A short term bounce was expected to continue for Friday. Price made a higher high and a higher low fitting the definition of upwards movement. The Elliott wave counts for this week nicely predicted price action.

Summary: The bigger picture sees a pullback continue here to about 1,261. It may be as low as 1,170 – 1,158.

Look out for a short term bounce. It may find resistance about the upper edge of the pink channel on the first hourly chart, which would see the bounce very shallow, maybe only as high as about 1,293. If the pink trend line is breached, then look for the bounce to end about 1,330.

The signal which was expected from On Balance Volume has not come. The signal must come early next week because the trend lines are quickly contracting.

Always trade with stops and invest only 1-5% of equity on any one trade.

New updates to this analysis are in bold.

Last monthly charts for the main wave count are here, another monthly alternate is here, and video is here.

Grand SuperCycle analysis is here.

The wave counts will be labelled first and second. Classic technical analysis will be used to determine which wave count looks to be more likely.

FIRST ELLIOTT WAVE COUNT

WEEKLY CHART

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There are more than 23 possible corrective structures that B waves may take, and although cycle wave b still fits well at this stage as a triangle, it may still be another structure. This wave count looks at the possibility that it may be a double zigzag.

If cycle wave b is a double zigzag, then current upwards movement may be part of the second zigzag in the double, labelled primary wave Y.

The target remains the same.

Within intermediate wave (C), no second wave correction may move beyond the start of its first wave below 1,205.41. However, prior to invalidation, this wave count may be discarded if price breaks below the lower edge of the black Elliott channel. If this wave count is correct, then intermediate wave (C) should not break below the Elliott channel which contains the zigzag of primary wave Y upwards.

There are two problems with this wave count which reduce its probability in terms of Elliott wave:

1. Cycle wave b is a double zigzag, but primary wave X within the double is deep and time consuming. While this is possible, it is much more common for X waves within double zigzags to be brief and shallow.

2. Intermediate wave (B) within the zigzag of primary wave Y is a double flat correction. These are extremely rare, even rarer than running flats. The rarity of this structure must further reduce the probability of this wave count.

DAILY CHART

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The analysis will focus on the structure of intermediate wave (C). To see details of all the bull movement for this year see daily charts here.

Intermediate wave (C) must be a five wave structure, either an impulse or an ending diagonal. It is unfolding as the more common impulse.

It is possible that minor wave 1 may have been over at the last high and the current pullback may be minor wave 2. Minor wave 2 may not move beyond the start of minor wave 1 below 1,205.41.

Minor wave 2 is not over and may continue lower to reach a more normal depth of about 0.618 the length of minor wave 1, about 1,261. This would also see minor wave 2 have a better proportion to minor wave 1 in terms of duration; minor wave 1 lasted 44 days and so far minor wave 2 has lasted only 15 days. If it continues now for another 6 days, it may total a Fibonacci 21.

The confidence point can now be moved lower to match the new invalidation point for the second wave count.

HOURLY CHART

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Note: I am aware that currently BarChart data for Gold is inaccurate. It looks very strange and wrong on the five minute chart. I have contacted BarChart, but I do not expect to get a response now until next week. I will supplement my consideration of hourly price movement with StockCharts data for the session.

This wave count would expect minor wave 2 to now continue for another 6 days, if it exhibits a Fibonacci duration of a total 21 days.

When the first zigzag in a correction has not moved price deep enough, then a second zigzag should be considered. Here, the first zigzag of minute wave w is only a 0.45 length of minor wave 1. Second wave corrections are usually deeper than this.

X waves within double zigzags are commonly brief and shallow. Minute wave x fits this definition here.

If this correction for minor wave 2 is correctly identified as a double zigzag, then minute wave y must subdivide 5-3-5. Within the zigzag of minute wave y, minuette wave (b) may not move beyond the start of minuette wave (a) above 1,313.39.

Minuette wave (b) for this wave count looks likely now to have begun. Overall, the last two sessions have moved price sideways. While subdivisions of this movement cannot be properly analysed due to the inaccuracy of BarChart data at this time, it can be accepted this sideways movement would easily fit as minuette wave (b).

