GOLD ANALYSIS

Summary: The main wave count expects a trend change to a new bear market to last one to several years, and the target is 470. A new low below 1,324.93 now offers further confidence in this view.

Full confidence may be had in the new bear market if price can make a new low below 1,236.54 in the next few weeks.

An alternate expects overall upwards movement from here. It would be confirmed if price makes a new high reasonably above 1,357.09.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART

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All main wave counts expect that Gold completed a large five down from the all time high in November 2011 to the low of December 2015, which is seen on the left hand side of weekly charts.

If this analysis is correct, then the five down may not be the completion of the correction. Corrective waves do not subdivide as fives; they subdivide as threes. The five down is seen as cycle wave a within Super Cycle wave (a).

Cycle wave b began in December 2015.

This wave count looks at cycle wave b to be most likely a regular contracting triangle.

All sub-waves must subdivide as threes within an Elliott wave triangle, and four of the five sub-waves must be zigzags or multiple zigzags, and the most common sub-wave to be a multiple is wave C. Only one sub-wave may be a more complicated multiple. This triangle meets all these rules and guidelines; all subdivisions fit perfectly at all time frames. It is the main wave count for these reasons, and thus is judged to have the highest probability.

The triangle trend lines have a normal looking convergence.

While primary wave E should also most likely look like an obvious three wave structure at the weekly and daily chart levels, it does not have to do this. It is possible that primary wave E could be over, falling reasonably short of the A-C trend line and being relatively quick. E waves of triangles can be the quickest of all triangle waves.

DAILY CHART

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This first daily chart follows on directly from the weekly chart above. The triangle for cycle wave b may have just recently completed.

Primary wave E fits as a completed zigzag and falls reasonably short of the A-C trend line, the most common point for E waves of Elliott triangles to end.

If this wave count is correct, then price needs to move strongly lower next week. Within the new trend, no second wave correction may move beyond the start of its first wave above 1,343.97.

The target for cycle wave c to end assumes the most common Fibonacci ratio to cycle wave a.

A new low below 1,236.54 would invalidate weekly alternate wave counts and provide a high level of confidence in this main wave count.

SECOND WAVE COUNT

WEEKLY CHART

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If cycle wave b is a single zigzag, then the upwards wave labelled here primary wave A must be seen as a five wave structure. But this is problematic because (within primary wave A) intermediate wave (4) lasted 12 weeks whereas intermediate wave (2) only lasted 2 weeks. While disproportion between corrective waves does not violate any Elliott wave rules, it does give a wave count the wrong look.

Gold is typical of commodities in that it often exhibits swift strong fifth waves, leading to blowoff tops in bull markets and selling climaxes in bear markets. This tendency is most often seen in Gold’s third waves. When this happens the strong fifth wave forces the fourth wave correction that comes before it to be more brief and shallow than good proportion to its counterpart second wave would suggest. When this happens the impulse has a curved three wave look to it at higher time frames.

It is acceptable for a wave count for a commodity to see a curved impulse which has a more time consuming second wave correction within it than the fourth wave correction.

The impulse has a more time consuming fourth wave than the second in this case though, giving the wave the look of a zigzag. This is unusual, and so the probability of this wave count is low.

Low probability does not mean no probability, so this wave count is possible; when low probability outcomes do occur, they are never what was expected as most likely.

Primary wave C must subdivide as a five wave structure, either an impulse or an ending diagonal. Because the upwards wave of intermediate wave (1) fits as a zigzag and will not fit as an impulse, an ending diagonal is considered.

Ending diagonals require all sub-waves to subdivide as zigzags.

Within intermediate wave (1), to see this wave as a zigzag, minor wave B is seen as a double flat correction. In my experience double flats are extremely rare structures, even rarer than running flats. The rarity of this structure further reduces the probability of this wave count.

Intermediate wave (3) must move beyond the end of intermediate wave (1) above 1,357.09.

Intermediate wave (3) must subdivide as a zigzag. Within the zigzag, minor wave B may not move beyond the start of minor wave A below 1,236.54. At this stage, the last three days of sideways movement look like a correction within an ongoing upwards trend which would favour this alternate wave count. Minor wave B may last from just a few days to a few weeks.

