An upwards breakout from a small Elliott wave triangle or a classic pennant pattern was expected, and this is what has happened.
Candlestick analysis is used today to determine if the target remains likely.
Summary: A long upper wick today suggests the upwards breakout may be short lived. Another multi week consolidation may now begin, which may end about 1,217 and may not move below 1,201.14. This view would have confidence with a new low below 1,223.20.
A new high above 1,239.02 would indicate that upwards movement should continue towards a target at either 1,246 – 1,247 (Elliott wave) or 1,281 (classic analysis).
The final target for this bounce to end is at strong resistance about 1,305 – 1,310.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
Last historic analysis with monthly charts is here.
There are four remaining weekly wave counts at this time for cycle wave b: a triangle, a flat, a combination, and a double zigzag.
At this stage, they will now be presented roughly in order of probability. The triangle and the double zigzag wave counts have about an even probability; the combination and flat wave counts now look less likely.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART – TRIANGLE
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Cycle wave b may be an incomplete regular contracting triangle. Primary wave E may not move beyond the end of primary wave C above 1,365.68. Within primary wave E, intermediate wave B may not move beyond the start of intermediate wave A below 1,160.75.
Four of the five sub-waves of a triangle must be zigzags, with only one sub-wave allowed to be a multiple zigzag. 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 E would most likely be a single zigzag. It is also possible that it may subdivide as a triangle to create a rare nine wave triangle.
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.
Primary wave E may now continue higher as a large three wave structure.
DAILY CHART – TRIANGLE
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Primary wave E should now be underway for this wave count.
Primary wave E should subdivide as a zigzag. Intermediate wave (A) should subdivide as a five wave structure.
Within intermediate wave (A), so far minor waves 1 through to 3 may now be complete. Minor wave 3 exhibits no Fibonacci ratio to minor wave 1. Minor wave 2 was a relatively shallow 0.497 flat correction. Minor wave 4 may exhibit alternation as a deeper zigzag, or it may also be a more shallow sideways combination or triangle.
Minor wave 4 may not move into minor wave 1 price territory below 1,201.14.
Minor wave 2 lasted 27 sessions. Minor wave 4 may exhibit reasonable proportion to minor wave 2; it may last about a Fibonacci 21 or 34 sessions. If minor wave 4 unfolds as a zigzag, then it may be quicker, possibly lasting about a Fibonacci 13 sessions.
Redraw the channel about intermediate wave (A) using Elliott’s first technique. Draw the first trend line from the ends of minor waves 1 to 3, then place a parallel copy on the end of minor wave 2. If it is time consuming enough, then minor wave 4 may find support about the lower edge of this channel.
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. It may also last a total Fibonacci 21 or 34 weeks. So far it has lasted only 8 weeks. Primary wave E may not move beyond the end of primary wave C above 1,365.68.
HOURLY CHART – TRIANGLE
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Minor wave 3 may now be a complete impulse.
Gold has a tendency to exhibit surprisingly brief and short (but still strong) fifth waves out of its fourth wave triangles. This tendency, along with the long upper candlestick wick on the daily candlestick for this session, indicates minute wave v may be over at today’s high.
Within minor wave 3, minute wave iii is just 1.88 short of 1.618 the length of minute wave i. If minute wave v is over at today’s high, then it does not exhibit a Fibonacci ratio to either of minute waves i or iii, which is acceptable because Gold does not always exhibit a Fibonacci ratio for all three actionary waves of its impulses.
Minor wave 4 would most likely subdivide as a zigzag, although it may still subdivide as any corrective structure. Within minor wave 4, no second wave correction nor B wave may move beyond its start above 1,239.02.
HOURLY CHART – TRIANGLE – ALTERNATE
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It is also possible that minute wave v may still continue higher. The target remains the same.
Within minute wave v, the correction for minuette wave (iv) may not move into minuette wave (i) price territory below 1,223.20.
If minute wave v continues higher, then it may last a few more days.
WEEKLY CHART – DOUBLE ZIGZAG
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It is also possible that cycle wave b may be a double zigzag or a double combination.
The first zigzag in the double is labelled primary wave W. This has a good fit.
The double may be joined by a corrective structure in the opposite direction, a triangle labelled primary wave X. The triangle would be about three quarters complete.
Within the triangle of primary wave X, intermediate wave (C) should be complete. Within intermediate wave (D), minor wave B may not move beyond the start of minor wave A below 1,160.75.
Intermediate wave (D) would most likely subdivide as a single zigzag. The subdivisions at the daily and hourly chart level for this wave count would be the same as for the first triangle wave count above; a zigzag unfolding higher would be labelled A-B-C.
This wave count may now expect choppy overlapping movement in an ever decreasing range for several more months.
Primary wave Y would most likely be a zigzag because primary wave X would be shallow; double zigzags normally have relatively shallow X waves.
