A small inside day for Friday leaves the Elliott wave count unchanged. The target remains the same.
Summary: The next target is 1,295. Look out for a possible further increase in upwards momentum towards this target. A relatively small blow off top may occur in coming days.
The final target for this bounce to end is 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.
Only three remaining wave counts have a reasonable probability and are published below: a triangle (the preferred wave count), a double zigzag, and a combination.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART – TRIANGLE
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 waves (A) and (B) may be complete. Intermediate wave (C) must subdivide as a five wave structure. Within intermediate wave (C), minor wave 2 may not move beyond the start of minor wave 1 below 1,181.06.
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.
When primary wave E is a complete three wave structure, then this wave count would expect a cycle degree trend change. Cycle wave c would most likely make new lows below the end of cycle wave a at 1,046.27 to avoid a truncation.
It is possible now that primary wave E may end early in January 2019. Some reasonable weakness should be expected at its end. Triangles often end with declining ATR, weak momentum and weak volume.
DAILY CHART – TRIANGLE
Primary wave E may now be nearing its final stages for this wave count.
Primary wave E should subdivide as a zigzag. Intermediate waves (A) and (B) may now be complete. Intermediate wave (C) may be underway.
Within intermediate wave (C), minor wave 1 fits perfectly as a five wave impulse. Minor wave 2 is a deep zigzag.
Minor wave 3 may be an almost complete impulse, now within the final fifth wave. The target is now calculated at two degrees and so has a higher probability.
Gold often exhibits swift strong fifth waves. This tendency is especially prevalent in fifth waves to end third wave impulses. Look out for a possible blow off top to end minute wave v of minor wave 3.
Although the triangle for cycle wave b is expected to end with weakness, it is still possible that a smaller blow off top may occur at the end of minor wave 3 just ahead.
Within minute wave v, minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,232.98.
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). It may last a total Fibonacci 21 or 34 weeks. So far it has lasted 18 weeks. Primary wave E may not move beyond the end of primary wave C above 1,365.68.
HOURLY CHART – TRIANGLE
The hourly chart focusses on the start of minute wave v. Minute wave v must subdivide as a five wave structure, either an impulse or ending diagonal. An impulse is much more likely as these are more common structures.
So far minuette waves (i) and (ii) may now be complete.
Minuette wave (iii) is exhibiting an increase in upwards momentum. MACD supports this wave count.
Within minuette wave (iii), so far subminuette waves i and ii may be complete. Subminuette wave ii may not move beyond the start of subminuette wave i below 1,241.62.
With two overlapping first and second waves complete to start minute wave v, this wave count now expects to see a further increase in upwards momentum early next week as the middle of a third wave within this fifth wave unfolds.
WEEKLY CHART – DOUBLE ZIGZAG
It is 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 waves A and B may be complete. Minor wave C must subdivide as a five wave structure. Within minor wave C, minute wave ii may not move beyond the start of minute wave i below 1,181.06.
Intermediate wave (D) would most likely subdivide as a single zigzag.
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
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.
No upper invalidation point is given on this chart. Minor wave X may still continue higher. There is no Elliott wave rule stating a minimum nor maximum length for X waves within multiples.
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 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.
Minor wave X now only fits as a possible triple zigzag which could possibly be complete.
While double zigzags are fairly common, triples are reasonably rare. I have found four examples at the daily chart level or higher for Gold back to 1976.
However, X waves within multiple zigzags (which is the structure seen here for intermediate wave (B) ) are very rarely themselves multiples.
The probability of this wave count is substantially reduced. It no longer warrants a daily chart.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
On Balance Volume has made a lower low than its prior low 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.
Volume this week suggests more upwards movement ahead. The slightly long upper wick warns a small pullback may unfold first; it may be complete intra-week.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Support on On Balance Volume may assist to force any pullback here to be relatively brief and shallow.
With ADX indicating an upwards trend, Stockcharts at overbought should be ignored. This indicator may remain extreme for long periods of time during a strong trend.
On balance this chart is very bullish.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price has been very strongly rejected just above 20.80.
The very strong Bearish Engulfing reversal pattern indicates the upwards trend is now over. Expect GDX to go on to make new lows below 17.28.