THIRD WAVE COUNT

WEEKLY CHART

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Cycle wave a is still seen as a completed five wave structure. This third wave count looks at cycle wave b as a possible double zigzag.

A triangle may be completing as an X wave within a double zigzag for cycle wave b.

Now the upwards wave labelled here primary wave W is seen as a zigzag. This has a better fit than the first alternate.

Within the triangle for primary wave X, intermediate waves (A) through to (C) may be complete. Intermediate wave (D) may also be complete, but there is room for it to still move higher. If the triangle for primary wave X is a regular contracting triangle, then intermediate wave (D) may not move beyond the end of intermediate wave (B) above 1,357.09. If the triangle is a barrier triangle, then intermediate wave (D) should end about the same level as intermediate wave (B), so that the (B)-(D) trend line remains essentially flat. In practice, this means that intermediate wave (D) may end slightly above 1,357.09 and this wave count would remain valid.

This is why a new high reasonably above 1,357.09 only would invalidate this wave count. This invalidation point is not black and white.

The final sub-wave of intermediate wave (E) may have now begun. Intermediate wave (E) may not move beyond the end of intermediate wave (C) below 1,236.54. This invalidation point is black and white. A new low by any amount at any time frame would invalidate this wave count.

TECHNICAL ANALYSIS

WEEKLY CHART

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Price found resistance this week, at about 1,345.

The small spinning top candlestick and decline in volume suggest a pause within an upwards trend, or a weak end to the upwards trend.

Stochastics may move further into overbought territory before price turns.

DAILY CHART

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Three doji in a row and three sessions on declining volume all suggest a consolidation here within an upwards trend. This favours the second weekly wave count at this stage.

Upwards movement continued for Friday to another new all time high as the main Elliott wave count expected.

S&P500 ANALYSIS

Summary: Assume the upwards trend may remain intact and the next target for an interruption is at 2,821.

An alternate looks at a correction or pullback underway to last one to two weeks. Some confidence may be had in this view if price makes a new low below 2,792.56. This view has support still from bearish signals in VIX and the AD line.

MAIN ELLIOTT WAVE COUNT

MONTHLY CHART

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The large expanded flat labelled Super Cycle wave (IV) completed a 8.5 year correction. Thereafter, the bull market continues for Super Cycle wave (V). The structure of Super Cycle wave (V) is incomplete. At this stage, it is subdividing as an impulse.

There is no Fibonacci ratio between cycle waves I and III within Super Cycle wave (V). This makes it more likely that cycle wave V will exhibit a Fibonacci ratio to either of cycle waves I or III. Cycle wave V has passed equality in length with cycle wave I. The next two Fibonacci ratios in the sequence are used for two possible targets for it to end.

The teal channel is drawn using Elliott’s first technique about an impulse. Draw the first trend line from the ends of cycle waves I to III (from the months of July 2011 to December 2014), then place a parallel copy on the low of cycle wave II. Cycle wave IV has found support very close to the lower edge of this channel, so the channel looks about right. The lower edge should continue to provide support, and the upper edge may provide resistance if price gets up that high.

Copy this large channel over to weekly and daily charts, all on a semi log scale. The lower edge will be important.

Cycle wave II was a shallow 0.41 zigzag lasting three months. Cycle wave IV is now seen as a more shallow 0.28 double combination lasting 14 months. With cycle wave IV nearly five times the duration of cycle wave II, it should be over there.

Cycle wave I lasted 28 months (not a Fibonacci number), cycle wave II lasted a Fibonacci 3 months, cycle wave III lasted 38 months (not a Fibonacci number), and cycle wave IV lasted 14 months (one more than a Fibonacci 13).

Cycle wave V has begun its 23rd month. The structure needs several more months to complete. It may last another 11 months to total a Fibonacci 34, but that may not be long enough. The next Fibonacci number in the sequence is 55, which would see it continue from now for another 32 months, just under three years. That looks entirely possible.

It is also possible that cycle wave V may not exhibit a Fibonacci duration.

Within cycle wave V, the upcoming correction for intermediate wave (4) may not move back down into intermediate wave (1) price territory below 2,193.81.

