A strong bounce at the end of the week creates a candlestick pattern on the daily chart that has support from volume. The short-term expectation is adjusted, but the mid and long-term Elliott wave targets remain the same as does the channel on the daily chart.
Summary: For the short term, look for a bounce to possibly end about 1,289. Use the channels on the daily chart to show where price may find resistance. Thereafter, expect the downwards trend to resume.
The mid-term Elliott wave target is at 1,220. The classic analysis target is at 1,217. Risk is just above the upper edge of the base channel on the daily chart.
Look out now for a possible strong increase in downwards momentum tomorrow or next week.
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.
Grand SuperCycle analysis is here.
Last monthly charts are here. Video is here.
MAIN ELLIOTT WAVE COUNT
WEEKLY CHART – TRIANGLE
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 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 has exhibited reasonable weakness as it came 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
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 base channel is drawn about minor waves 1 and 2. There will be bounces and consolidations on the way down. The last bounce has found resistance at the upper edge of the base channel. Towards its middle or end the power of a third wave may be able to break below support at the lower edge of the base channel. The upper edge of the base channel may be used to calculate a trailing stop for short positions.
Minor wave 3 may only subdivide as an impulse. Within the impulse, minute waves i and ii may now be complete . Minute wave iii may only subdivide as an impulse. Within minute wave iii, minuette wave (i) may be complete. Minuette wave (ii) may be continuing sideways as a regular flat correction. Draw a small channel about minuette wave (ii). Look for resistance about the upper edge. If price moves above that trend line, then look for next resistance about the upper edge of the taupe base channel.
This wave count now expects there may soon be a completed series of three overlapping first and second waves. This expects an increase in downwards momentum as the middle of a third wave unfolds.
It is possible that minute wave iii and / or minor wave 3 may end with a selling climax; either or both may exhibit a swift and strong fifth wave to end the impulse. This behaviour is typical of commodities, and this tendency is especially prevalent for third wave impulses.
HOURLY CHART
The degree of labelling within the last bounce labelled subminuette wave a is moved down one degree. Minuette wave (ii) may be continuing sideways as a regular flat correction.
Subminuette waves a and b both subdivide as three wave structures. Subminuette wave b is a 0.99 correction of subminuette wave a, meeting the minimum requirement for a flat correction of 0.9.
Within regular flat corrections, wave C is most commonly about equal in length with wave A; this gives a target for subminuette wave c. Regular flats usually fit well within trend channels; look for resistance about the upper edge of the orange channel.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,310.17.
Within subminuette wave c, micro wave 4 may not move into micro wave 1 price territory below 1,271.59.
As soon as subminuette wave c makes a new high by any amount at any time frame above the end of subminuette wave a at 1,288.37, a truncation would be avoided. It may end at any time once this condition is met.
WEEKLY CHART – DOUBLE ZIGZAG
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.
Intermediate wave (E) should subdivide as a zigzag labelled minor waves A-B-C. Zigzags subdivide 5-3-5, exactly the same the start of an impulse.
The preferred wave count labels downwards movement minor waves 1-2-3, and this wave count labels downwards movement minor waves A-B-C. At the daily and hourly chart levels, the subdivisions for both wave counts are seen in the same way.
ALTERNATE ELLIOTT WAVE COUNT
WEEKLY CHART
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 37 weeks. It should be beginning to exhibit some support from volume, increase in upwards momentum and increasing ATR. However, 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
Click chart to enlarge. Chart courtesy of StockCharts.com.
Two long lower wicks now suggest a bounce here may continue, but volume suggests it may be shallow and short lived.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
From August 2018 Gold moved higher with a series of higher highs and higher lows. This series remained intact until the 1st of March 2019 when a lower low was made. At that stage, it was possible that Gold had seen a trend change.
There is now a new series of three lower swing highs and two lower swing lows. This supports the idea that there has been a trend change and Gold is in a new downwards trend. ADX agrees.
A complex Head and Shoulders pattern is identified. The neck line has been breached. A target is at 1,217.
Overall, the short-term volume profile is bearish, but reasonably strong volume for Friday and a Bullish Engulfing candlestick pattern suggest a bounce here may be incomplete. Look for resistance first about 1,285, and above that again at the neck line of the Head and Shoulders pattern.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
There is now a series of two lower highs and lower lows at the weekly chart level. GDX may have seen a trend change to downwards, but ADX does not yet agree. The bearish signal from On Balance Volume supports this view.
Price has closed below 20.80. With volume pushing price lower, expect downwards movement to continue.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A target calculated from the triangle width is now at 19.58.
Published @ 11:27 p.m. EST.
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New updates to this analysis are in bold.
Hourly chart update:
Subminuette c has not yet moved above Subminuette a. So it needs to move a little higher if the short term count is correct.
“Gold Has Become Money Again
Fittingly, gold is an alternative to the dollar. In the past, it has been a protector or hedge against the debasement of currency, because it is less susceptible to government manipulation. Last year, central banks purchased a near record 23 million ounces, becoming the world’s largest buyer, adding to their reserves at the highest pace in 50 years. Central banks keep dollars in reserve but under the new Basel III standard, gold has taken on more importance and can be today valued the same as dollars. Basel III returns gold as a meaningful reserve asset whereby, gold is now risk weighted as a Tier I asset as part of total reserves. Thus, gold reserves held on central banks’ balance sheet can be valued at 100 percent allowing them to increase their liquidity and revalue their balance sheets upward. Gold has become money again. ”
If above is true why gold will go down while all CBs want to hold gold as tier I asset in their portfolio along with Dollar????
US Dollar is also tier I asset and considered reserve currency.
Gold will do what it wants to do, which may not be what the banks want it to do.
A core understanding of EW theory is it is social mood which moves the markets, not big players like central banks and governments.
I know this is a really unpopular view and so many members here may be shaking their heads as they read this.
Recall the crash of the Shanghai Stock Exchange. The CCP, as close to a God of markets if there ever was one in that they have more control over their market and population than most other countries globally, tried everything to stop price from falling. And they could not. It kept falling until it found its natural low, not in response to anything the government or the banks did.
IMO that is a really strong example of the idea that banks and governments cannot influence the primary trend of a market. They can influence small movements for sure, but not a large primary trend.
Lara: “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.”
Isn’t true that the rule of alternation applies here very well for the third Alternate wave count?? . Elliott Wave theory does not specifies behaviors to markets being analysed.
Gold is not traded as commodity but as a monetary metal and affected by the credit cycle and monetary implications on economy.
Just a suggestion. I am not the expert here.
It appears wave 2 was short and swift and wave four was long.
How did gold’s waves 2 and 4 count relatively behaved in 1999 when it came off Gordon Brown’s bottom at $256. Thus launching a major trend change?
https://www.mtpredictor.com/The-rule-of-Alternation
Gold is a commodity.
That is how it typically behaves.
Sure, alternation could be used to explain a big fourth wave and a quick second wave, but the proportions really are horrible. And in that link which shows alternation, there is a big problem. That fourth wave is shown as a five wave impulse. Which is wrong.
The bounce from the low on 25th August 1999 was again a very typical bounce for Gold. A time consuming second wave, and a quick fourth wave. I’ve counted it with wave 2 lasting 7 days and wave 4 just over 1 day (almost 2 as there are two red candlesticks).
Looks like Lara changed the hourly count after looking at the daily and technical charts. Another reason for the larger bounce here is likely that price bounced up off the strong support trendline in place since last August. It may take a couple of tries to break below.
https://www.tradingview.com/x/6wFgWZr1/
A very nice trend line indeed. Yes, that explains the bounce. I’ll add that trend line to my daily charts, thanks Dreamer.