A little upwards movement provides a little short-term clarity. The target is now close by.
Summary: The target is at 1,338 to 1,341.
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.
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 expect a cycle degree trend change as imminent. Cycle wave c would most likely make new lows below the end of cycle wave a at 1,046.27 to avoid a truncation.
Primary wave E should exhibit reasonable weakness as it comes to an 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 again 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 following still needs to be seen:
1. A new low below support at 1,300.
2. A breach of the blue channel.
HOURLY CHART
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The hourly chart focusses on the strucutre of minor wave 5.
Minor wave 5 may be incomplete and may require only one final high. The target is widened to a $3 zone calculated at two degrees.
A best fit channel is drawn about minor wave 5. A breach of the lower edge of this channel by downwards (not sideways) movement would be the very first indication that minor wave 5 may possibly be over.
While minor wave 5 may be continuing higher, minute wave iv may not move into minute wave i price territory.
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 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 1,302.62.
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 1,352. 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
The NYSE has been closed this Monday for Washington’s Birthday public holiday. StockCharts provides NY session only data. There is no new data to update this classic technical analysis section today.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Strong support about 1,300 continues. For the short term, the last two weeks look like a small consolidation within the ongoing upwards trend.
With the trend extreme at this time frame, upward movement may be limited.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Friday closed above the upper trend line of the flag without support from volume, so this upwards breakout is suspicious. Upwards breakouts require support from volume for confidence.
A target using the flag pole would be at 1,375.
GDX WEEKLY CHART
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A downwards week closes green and the balance of volume is upwards. Upwards movement within the last week lacks support from volume.
ADX indicates an upwards trend. RSI indicates there is room for price to continue higher. Next resistance is about 23.0, and there is strong resistance above about 25.5.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
For the short term, GDX is noticeably more bullish than Gold. The upwards breakout from its flag pattern has a little support from volume, and Friday’s candlestick has a bullish long lower wick and an almost shaven head.
The target from the last flag pattern is calculated at 24.65.
Published @ 08:30 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.
It’s possible again that Gold may have found a high. The structure is complete, the target is almost met. The ? is over whether or not this upwards trend is about to end.
We can’t know that until there are signs of a reversal, and they come after a high, not at a high.
Signs of a reversal now would be:
1. A bearish candlestick pattern on the daily chart.
2. A breach of the blue channel on the daily chart.
3. A break below support of 1,300.
Assume the trend remains the same, until proven otherwise, in your trading. Assume upwards movement will continue, until we have proof it has ended.
Be flexible and cautious though right now. Price is in a zone of very strong resistance and the trend is extreme.