If price breaks above that pink trend line, then minor wave 2 would be relabelled as a single zigzag in the same way as the second wave count labels this downwards movement.

The labelling on the alternate chart for this downwards movement works in the same way for this main wave count. Minor wave 2 may also be a single zigzag. The low of the 21st of September may be minute wave a. Minute wave b may be continuing sideways as an expanded flat. An explanation of how this works will again be given in the end of week video. Members are encouraged to watch the video if they are having any confusion here about short term possibilities.

SECOND ELLIOTT WAVE COUNT

WEEKLY CHART

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It is still possible that cycle wave b is unfolding as a regular contracting triangle.

Within a triangle, one sub-wave should be a more complicated multiple, which may be primary wave C. This is the most common sub-wave of the triangle to subdivide into a multiple.

Intermediate wave (Y) now looks like a complete zigzag at the weekly chart level.

Primary wave D of a contracting triangle may not move beyond the end of primary wave B below 1,123.08. Contracting triangles are the most common variety.

Primary wave D of a barrier triangle should end about the same level as primary wave B at 1,123.08, so that the B-D trend line remains essentially flat. This involves some subjectivity; price may move slightly below 1,123.08 and the triangle wave count may remain valid. This is the only Elliott wave rule which is not black and white.

Finally, primary wave E of a contracting or barrier triangle may not move beyond the end of primary wave C above 1,295.65. Primary wave E would most likely fall short of the A-C trend line. But if it does not end there, then it can slightly overshoot that trend line.

Primary wave A lasted 31 weeks, primary wave B lasted 23 weeks, and primary wave C lasted 38 weeks.

The A-C trend line now has too weak a slope. At this stage, this is now a problem for this wave count, the upper A-C trend line no longer has such a typical look.

Within primary wave D, no part of the zigzag may move beyond its start above 1,357.09.

DAILY CHART

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This second wave count expects the new wave down may be deeper and longer lasting than the first wave count allows for.

A common length for triangle sub-waves is from 0.8 to 0.85 the length of the prior wave. Primary wave D would reach this range from 1,170 to 1,158.

If primary wave C is correctly labelled as a double zigzag, then primary wave D must be a single zigzag.

HOURLY CHART

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1-2-3 of an unfolding impulse subdivides 5-3-5, exactly the same as a zigzag. This second wave count sees an unfolding impulse at minor degree (the first wave count may see subdivisions in the same way for a zigzag downwards for minor wave 2).

Downwards movement to the last low so far has a slightly neater fit as a zigzag than it does as an impulse.

An expanded flat correction may be unfolding. These are very common structures. Here, minute wave b is within the most common range of up to 1.38 times the length of minute wave a.

This wave count today still has reasonable support from classic technical analysis.

The target remains the same. Minor wave 2 would most likely end close to the 0.618 Fibonacci ratio of minor wave 1 about 1,330.

TECHNICAL ANALYSIS

WEEKLY CHART

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

Support of the Elliott wave counts which expect overall more downwards movement next week comes from an increase in volume this week for downwards movement, a bearish upper candlestick wick, and a weak bearish signal now from On Balance Volume.

These signals cannot tell us how far price may fall though. Support and resistance may be used as a guide for this. Next strong support for price is about 1,225.

DAILY CHART

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

Price moved slightly higher but the candlestick closed red. The balance of volume was downwards, and lighter volume did not support downwards movement during Friday’s session. This supports the hourly Elliott wave counts which expect a bounce to continue a little higher early next week.

Look out for strong resistance above about 1,305 – 1,310.

GDX

DAILY CHART

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Give reasonable weight to the bearish signal from On Balance Volume. It looks like GDX has completed a small consolidation within a downwards trend.

Expect downwards movement as most likely now from GDX. Next support is about 22.75, and below that about 21.50.

Stochastics can remain extreme for longer than this. Wait for RSI to reach oversold and then exhibit some divergence with price before expecting a low as most likely in place.

Published @ 11:44 p.m. EST.