300 k net short. At about 250k net short I’ll be worried about this rally.
I closed my small long position for a very small loss (0.9% of equity) as soon as the channel was breached.
I opened a short. I may not hold that for very long though.
I’m working on the second wave count now. That intermediate (1) is over and intermediate (2) has finally begun.
Lara, my gold channel was broken some time ago on my fxcm chart?
Yes, I noted this in comments on the last analysis.
It was broken as Cesar was proofing my work.
Papudi,
Here’s the inverse H&S chart for Silver. The only question is does it go down for a correction before breaking the neckline or does it go up from here?
As I post this, gold appears to be breaking it’s channel to the downside, so Silver may follow gold down very soon for a correction.
Thanks. Yes more consolidation downward now.