For the short term, the two preferred Elliott wave counts (combination and triangle) expected downwards movement to begin the new trading week. So far that is what is happening.

Summary: The trend is down and may not be complete for Gold. Expect some more downwards movement this week, although it is possible price may move sideways for another week or so to relieve extreme conditions before the trend continues.

The target for Gold is now at 1,132.

The longer term target for GDX is at 16.02. A short term target for an interruption to the downwards trend was at 17.37 but this may not be quite met. Some consolidation for GDX may develop next week to relieve extreme conditions.

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.

All four weekly charts were again reviewed here, with video here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART – COMBINATION

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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

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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. The last bounce may be minute wave iv.

It is possible that minute wave iv is now complete as a relatively brief and shallow zigzag. It is also possible that it may continue sideways for another one to few weeks as a flat, combination or triangle. Minute wave iv may not move into minute wave i price territory above 1,282.20.

HOURLY CHART

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If minute wave iv is complete, then minute wave v may have begun.

Minute wave v may be beginning with a leading expanding diagonal for minuette wave (i).

The diagonal is expanding: subminuette wave iii is longer than subminuette wave i, subminuette wave iv is longer than subminuette wave ii, and the trend lines diverge. Subminuette wave v must be longer than subminuette wave iii, so it must end below 1,187.87 where it would reach equality in length with subminuette wave iii.

Subminuette wave v would most likely subdivide as a zigzag (although it may also subdivide as an impulse for a leading diagonal). Within the zigzag, micro wave A may now be a complete five wave impulse; if micro wave A is complete, then micro wave B may not move beyond the start of micro wave A above 1,206.35.

When the diagonal structure may be seen as complete and meets all Elliott wave rules, then a deeper correction for minuette wave (ii) would be expected. At that stage, the invalidation point would move up to the start of minuette wave (i) at 1,214.10.

HOURLY CHART – ALTERNATE

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By moving the degree of labelling within minute wave iv down one degree, it is possible that it may be incomplete. The last zigzag upwards may have been only minuette wave (a).

Minute wave ii (which can be seen on the daily chart) subdivided as a double zigzag. Minute wave iv would be likely to exhibit alternation in structure, and so a double zigzag would be the least likely structure for minute wave iv to unfold as.

If minuette wave (a) has completed as a three wave structure, then minute wave iv may be continuing sideways as a flat or triangle.

Within a flat correction, minuette wave (b) would be required to retrace a minimum 0.9 length of minuette wave (a) and may end within the most common range of 1 – 1.38 times the length of minuette wave (a).

Within a triangle, for minuette wave (b) there is no minimum nor maximum requirement; it only needs to complete as a three wave structure. Minuette wave (b) may be completing as a double zigzag. Within the second zigzag of the double, micro wave B may not move beyond the start of micro wave A above 1,206.35.

Minuette wave (b) should exhibit weakness. It should not have support from volume, and at its end it may exhibit bullish divergence between price and one or both of Stochastics and RSI; it may also exhibit a decline in ATR.

WEEKLY CHART – TRIANGLE

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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

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Primary wave D may again be complete. For Barchart data, there is a Morning Doji Star candlestick reversal pattern at the low.

For 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. The following movement may be an expanded flat correction for minor wave 2. Within the expanded flat, minute wave b would be a 1.73 length of minute wave a. This is longer than the common length of up to 1.38, but within the allowable guideline of no longer than 2.

Minute wave c would now be extremely likely to make at least a slight new low below the end of minute wave a at 1,183.36 to avoid a truncation and a very rare running flat.

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.

HOURLY CHART

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If minor wave 2 is completing as an expanded flat correction, then within it minute wave c must subdivide as a five wave motive structure, either an impulse or an ending diagonal.

Overlapping within downwards movement indicates a diagonal may be likely.

All sub-waves must subdivide as zigzags within an ending diagonal. Minuette wave (iv) must overlap minuette wave (i) price territory.

Within the zigzag of minuette wave (v), subminuette wave b may not move beyond the start of subminuette wave a above 1,206.35.

The diagonal would be expanding: minuette wave (iii) is longer than minuette wave (i), and minuette wave (iv) is longer than minuette wave (ii). Minuette wave (v) must be longer in length than minuette wave (iii) and so must end below 1,187.87.

Minute wave c would be extremely likely to make a new low below the end of minute wave a at 1,183.36 to avoid a truncation and a very rare running flat. If minor wave 2 ends about the 0.618 Fibonacci ratio of minor wave 1 at 1,176, then this would be achieved.

Minor wave 2 may not move beyond the start of minor wave 1 below 1,160.75.

TECHNICAL ANALYSIS

WEEKLY CHART

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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.

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

DAILY CHART

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Support below is now about 1,140.

Another small pennant pattern may be forming. However, this is not a very good example and does not immediately follow a strongly sloped flag pole. A downwards breakout would be expected. The target would be about 1,141.

The short term volume profile remains bearish, although slightly less so as today price fell of its own weight.

GDX WEEKLY CHART

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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. Now a gap lower this week can be used to calculate a new target at 17.37 for the short term.

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.

GDX DAILY CHART

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GDX has now closed below support on a strong downwards day with support from volume. New lows are the lowest for GDX since December 2016. This is extremely significant for GDX.

GDX is in a downwards trend. Bounces and consolidations may be used as opportunities to join the trend. The last small bounce looks now to be over.

The measuring gap at 19.74 – 19.45 provided resistance, which is about where the last bounce ended. This may continue to provide resistance for any future bounces or consolidations.

Looking back over the last 3 1/2 years at GDX, at the daily chart level, I see it can reach extreme levels and remain there while price continues to move a reasonable distance. Only when it has reached very extreme and then exhibits strong divergence may an end to a strong trend be indicated. I would advise members trading GDX at this time to take some time to look over price action of the last few years, with ADX and RSI especially, and study carefully what happened towards at the end of strong trends.

The short term target at 17.37, using the last measuring gap, may not be quite met if a low is in place.

The trend is very extreme at this stage. Strong bullish divergence remains between price and RSI, and ATR is now flattening off. It looks like for now this downwards trend is tiring and may be interrupted by a more time consuming consolidation or bounce to relieve extreme conditions. Resistance is still expected at 19.74. If resistance is overcome there, then a bounce to test prior extremely strong resistance at 20.80 may unfold. If this happens, it would offer a once in several years opportunity for a short position on GDX.

Published @ 09:30 p.m. EST.

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