Published @ 09:28 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.
Updated analysis for 27th December:
The doji yesterday has amounted to no more than a brief pause. With a strong bullish candlestick today, expect more upwards movement for the short term at least.
RSI is nearing overbought, but it can get there and price can still move quite a bit further. Only when it is strongly overbought and / or exhibits bearish divergence with price after reaching overbought would it tell us to expect an end to the trend.
ADX is still not yet extreme.
The expectations remain the same.
This is a very clear upwards trend.
Preferred daily Elliott wave count:
This is unfolding as expected.
Still a warning to look out for a potential small blow off top right ahead. This doesn’t have to happen, it’s just a tendency of commodities to look out for.
Also, this bears repeating, when price shocks occur and price moves really fast, watch for the direction to reverse during the shock. Most (not all) price shocks are mostly or fully retraced. It is possible here that minute v may end minor 3 on very strong upwards movement. The reversal may be quick and sharp. If members are holding long positions (and I surely hope you all are, if you’ve been following this analysis over the last few weeks) then you might like to keep a close eye on markets looking for a possible price shock / blow off top and take profits as soon as you see a sharp reversal.
The target remains the same. The invalidation point remains the same.
Keep redrawing the channel as price makes new highs: from minor 1 to the last high, a parallel copy on the low of minor 2. Use the lower edge for final support.
Hourly chart updated:
Now moving close to the end of minute wave v.
I’m leaving the invalidation point the same in case I have my labelling of minuette wave (iii) wrong.
Brief update for the 26th December:
Techincal Analysis:
The doji candlestick today sounds a warning of a possible sooner than expected end to minor wave 3.
However, a doji on its own is not a candlestick reversal pattern. This is a warning only. Next session will be important. If it completes a red downwards day then there would be a reversal signal. If not, then the warning sounded by the doji may come to nothing.
Doji may appear as a brief pause within a trend. This trend is not yet extreme, there is still some support from volume for upwards movement.
Elliott wave count:
Be aware still there may still be a strong piece of upwards movement immediately ahead. While minor wave 3 does not have to end with strength, this is a tendency of commodities. It is a possibly to look out for.
The invalidation point may now be moved higher. When minor wave 3 is complete then a correction for minor wave 4 should unfold. It may not move into minor wave 1 price territory.
Minor wave 4 would most likely be a sideways flat, combination or triangle. It may last about one to four weeks.
Redraw the channel and keep redrawing it as price moves higher; the first trend line from the end of minor wave 1 to the latest high, then a parallel copy down on the end of minor wave 2. When minor wave 3 is over then the lower edge of this channel may provide support for minor wave 4.
Hourly chart:
The shorter term invalidation point is higher. Within minute wave v, the correction for minuette wave (iv) may not move into minuette wave (i) price territory.
The target may be widened to a zone, calculated at three degrees. The lower edge of the zone may be favoured as it is calculated at the lowest degree.
Thank you Lara, these updates you do help us a lot . I look out for them.
Great to hear Keith 🙂
Minor 3 has now broken out above the upper edge of the pink Elliott channel drawn about it. That may happen at the end of a third wave impulse when it exhibits a swift strong fifth wave.
Minute v may continue to gather strength this week and next.
Look out for minuette (iv) to possibly be rather quick.
When fifth waves within third wave impulses are strong, the fourth wave corrections towards the end of the impulse can be quite quick.
Lara, thx for the update!
Again, members should have nice profits today on Gold.
Still expect a possible blow off top ahead.
A word about price shocks: when they occur, they are almost always fairly quickly reversed, sometimes to be fully retraced even. If we see a price shock to the upside that may be the end of minor wave 3, minor wave 4 should begin there and may begin with a quick sharp reversal.
So traders may be best advised to take profits as soon as you see price reverse after moving up very strongly. Use the target, but be aware price may fall slightly short of it.
As always, with trading advice this comes with very strong risk management advice. Invest only 1-5% of equity on any one trade, and ALWAYS trade with stops.
Merry Christmas everybody!
Thanks Lara,
and a very Merry Christmas to you and your family and all the members here.
Happy holidays to Lara and all the members!