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Price remains range bound. A breakout should come tomorrow or early next week.

On Balance Volume shall be watched carefully; it may give a signal prior to a breakout.

Summary: A small Elliott wave triangle looks like it may be very close to completion now for Gold. Look out for a downwards breakout. A new low below the lower triangle trend line may be the earliest indication of a downwards breakout. The target would then be at 1,124.

A new high above 1,212.06 would invalidate the triangle and indicate an upwards breakout. If that happens, then look for a strong sustained bounce to end about 1,305 – 1,310.

For GDX a bounce may continue higher. Next resistance is about 19.74.

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 reviewed at the end of last week here. Video is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART – COMBINATION

Gold Elliott Wave Chart Weekly 2018
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.

All four weekly wave counts were again considered at the end of last week. Only two shall be followed on a daily basis.

At this stage, this wave count may have a slightly higher probability than the other three weekly wave counts because it has more support from classic technical analysis.

If cycle wave b is a combination, then the first structure in a double may be a complete zigzag labelled primary wave W.

The double may be joined by a three in the opposite direction, a zigzag labelled primary wave X.

The second structure in the double may be a flat correction labelled primary wave Y. My research on Gold so far has found that the most common two structures in a double combination are one zigzag and one flat correction. I have found only one instance where a triangle unfolded for wave Y. The most likely structure for wave Y would be a flat correction by a very wide margin, so that is what this wave count shall expect.

Within a flat correction for primary wave Y, the current downwards wave of intermediate wave (B) may be a single or multiple zigzag; for now it shall be labelled as a single. Intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) at 1,147.34. Intermediate wave (B) may move beyond the start of intermediate wave (A) as in an expanded flat.

Because the minimum requirement for intermediate wave (B) is not yet met, this wave count requires that minute wave v of minor wave C of intermediate wave (B) continues lower. This is the most immediately bearish of all four weekly wave counts.

When intermediate wave (B) is complete, then intermediate wave (C) would be expected to make at least a slight new high above the end of intermediate wave (A) at 1,365.68 to avoid a truncation. Primary wave Y would be most likely to end about the same level as primary wave W at 1,374.91, so that the whole structure takes up time and moves price sideways, as that is the purpose of double combinations.

While double combinations are very common, triples are extremely rare. I have found no examples of triple combinations for Gold at daily chart time frames or higher back to 1976. When the second structure in a double is complete, then it is extremely likely (almost certain) that the whole correction is over.

DAILY CHART – COMBINATION

Gold Elliott Wave Chart Daily 2018
Click chart to enlarge.

Intermediate wave (B) may be unfolding lower as either a single or double zigzag. At this stage, a single zigzag will be considered; the expected direction nor minimum requirement at 1,147.34 do not differ from a double zigzag.

If intermediate wave (B) is unfolding as a single zigzag, then within it minor wave C must subdivide as a five wave impulse.

It now looks most likely that minute wave iv may be a regular contracting triangle, although this may still morph into a double combination. An almost complete structure can be seen for minute wave iv, so a downwards breakout to new lows is now expected to be imminent. The target calculated expects minute wave v to exhibit the most common Fibonacci ratio to minute wave i. If price moves slightly higher, then the target must also move correspondingly higher.

Gold often exhibits surprisingly swift and short fifth waves out of its fourth wave triangles. If the target is wrong, then it may be too low.

HOURLY CHART

Gold Elliott Wave Chart Hourly 2018
Click chart to enlarge.

Minute wave iv is now labelled as a possible regular contracting triangle.

Minuette wave (e) may still be completing. Minuette wave (e) must be a single corrective structure, most likely a zigzag.

There is too much overlapping within the zigzag of minuette wave (e) to see subminuette wave c as an impulse, so an ending diagonal is indicated. At this stage, the ending diagonal may need micro wave 4 to overlap back into micro wave 1 price territory below 1,206.35 and not move beyond the end of micro wave 2 below 1,201.31. Thereafter, micro wave 5 may end as soon as it makes a new high above the end of micro wave 3 at 1,207.04 to avoid a truncation.

A breach of the lower triangle trend line would be a strong indication that the triangle for minute wave iv is over and price is on its way towards a downwards breakout.

Minuette wave (e) may not move beyond the end of minuette wave (c) above 1,212.06. This invalidation point is black and white; any amount at any time frame above this point invalidates a triangle.

At this stage, if the triangle is invalidated, then an upwards breakout would look most likely; use the alternate daily chart below.

WEEKLY CHART – TRIANGLE

Gold Elliott Wave Chart Weekly 2018
Click chart to enlarge.

The triangle so far has the best fit and look, but at this stage it no longer has good support from classic technical analysis. It is now judged to have a slightly lower probability than the combination wave count.

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.

A channel is drawn on all charts about the downwards wave of primary wave D. Here, it is labelled a best fit channel. If this channel is breached by upwards movement, that may provide reasonable confidence in this weekly triangle wave count and the double zigzag count, and put serious doubt on the combination and flat wave counts.