Primary wave Y may also be a flat correction if cycle wave b is a double combination, but combinations normally have deep X waves. This would be less likely.
This wave count has good proportions and no problems in terms of subdivisions.
WEEKLY CHART – COMBINATION
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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 double zigzag. 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 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 a double zigzag.
The first zigzag may be complete, labeled minor wave W. The double may now be joined a complete three in the opposite direction, a zigzag labelled minor wave X. X waves within double zigzags are usually fairly shallow and often also reasonably brief.
For this wave count, minor wave Y downwards should now continue.
At the hourly chart level, the subdivisions for this wave count are the same as the two published hourly charts above. It is possible that minuette wave (v) could be complete today, but it is also possible that it may move higher for a few more days.
WEEKLY CHART – FLAT
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It is possible that cycle wave b may be a flat correction. Within a flat correction, primary wave B must retrace a minimum 0.9 length of primary wave A at 1,079.13 or below. Primary wave B may make a new low below the start of primary wave A at 1,046.27 as in an expanded flat correction.
Only a new low reasonably below 1,123.08 would provide reasonable confidence in this wave count.
Intermediate wave (C) must subdivide as a five wave structure; it may be unfolding as an impulse. Within intermediate wave (C), minor waves 1 through to 4 may be complete. If it continues further, then minor wave 4 may not move into minor wave 1 price territory above 1,307.09.
The blue channel is drawn using Elliott’s second technique. Minor wave 5 may end at support about the lower edge of this channel.
Minor wave 2 was a double zigzag lasting nine weeks. Minor wave 4 exhibits little alternation as a single zigzag and reasonable proportion lasting ten weeks.
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.
The short term volume profile and the long upper candlestick are bearish this week. Some downwards or sideways movement next week looks most likely.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
With support from volume, today completes an upwards breakout from the small pennant pattern. The target is calculated about 1,281.
However, the long upper candlestick wick is a warning that the target may be too optimistic. It may also be an indication that a quick back test of support at prior resistance may occur over the next very few days. Look for support initially at 1,235, and below that at the upper pennant trend line. If price closes below the upper pennant trend line, then the upwards breakout may have been more short lived than the target expects.
While price remains above 1,235, it would be safest to assume the upwards breakout is true and that price may now continue upwards towards the target at 1,281.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
GDX had a large consolidation that lasted from January 2017 to August 2018. A downwards breakout below support at 20.80 in early August 2018 is highly significant. The breakout had support from volume, which adds confidence.
Upwards movement of the last five weeks would most likely be a bounce to backtest resistance at 20.80. If price does reach up to this point, then the probability of a quick turn there and a strong downwards trend is highly likely.
A technical principle is the longer price consolidates, the longer and stronger the resulting trend may be. The downwards trend developing here may last over a year.
A target for the eventual low is about 16.02.
The doji last week puts the short term upwards bounce from bullish to neutral.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
It now looks like GDX may be curving back up to test very strong resistance about 20.80. If it does get up to this point, then that may offer a very good entry point for a short position which may be held for a reasonably long term.
Although today saw price break out above the flag pattern, price could not close above the upper edge. The flag pattern no longer looks right and is discarded.
There is support today for upwards movement from volume. With an upwards trend in place, expect more upwards movement to next resistance about 20.80, which is very strong indeed.
Published @ 09:21 p.m. EST.
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Careful risk management protects your trading account(s).
Follow my two Golden Rules:
1. Always trade with stops.
2. Risk only 1-5% of equity on any one trade.
Here’s one possible approach to trading consolidations, but a warning, this is for more experienced traders only.
First, determine where support and resistance lie. This cannot be done right at the start of a consolidation, it needs at least one complete swing for initial identification.
Next, determine the time frame in which Stochastics reaches overbought when price is at resistance, and oversold when price is at support.
Use Stochastics along with resistance and support to identify when one swing ends and the next begins.
What can go wrong? Lots! Resistance and support can be overshot (sometimes by quite a bit) before price turns and ends one swing and begins the next. Movement from resistance to support and back again is not in a straight line, price behaviour is choppy and overlapping, with lots of whipsaws.
Systems used to trade consolidations are generally characterised by many small profits and a few large losses. This system outlined above may sound simple (and it is) but price behaviour makes implementation very difficult.
The best approach for less experienced traders is to patiently sit out and wait for the consolidation to mature, either entering in the expected breakout direction prior to a breakout (and I’ll be trying to identify this for you), setting up a hedge, or most safely entering after a confirmed breakout in the direction of the next trend.
If anyone has any questions, ask here in comments.
Minor 3 does indeed look to be over.
Now expecting another choppy consolidation to last weeks for minor 4. Not the best trading opportunity, sadly.
When minor 4 is done, then another upwards breakout would be expected. The mid term trend for now is up.