GDX continues to move towards the short term target at 17.37.

Gold looks to be neutral short term, with conflicting bullish and bearish indicators.

Summary: GDX analysis remains bearish for the bigger picture, but now strong bullish divergence and a little weakness in volume today suggest another bounce here or very soon.

Gold may still continue lower this week towards a target at 1,132. If a bounce develops here for Gold, then it could last several weeks, ending about 1,305 – 1,310.

The bigger picture for both markets remains bearish.

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 all reviewed at the end of last week. Video analysis is here. Text analysis is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART – COMBINATION

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 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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This wave count sees the last upwards wave a completed zigzag now labelled minute wave iv.

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).

Within the diagonal, subminuette wave iv may not move beyond the start of subminuette wave ii above 1,208.28.

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.

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.

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, but it may not move beyond the end of minuette wave (ii) above 1,208.28.

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

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.

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.

The last week is inconclusive. Price moved higher, but the balance of volume was downwards and the candlestick closed red. The short term volume profile remains bearish, which supports the idea of more downwards movement shortly.

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

DAILY CHART

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

Support below is now about 1,140.

When a trend is very extreme, it is time to look out for candlestick reversal patterns and a possible trend reversal to the opposite direction, or a reasonable sideways move to relieve extreme conditions. Here, there is a Hammer reversal pattern at the low (it is almost a Dragonfly doji, but there is a little too great an upper shadow for that pattern). This is a warning that a low may now be in place.

The last small bounce has relieved extreme oversold conditions. There is again room for price to fall.

A low in place may now only be seriously considered if the channel on the Elliott wave counts is breached by upwards movement.

Overall, this chart is today judged to be neutral. There are conflicting bullish and bearish signals. It may be wisest at this time to wait for price to indicate which Elliott wave count is correct, either with a breach of the Elliott channel in the daily combination chart or a new low below 1,160.75.

GDX WEEKLY CHART

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.

The target for this downwards trend to end is calculated using the measured rule. The widest part of the consolidation is added to the breakout point at 20.80 giving a target at 16.02. That is not yet met.

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 last weekly candlestick is bearish with a long upper wick and a close near the low for the week. A lack of support from volume is not a concern as price can continue to fall of its own weight.

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.

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 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.

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.

A possible target for this downwards trend to end may be now calculated using the measured rule, giving a target about 16.02.

The short term target at 17.37, using the last measuring gap, may not be quite met if a low is in place today; but, it is also again possible it may be met tomorrow.

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 relive 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 @ 08:49 p.m. EST.

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