A downwards breakout from a Pennant pattern for Gold was expected for this week, which is exactly what has happened.
Summary: With support from volume, GDX has effected a downwards breakout from a very long held consolidation (beginning December 2016). The target is at 16.02.
The target for Gold is still at 1,185. If price keeps falling through this target, then a classic analysis target is at 1,157. At about one of these targets a bounce is expected for a multi week throwback or consolidation.
Always trade with stops to protect your account. Risk only 1-5% of equity on any one trade.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
Last historic analysis with monthly charts and several weekly alternates is here, video is here.
Weekly charts were last all reviewed here, with video here.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART – TRIANGLE
Click chart to enlarge.
There are four remaining weekly wave counts at this time for cycle wave b: a triangle, flat, combination or double zigzag. Again, only one weekly chart shall be published Monday to Thursday and all four weekly charts will be reviewed at the end of the week after the close of Friday’s session.
While the direction does not diverge for these four weekly wave counts, only one weekly wave count shall be published on a daily basis, so that the analysis is manageable for me to publish and for members to digest. Note: This does not mean that the remaining three counts may not be correct.
The triangle so far has the best fit and look.
Cycle wave b may be an incomplete triangle. The triangle may be a contracting or barrier triangle, with a contracting triangle looking much more likely because the A-C trend line does not have a strong slope. A contracting triangle could see the B-D trend line have a stronger slope, so that the triangle trend lines converge at a reasonable rate. A barrier triangle would have a B-D trend line that would be essentially flat, and the triangle trend lines would barely converge.
Within a contracting triangle, primary wave D may not move beyond the end of primary wave B below 1,123.08. Within a barrier triangle, primary wave D may end about the same level as primary wave B at 1,123.08, so that the B-D trend line is essentially flat. Only a new low reasonably below 1,123.08 would invalidate the triangle.
Within both a contracting and barrier triangle, primary wave E may not move beyond the end of primary wave C above 1,365.68.
Four of the five sub-waves of a triangle must be zigzags, with only one sub-wave allowed to be a multiple zigzag. Primary wave C is the most common sub-wave to subdivide as a multiple, and this is how primary wave C for this example fits best.
Primary wave D must be a single structure, most likely a zigzag.
There are no problems in terms of subdivisions or rare structures for this wave count. It has an excellent fit and so far a typical look.
DAILY CHART – TRIANGLE
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Primary wave D may now be close to completion with minor wave 5 completing.
Minor wave 5 has not found support at the lower edge of the blue Elliott channel; it has now slightly overshot the channel. Fifth waves for commodities do sometimes exhibit strength and do sometimes overshoot channels.
If price turns up and breaks above the upper edge of this channel, then that shall be a very strong indication that the downwards wave of intermediate wave (C) should be over and a new upwards wave should have begun.
Minor wave 4 looks like a complete triangle. Gold often exhibits surprisingly short fifth waves out of its fourth wave triangles. The target calculated now looks about right and would expect minor wave 5 to be short.
Minor wave 4 may not move into minor wave 1 price territory above 1,282.20.
HOURLY CHART
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Minor wave 4 fits as a completed regular barrier triangle. Here, the b-d trend line is essentially flat with minute wave d only very slightly below the end of minute wave b.
Minor wave 5 is unfolding as an impulse. Within the impulse, minute waves i through to iv now look complete. If minute wave iv continues any further, it should find reasonable resistance about the upper edge of the narrow best fit channel. Minute wave iv may not move into minute wave i price territory above 1,210.53.
Only one final low would be required now to complete the structure of minor wave 5, and so of the entire downwards wave of primary wave D.
When minor wave 5 may be seen as complete, then a trend change would be confirmed with a new high above its start at 1,216.30. At that stage, upwards movement could not be a second wave correction within minor wave 5 as no second wave correction may move beyond its start.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The long term picture for this chart is bearish due to the long term bearish divergence between price and On Balance Volume.
Short term bullishness may have now been resolved by some sideways movement.
For this market, when a strong trend is unfolding, ADX may reach very extreme and may continue as such for several weeks.
Low and declining ATR looks normal for a B wave, particularly a triangle.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Today is a downwards breakout below the Pennant pattern that has support from volume. The target using the length of the flagpole which precedes the Pennant is 1,157. This is lower than the Elliott wave target, so use this classic target if price keeps on falling through the Elliott wave target.
Support below is now close by, about 1,195 and then 1,125.
This trend is very extreme and downwards movement exhibits divergence now between price and both of RSI and Stochastics. Look out for an end to this trend soon.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
GDX has been range bounce since January 2017. This is a very long sideways consolidation. The longer it continues, the more sustained the eventual breakout will be. Volume suggests the breakout may more likely be downwards.
Price last week closed below support, which was about 20.80. The close this week is the lowest price point for about a year and a half, which is extremely significant. A very long term downwards trend now looks very likely for GDX.
The long term target for the trend is at 16.02.
Next support is about 18.40.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
GDX has now closed below support on a strong downwards day with support from volume. New lows are the lowest low for GDX since December 2016. This is extremely significant for GDX.
GDX is in a downwards trend. The short term picture now looks bearish.
A short to mid term target using the measuring gap is about 19.12.
Please remember to protect your trading accounts by careful risk management. Follow my two Golden Rules:
1. Always trade with stops.
2. Risk only 1-5% of equity on any one trade.
A possible target for this downwards trend to end may be now calculated using the measured rule, giving a target about 16.10.
While GDX and Gold are often positively correlated, this correlation is unreliable. Gold may still have a multi week shallow bounce and GDX may still move overall lower with smaller bounces along the way. The two wave counts, and indeed technical analysis for these two markets, cannot be reliably linked while the correlation is unreliable.
Published @ 08:36 p.m. EST.
How is everyone getting along with GDX?
Members should all now have very profitable short positions on this today and be either taking some profit or waiting for the first target to be reached.
Minor 5 could be over at the low, but this small doji today does not look convincing at all as the start of a new trend.
And so the trend remains down, until proven otherwise.
If minor 5 is incomplete then the target was inadequate. A new lower target is calculated using the next Fibonacci ratio in the sequence.
The invalidation / confirmation point is still at 1,216.30. A new high above this point could not be a second wave correction within minor wave 5, and so at that point minor wave 5 would have to be over and so we would then have indication that a low should finally be in place.
This trend is stretched and extreme, but Gold can sustain this for a while. At this time there is no candlestick reversal pattern, and no indication yet of a low.