Price is moving sideways. The Elliott wave counts remain unchanged.
Summary: Three long-term targets are now calculated for cycle wave c to end. Confidence in a new downwards trend may be had with a new low below 1,160.75.
For the short term, minor wave 2 may now test resistance about 1,300 – 1,310. Within this range is the 0.382 Fibonacci ratio of minor wave 1 at 1,306.69, which is the preferred target.
New updates to this analysis are in bold.
Grand SuperCycle analysis is here.
Last monthly charts are here. Video is here.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART – TRIANGLE
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This is the preferred wave count.
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.
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.
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 has just occurred. 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.
Three targets are calculated for cycle wave c. Cycle wave a lasted 4.25 years. Cycle wave b may be over in 3.17 years. Cycle wave c may last a minimum of 2 years and possibly up to 5 years.
DAILY CHART – TRIANGLE
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Further confidence in this wave count may be had now that the blue channel is breached.
Classic analysis offers good support to this wave count.
Cycle wave c must subdivide as a five wave structure, either an impulse or an ending diagonal. An impulse is much more common and that shall be how it is labelled unless overlapping suggests a diagonal should be considered.
A new trend at cycle degree should begin with a five wave structure on the daily chart, which will be labelled minor wave 1. A best fit channel is drawn about minor wave 1. This channel is breached by strong upwards movement on Friday, indicating minor wave 1 should be over and now minor wave 2 should be underway.
Minor wave 2 may not move beyond its start above 1,345.90.
HOURLY CHART
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Minor wave 2 may unfold over a few days. It would most likely subdivide as a single or multiple zigzag, but it may be any corrective structure except a triangle.
Minor wave 2 may end about either the 0.382 Fibonacci ratio at 1,306.69 or the 0.618 Fibonacci ratio at 1,321.94.
Minor wave 2 may not move beyond the start of minor wave 1 above 1,345.90.
Within minor wave 2 so far, both minute waves a and b now look to be over and minute wave c may be an incomplete five wave impulse. Minute wave c so far continues to find resistance about the lower edge of the blue channel copied over from the daily chart.
A channel is drawn about minor wave 2 using Elliott’s technique for a correction. When this pink channel is breached by at least one full hourly candlestick below and not touching it, that may be an indication that minor wave 2 may be over and minor wave 3 may then be underway.
Minor wave 3 would reach about 1.618 the length of minor wave 1 about 1,200. When the end of minor wave 2 is known with confidence, then the target for minor wave 3 may be calculated more accurately. It may change.
WEEKLY CHART – DOUBLE ZIGZAG
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It is possible that cycle wave b may be an incomplete 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 four fifths complete.
Within multiples, X waves are almost always zigzags and rarely triangles. Within the possible triangle of primary wave X, it is intermediate wave (B) that is a multiple; this is acceptable, but note this is not the most common triangle sub-wave to subdivide as a multiple. These two points reduce the probability of this wave count.
Intermediate wave (D) may be complete. The (B)-(D) trend line is almost perfectly adhered to with the smallest overshoot within intermediate wave (C). This is acceptable.
Intermediate wave (E) should continue to exhibit weakness: ATR should continue to show a steady decline, and MACD may begin to hover about zero.
Intermediate wave (E) may not move beyond the end of intermediate wave (C) below 1,160.75.
This wave count may now expect downwards movement for several weeks.
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.
ALTERNATE ELLIOTT WAVE COUNT
WEEKLY CHART
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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 now be complete. The target for primary wave 2 is the 0.618 Fibonacci ratio of primary wave 1. Primary wave 2 may not move beyond the start of primary wave 1 below 1,160.75.
A black channel is drawn about primary wave 1. Primary wave 2 may breach the lower edge of this channel.
Cycle wave III so far for this wave count would have been underway now for 27 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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There are now two bearish candlestick reversal patterns on the weekly chart: a Shooting Star and a Bearish Engulfing pattern. This supports the view that a high is in place.
Last weekly candlestick may not be considered a bullish reversal pattern as it does not come after a downwards trend at this time frame. The long lower wick is still bullish.
DAILY CHART
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There has been a shorter lived downwards trend at the daily chart level. That trend may now be considered over with a strong bullish candlestick reversal pattern that has support from volume and a bullish signal from On Balance Volume.
Look for a test of resistance about 1,300 to 1,310.
On Balance Volume remains above support and price remains above support. A back test of resistance is still expected.
GDX WEEKLY CHART
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The Bearish Engulfing pattern at the weekly chart level should still be given weight in this analysis. It signals an end to the upwards trend and a new downwards or sideways trend.
GDX DAILY CHART
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Friday saw an upwards breakout from a small consolidation that has support from volume and a breakaway gap. Look now for support at the breakaway gap at 21.89 and resistance above about 22.50 and then 22.90.
Published @ 06:16 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.
Hourly chart updated:
It is possible now that minor 2 may be a complete zigzag, it may end here at strong resistance in the 1,300 – 1,310 zone.
It is also possible that minor wave 2 could continue higher, final risk remains at 1,345.90.
The pink upwards sloping channel is the same, and for more risk averse traders this still illustrates how to find a lower risk entry point. Waiting for this channel to be breached by downwards movement gives some confidence that minor wave 2 is over. While price remains within this channel the risk is minor 2 could continue higher.
However, I will say that with price now at the upper edge of the pink channel that gives this zigzag a very typical look. C waves often end at the upper edge of these channels.
A target is again calculated for minor 3.
As always, risk management is the most important aspect of trading. Always use stops. Invest only 1-5% of equity on any one trade. Reduce position size until that 1-5% is met.
Thank you!