Another upwards day fits the second hourly Elliott wave count. Price is now just above the target range, which was 1,219.11 to 1,233.43.
Summary: If we expect the most common scenario to unfold, then we should be right more often than wrong. We will still be wrong sometimes, alternates are still possible, but this is an exercise in probability.
A new low below 1,225.11 would invalidate the alternate and provide some confidence that a high may be in place. It is very important though to also wait for the trend channel on the hourly charts to show a breach of the lower edge. If that happens, then enter short. The target is now at 1,137.
If price breaks above the upper edge of the trend channel, then the target for either a third or C wave up to end is about 1,273 – 1,277 in the first instance. Upwards momentum should increase and corrections should be brief and shallow.
Always use a stop for every trade. Do not invest more than 1-5% of equity on any one trade.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
MAIN ELLIOTT WAVE COUNT
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.
At this stage, the degree of labelling within intermediate wave (2) is moved up one degree. Minor wave A is complete and now minor wave B may be complete. If this is correct, then minor wave C down should be relatively time consuming. Intermediate wave (2) at its end should be somewhat in proportion to intermediate wave (1), which lasted 30 days. Intermediate wave (2) is expected to last a Fibonacci 21 or 34 days.
Intermediate wave (2) is labelled as an incomplete expanded flat correction. These are very common structures. Within them their B waves make a new price extreme beyond the start of the A wave. B waves of expanded flats should exhibit clear and strong weakness.
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 may be deeper. It may not move beyond the start of intermediate wave (1) below 1,123.08.
To label intermediate wave (2) complete as a very quick shallow zigzag at the low of minor wave A would be possible, but the probability is extremely low. It is much more likely that an expanded flat is unfolding. This idea is now charted on the alternate wave count. There, it is labelled intermediate waves (A) – (B) – (C). Both A-B-C of a zigzag and 1-2-3 of an impulse subdivide in exactly the same way.
Minor wave B is now at 1.44 the length of minor wave A. There is unfortunately no rule stating a limit for B waves within flat corrections. There is a convention within Elliott wave that states the idea of a flat should be discarded when the B wave reaches twice the length of the A wave. That price point for this wave count would be at 1,256.81.
Most commonly B waves within flats are from 1 to 1.38 the length of their A waves. This is a common range, not a maximum. B waves may be longer than the common range.
When B waves are longer than the common range, then the appropriate target for wave C is 2.618 the length of wave A.
Price reacts downwards each time it touches the upper edge of the Elliott channel. Price bounces upwards each time it touches the lower edge. So far this channel is neatly showing where price is finding support and resistance. A downwards reaction may be expected either right here or very soon; price may come up for a slight new high first to more perfectly touch the upper trend line.
What happens on the next downwards reaction may indicate which wave count is correct.
If members are bullish and choose to ignore the possibility of an expanded flat here, then entering long, if price again touches the lower edge of the channel, would give a good entry point. Always use a stop and do not invest more than 1-5% of equity on any one trade.
ALTERNATE ELLIOTT WAVE COUNT
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. Intermediate wave (A) is complete.
Today’s alternate idea (which fits for both wave counts) will be charted on this chart. If the correction for intermediate wave (B) is over (and for the main wave count this would be labelled intermediate wave (2) ), then this is what it would look like.
Intermediate wave (A) would have lasted 28 sessions. Intermediate wave (B) would have lasted only three sessions and been a shallow 0.393 correction of intermediate wave (A). This is possible, but it would be unusually brief and shallow (particularly for a second wave).
The target expects the most common ratio for intermediate wave (C) and the most common depth for primary wave 2.
Within intermediate wave (B), no second wave may move beyond its start below 1,181.41.
Primary wave 2 may not move beyond the start of primary wave 1 above 1,374.81.
If Gold is within an impulse up (and this would be labelled intermediate wave (3) for the main wave count), then the third wave is unlikely to be over.
It would have begun with two overlapping first and second waves. Minute wave iii would be incomplete. When it is done, then minute wave iv may not move into minute wave i price territory below 1,225.11.
The base channel is the same as the Elliott channel on the main hourly chart. For this wave count, the power of minor wave 3 should break above the upper edge of the base channel and afterwards that trend line should offer support.
If price does break above the upper edge of this channel, that would substantially increase the probability of this wave count. At that stage, expect an increase in upwards momentum and corrections to be brief and shallow.
Click chart to enlarge. Chart courtesy of StockCharts.com.
The bearish engulfing candlestick pattern of last week has failed. Price has made a new high.
Since four weeks ago, volume is overall declining. Price is still finding strong resistance about 1,225.
On Balance Volume has bounced up off the yellow support line. Next resistance is some distance away at the purple line. Another breach of the yellow line would be a weak bearish signal.
RSI is not extreme and exhibits no divergence with price. There is plenty of room for this market to continue higher, or lower.
ADX is strongly declining, indicating a consolidation. The -DX line remains above the +DX line, so at this stage a downwards trend would be indicated if ADX turns upwards.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Gold has today broken above prior resistance, which was about 1,225. However, the breakout should be approached with suspicion. Upwards breakouts should be supported by volume for confidence. Volume has been declining for the last two upwards days, with today particularly light. Volume today was the lightest it has been since the 4th of January.
On Balance Volume still has a further way to go before it reaches resistance. The purple line does not have good technical significance, but it may offer some resistance.
Divergence seen up to the last trading session between price and RSI has now disappeared. This is bullish. There is still divergence with price and Stochastics, but this is not particularly reliable; this is a weak bearish signal.
ADX still indicates an upwards trend in place, which is not yet extreme.
ATR remains flat. This supports the main Elliott wave count; if this upwards movement of the last six days is the start of a third wave at intermediate degree (or a C wave for the alternate), then so far it is not showing strength usual for third or C waves. ATR should be increasing, not remaining flat, and volume should support the move in price.
Bollinger Bands have not yet begun to widen. This too supports the main Elliott wave count.
Next resistance is at 1,240 and thereafter at 1,255.
This analysis is published @ 08:58 p.m. EST.