WEEKLY CHART

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Cycle wave V must complete as a five structure, which should look clear at the weekly chart level. It may only be an impulse or ending diagonal. At this stage, it is clear it is an impulse.

Within cycle wave V, the third waves at all degrees may only subdivide as impulses.

Within cycle wave V, the corrections for primary wave 2 and intermediate wave (2) both show up clearly, both lasting several weeks. The respective corrections for intermediate wave (4) and primary wave 4 should also last several weeks, so that they show up at weekly and monthly time frames. The right proportions between second and fourth wave corrections give a wave count the right look. This wave count expects to see two large multi week corrections coming up.

Cycle wave V has passed equality in length with cycle wave I, which would be the most common Fibonacci ratio for it to have exhibited. The next most common Fibonacci ratio would be 1.618 the length of cycle wave I.

Intermediate wave (3) has passed equality in length with intermediate wave (1). It has also now passed both 1.618 and 2.618 the length of intermediate wave (1), so it may not exhibit a Fibonacci ratio to intermediate wave (1). The target calculation for intermediate wave (3) to end may have to be done at minor degree; when minor waves 3 and 4 are complete, then a target may be calculated for intermediate wave (3) to end. That cannot be done yet.

When minor wave 3 is complete, then the following multi week correction for minor wave 4 may not move into minor wave 1 price territory below 2,400.98. Minor wave 4 should last about four weeks to be in proportion to minor wave 2. It may last about a Fibonacci three, five or even eight weeks if it is a time consuming sideways correction like a triangle or combination. It may now find support about the mid line of the yellow best fit channel. If it does find support there, it may be very shallow. Next support would be about the lower edge of the channel.

A third wave up at four degrees may be completing. This should be expected to show some internal strength and extreme indicators, which is exactly what is happening.

DAILY CHART

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Keep redrawing the acceleration channel as price continues higher: draw the first line from the end of minute wave i to the last high, then place a parallel copy on the end of minute wave ii. When minute wave iii is complete, this would be an Elliott channel and the lower edge may provide support for minute wave iv.

Minute wave iii has passed 1.618 the length of minute wave i. The next Fibonacci ratio in the sequence is used to calculate a target for it to end.

Minute wave iii may only subdivide as an impulse, and within it minuette wave (i) only may have recently ended as a long extension. This main wave count fits with MACD: upwards momentum is showing an increase as a third wave continues upwards.

Within the impulse of minute wave iii, the upcoming correction for minuette wave (iv) may not move back into minuette wave (i) price territory below 2,694.97.

Because minuette wave (i) with this wave count is a long extension, it is reasonable to expect minuette wave (iii) may only reach equality in length with minuette wave (i). This target fits with the higher target for minute wave iii one degree higher.

ALTERNATE DAILY CHART

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It is possible that minute wave iii is over. Some confidence in this wave count may be had if the main hourly wave count above is invalidated with a new low below 2,768.64.

If minute wave iv is underway, then it may be expected to be reasonably in proportion to its counterpart minute wave ii correction. Minute wave ii lasted nine days, so expect minute wave iv to last a Fibonacci eight or thirteen days.

Minute wave iv may be unfolding as an expanded flat correction. These are very common structures.

Minute wave ii was a zigzag, so minute wave iv may exhibit alternation as a flat, combination or triangle. These corrections are all sideways and usually more time consuming than zigzags.

Minute wave iv may end when it finds support about the lower edge of the pink Elliott channel. If it does not end there and if it overshoots the channel, then minute wave iv may end within the price territory of the fourth wave of one lesser degree. Minuette wave (iv) has its territory from 2,694.97 to 2,673.61.

Minute wave iv may not move into minute wave i price territory below 2,490.87.

TECHNICAL ANALYSIS

WEEKLY CHART

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This upwards trend is extreme and stretched, but there is still no evidence of weakness at the weekly time frame.

As a third wave at multiple degrees comes to an end, it would be reasonable to see indicators at extreme levels.

A correction will come, but it looks like it may not be here yet.

DAILY CHART

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On Balance Volume has not yet broken out of its small range. This should happen on Monday.