This wave count now expects a consolidation for primary wave E to back test resistance at prior support, and then a significant new downwards wave for cycle wave C. For the long term, this is the most bearish wave count.

DAILY CHART – TRIANGLE

Gold Elliott Wave Chart Daily 2018
Click chart to enlarge.

This wave count is identical to the alternate daily triangle wave count below, up to the end of minor wave 2 within intermediate wave (C). Thereafter, it considers the possibility that a triangle within intermediate wave (C) may currently be completing for minor wave 4.

Gold often exhibits surprisingly short and brief fifth waves out of its fourth wave triangles. This wave count would expect a triangle to come to a quick conclusion and then to be followed by a very short wave for minor wave 5, which may move only slightly below the end of minor wave 3 at 1,160.75 to avoid a truncation.

DAILY CHART – TRIANGLE – ALTERNATE

Gold Elliott Wave Chart Daily 2018
Click chart to enlarge.

Primary wave D may be complete.

Earliest confidence may come with a new high above 1,212.60 to invalidate the daily wave counts, which see a fourth wave triangle completing. If price moves above 1,212.60, with strength and support from volume, then this alternate wave count would be indicated as most likely.

For strong confidence, this wave count now requires a breach of the upper edge of the blue best fit channel. This channel is drawn the same way on all weekly and daily charts, all on a semi-log scale.

Minor wave 1 may have been over on the 22nd of August.

Minor wave 2 may be a complete double combination: zigzag – X – flat. Minute wave y may have ended a few days ago.

A target for primary wave E is the strong zone of resistance about 1,305 to 1,310. Primary wave E is most likely to subdivide as a zigzag (although it may also subdivide as a triangle to create a rare nine wave triangle), and it should last at least a Fibonacci 13 weeks. Primary wave E may not move beyond the end of primary wave C above 1,365.68.

TECHNICAL ANALYSIS

WEEKLY CHART

Gold Weekly 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

On Balance Volume is lower than its prior point at the end of November 2015. This divergence is extremely bearish but does not rule out a consolidation unfolding here; the divergence does strongly support the Triangle wave count, which expects a consolidation or bounce up to test resistance now and then a continuation of a major bear market. It could also support the flat wave count that allows for a new low below 1,046.27 in coming months.

On Balance Volume has made another new low, but price has not. There is now double bearish divergence between price and On Balance Volume.

When Gold has a strong trend, ADX may remain very extreme for long periods of time and RSI can move more deeply into oversold. However, most recent lows since November 2015 were all found when RSI just reached oversold, so some caution here in looking out for a possible consolidation or trend change would be reasonable.

Last week completes an outside week with the balance of volume upwards. Upwards movement within the week has support from volume. The long legged doji candlestick represents indecision; this is typical during a consolidation.

If price does continue lower, then look for next support about 1,140.

DAILY CHART

Gold Daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

Gold is now range bound. Resistance and support are identified on the chart. It is a downwards day that has strongest volume during this small range bound movement so far, suggesting a downwards breakout may be more likely than upwards. This technique does not always work, but it does work more often than it fails.

On Balance Volume remains range bound, and the trend lines are converging. On Balance Volume will give a signal; if it does so prior to price breaking out, then a direction would be indicated.

From Kirkpatrick and Dhalquist regarding ascending triangles:

“Upwards breakouts occur 77% of the time, and all breakouts usually happen roughly 61% of the distance (time) from the base to the cradle.”

In this case, 61% of the distance from base to cradle was five sessions ago, which clearly did not see a breakout. This pattern may fail, but it should still be noted anyway as not all breakouts occur 61% of the distance. Look for a break above or below the triangle trend lines. Upwards breakouts require support from volume for confidence but downwards breakouts do not.

GDX WEEKLY CHART

GDX Weekly 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

GDX is now moving lower exactly as expected.

After a breakout, a technical principle is the longer that price consolidates sideways the longer the resulting trend may be expected to be. Also, the longer that price meanders sideways the more energy may be released after a breakout. This is what is happening now for GDX.

A target for this downwards trend to end calculated using the measured rule is at 16.02. That is not yet met. The last gap lower was used to calculate a new target at 17.37 for the short term, which has been met. The gap remains open and so far is providing resistance.

At the weekly chart level, there is a clear downwards breakout with a breakaway gap. As breakaway gaps should not be closed, they may be used to set stops that may be set just above a downwards breakaway gap.

The bullish divergence between price and On Balance Volume noted with green trend lines is also not a strong signal. On Balance Volume is a leading indicator; when it leads, it offers a signal, but it does not always lead price.

There is short term bullish divergence between price and Stochastics. A consolidation may develop here to relieve extreme conditions.

An outside week closes green with the balance of volume upwards. The consolidation has some support from volume at this stage. A long legged doji is typical during a consolidation.

GDX DAILY CHART

GDX Daily 2018
Click chart to enlarge. Chart courtesy of StockCharts.com.

Expect this bounce to continue up to resistance. If price reaches up to resistance and Stochastics reaches overbought at the same time, then that may be taken as an indication the bounce may be over.

The larger trend remains down.

Published @ 10:40 p.m. EST.


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