Price remains within the consolidation zone. While strong support holds, the preferred Elliott wave count will remain at a critical juncture.

Summary: A new high on an upwards day with support from volume would be a classic upwards breakout. If that happens, then the target is at 1,338.

A new low now below 1,302.86 would indicate a high may be in place.

Some indication of a trend change is seen by a weak bearish engulfing reversal pattern and closure of the last gap.

For reasonable confidence in a trend change the remaining things may be seen:

1. A new low below 1,302.86.

2. A breach of the blue channel on the daily chart.

Once a trend change is indicated, then a new wave down to last years may be expected to make new lows below 1,046.27.

New updates to this analysis are in bold.

Grand SuperCycle analysis is here.

Last historic analysis with monthly charts is here.

Only two remaining wave counts have a reasonable probability and are published below: a triangle (the preferred wave count) and a double zigzag.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART – TRIANGLE

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Cycle wave b may be a complete regular contracting triangle. If it continues further, then 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.

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 looks like it is unfolding as a single 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.

This wave count would now 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 could have been over the last high. Some reasonable weakness should be expected at its end. Triangles often end with declining ATR, weak momentum and weak volume.

If this weekly wave count is correct, then cycle wave c downwards should develop strength, ATR should show some increase, and MACD should exhibit an increase in downwards momentum.

DAILY CHART – TRIANGLE

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Primary wave E should subdivide as a zigzag. Intermediate waves (A) and (B) may now be complete. Intermediate wave (C) may be complete, but as yet there is no confidence in a high.

It is now possible to see minor wave 5 complete at the daily and hourly chart level. However, it is always safest to assume the trend remains the same until proven otherwise. For reasonable confidence in a trend change the remaining two things need to be seen:

1. A new low below 1,302.86.

2. A breach of the blue channel.

If minor wave 5 continues, then the next target is at 1,338 where minor wave 5 would reach equality in length with minor wave 1.

FIRST HOURLY CHART

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It is possible that minute wave i may have been over at the last low. This movement is labelled as a five wave impulse.

Minute wave ii will fit as a complete zigzag.

A target is calculated for minute wave iii using the most common Fibonacci ratio to minute wave i.

Minute wave iii may only subdivide as an impulse. Within minute wave iii, minuette wave (i) may now be complete and minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,315.34. Minuette wave (ii) may end about the 0.618 Fibonacci ratio of minuette wave (i).

A base channel is drawn about minute waves i and ii. The first trend line is drawn from the last high on the 31st of January to the high labelled minute wave ii, then a parallel copy is placed on the low of minute wave i. If this wave count is correct, then upwards bounces may find resistance about the upper edge of the base channel.

Minute wave iii should have the power to break below the lower edge of the base channel.

SECOND HOURLY CHART

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It is also possible that the last downwards wave subdivided as a three, a zigzag. This may be another correction within an ongoing upwards trend.

The target for minor wave 5 to end remains the same.

Within minor wave 5, minute waves i and ii may be complete. Within minute wave iii, minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,302.62.

WEEKLY CHART – DOUBLE ZIGZAG

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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 iv should now be over. Within minute wave v, no second wave correction may move beyond its start below 1,276.84.

Intermediate wave (D) would most likely subdivide as a single zigzag. Intermediate wave (D) should end at the upper (B)-(D) trend line for this wave count, so that the triangle adheres neatly to this trend line. That price point is about 1,354. This wave count now requires upwards movement to continue. It would not be acceptable for the upper (B)-(D) trend line to have breaches or substantial overshoots. Elliott wave triangles almost always adhere very neatly to their trend lines.

Intermediate wave E should continue to exhibit weakness: ATR should continue to show a steady decline, and MACD may begin to hover about zero.

This wave count may now expect choppy overlapping movement in an ever decreasing range for a few 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 – ALTERNATE BULLISH

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Because the preferred wave count is at a critical juncture in expecting a cycle degree trend change, it is time to consider an alternate which expects the continuation of the current upwards trend.

It is possible that the low in December 2015 was the end of a bear market and that Gold has been in a basing action for the past three years. Downwards movement to that low will subdivide as a double zigzag, a corrective structure.

If Gold is in a new bull market, then it should begin with a five wave structure upwards on the weekly chart. However, the biggest problem with this wave count is the structure labelled cycle wave I because this wave count must see it as a five wave structure, but it looks more like a three wave structure.

Commodities often exhibit swift strong fifth waves that force the fourth wave corrections coming just prior to be more brief and shallow than their counterpart second waves. It is unusual for a commodity to exhibit a quick second wave and a more time consuming fourth wave, and this is how cycle wave I is labelled. The probability of this wave count is low due to this problem.

Cycle wave II subdivides well as a double combination: zigzag – X – expanded flat.

Cycle wave III may have begun. Within cycle wave III, primary wave 1 may be an incomplete impulse. Within primary wave 1, intermediate wave (4) may not move into intermediate wave (1) price territory below 1,201.14.

A black Elliott channel is drawn about primary wave 1. Intermediate wave (4) may find support about the lower edge.

Cycle wave III so far for this wave count would have been underway now for 25 weeks. It should be beginning to exhibit some support from volume, increase in upwards momentum and increasing ATR. However, volume continues to decline, ATR continues to decline and is very low, and momentum is weak in comparison to cycle wave I. This wave count lacks support from classic technical analysis.

TECHNICAL ANALYSIS

WEEKLY CHART

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Last weekly candlestick so far looks like a small correction within an ongoing upwards trend. Volume is not pushing price lower and the lower candlestick wick is bullish.

DAILY CHART

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Using the flag pole length, a target at 1,359 is calculated. This target looks rather optimistic.

The last gap is now closed, correctly labelled an exhaustion gap. This indicates the target for the flag pole may not be met. This adds a little further confidence that a high may now be in place.

With the trend now extreme and a bearish candlestick reversal pattern, some caution regarding targets would be advisable. However, the Bearish Engulfing candlestick has a small real body; this is not a strong Bearish Engulfing pattern.

The purple resistance line for On Balance Volume needed to be adjusted to better sit on as many highs and lows as possible. A reaction downwards today is slightly bearish.

The short-term volume profile is slightly bearish. MACD gives a bearish crossover.

The bottom line for the short term though is strong support about 1,300 needs to be broken before downwards movement may continue. While price remains above 1,300, this movement of the last seven sessions looks like it may be a small pullback within an ongoing upwards trend.

GDX WEEKLY CHART

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A small range inside week looks like a small pause within an ongoing upwards trend at this stage.

GDX DAILY CHART

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With ADX now indicating the trend as extreme and RSI overbought at the high, the risk of a trend change has increased.

However, so far movement over the last seven sessions looks more like a small pullback within an ongoing upwards trend than the start of a new downwards trend.

Published @ 09:45 p.m. EST.

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