The trend is stretched and extreme at daily and weekly chart levels, and close to extreme at the monthly chart level.

Divergence with price and RSI is too slight to indicate reasonable weakness.

This trend may still continue for longer.

VOLATILITY – INVERTED VIX CHART

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So that colour blind members are included, bearish signals will be noted with blue and bullish signals with yellow.

Normally, volatility should decline as price moves higher and increase as price moves lower. This means that normally inverted VIX should move in the same direction as price.

Bearish signals from VIX have not been followed by any downwards movement. They may have all failed, or it could be that these signals are early.

There is strong short term divergence between price and inverted VIX. The new high in price has not come with a normal corresponding decline in market volatility. This is bearish.

BREADTH – AD LINE

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There is normally 4-6 months divergence between price and market breadth prior to a full fledged bear market. This has been so for all major bear markets within the last 90 odd years. With no longer term divergence yet at this point, any decline in price should be expected to be a pullback within an ongoing bull market and not necessarily the start of a bear market.

All of small, mid and large caps last week made new all time highs. This market has good support from rising breadth.

Breadth should be read as a leading indicator.

The last bearish signal from the AD line has not been followed by any downwards movement. It may have failed, or it may be an early warning.

There is now divergence with the new high in price failing to be matched by a new high in market breadth. The rise in price does not have support from a rising AD line. This is bearish.

DOW THEORY

The S&P500, DJIA, DJT and Nasdaq last week all made new all time highs. The ongoing bull market is confirmed.

The following lows need to be exceeded for Dow Theory to confirm the end of the bull market and a change to a bear market:

DJIA: 17,883.56.

DJT: 7,029.41.

S&P500: 2,083.79.

Nasdaq: 5,034.41.

US OIL ANALYSIS

Summary: The bottom line for Oil is that while price remains within the yellow channel on the daily chart no confidence in a trend change may be had. If price breaks below the lower edge of this channel then have confidence a high is in place and the target is at 24.67.

MONTHLY ELLIOTT WAVE COUNT

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Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.

Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.

There is alternation in depth with primary wave 2 very deep and primary wave 4 relatively shallow. There is inadequate alternation in structure, both are zigzags. So far primary wave 4 has lasted 23 months. At this stage, there is almost perfect proportion between primary waves 2 and 4.

Primary wave 4 may not move into primary wave 1 price territory above 74.96.

WEEKLY ELLIOTT WAVE COUNT

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Intermediate wave (C) must subdivide as a five wave structure, either an impulse or an ending diagonal. Intermediate wave (C) may now be a complete structure.

A trend change is now expected. The target for primary wave 5 assumes the most common Fibonacci ratio to primary wave 1.

Price is finding resistance about the upper edge of the teal channel which is copied over from the monthly chart.

An Elliott channel is added to this possible zigzag for primary wave 4. A breach of the lower edge of this channel would provide a very strong indication that primary wave 4 should be over and primary wave 5 should be underway.

DAILY ELLIOTT WAVE COUNT

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The structure for intermediate wave (C) is now complete at all degrees. Price has found resistance almost perfectly at the upper edge of the teal channel which is drawn on all charts on a semi-log scale.

There are some excellent Fibonacci ratios within this wave count.

However, the bottom line remains that only when price has breached the channel may confidence be had in this wave count.

TECHNICAL ANALYSIS

MONTHLY CHART

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The strongest recent monthly volume is for the downwards month of August 2017. This is bearish.

Price is currently rising on declining volume at this time frame. While that could change, at this time it looks unsustainable.

RSI indicates there is room for upwards movement to continue.

DAILY CHART

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With RSI and Stochastics both reaching overbought while ADX reached extreme, the upwards trend was stretched and extreme. There was reasonable divergence between price and Stochastics to indicate some reasonable weakness.

Now volume supports downwards movement it looks like Oil may have seen a trend change. This chart supports the Elliott wave count this week.

VOLATILITY INDEX

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For Friday’s session price moved lower but volatility has not shown a normal corresponding increase. The decline in volatility for Friday’s session is interpreted as bullish. This does not support the Elliott wave count.

Published @ 12:22 a.m. EST.