A bounce was expected for the short term, which is exactly what has happened for the session.

Summary: Friday’s high may have been the end of cycle wave b triangle. A downwards breakout may be beginning.

A new target is at 1,014. Thereafter, if price keeps falling, the next target is at 808. Along the way down, a new low below 1,160.75 would add strong confidence in the main Elliott wave count.

For the short term, a small bounce may continue higher for one or two more sessions for minor wave 2.

Grand SuperCycle analysis is here.

Last monthly charts are here. Video is here.

MAIN ELLIOTT WAVE COUNT

WEEKLY CHART – TRIANGLE

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The basic Elliott wave structure is five waves up followed by three waves back (in a bull market). At this time, the preferred Elliott wave count sees Gold as still within three waves back, which began at the all time high in September 2011.

Five waves up are labelled 1,2,3,4,5. Three waves back are labelled A,B,C.

This wave count sees Gold as now about two thirds through the three waves back. The three wave structure is labelled cycle waves a, b and c.

The triangle for cycle wave b may be complete. Primary wave E may have ended with an undershoot of the A-C trend line. If it continues higher, then primary wave E may not move beyond the end of primary wave C above 1,365.68.

Draw a channel about the zigzag of primary wave E using Elliott’s technique. Draw the first trend line from the start of intermediate wave (A) to the end of intermediate wave (B), then place a parallel copy on the end of intermediate wave (A). Now that it is possible that intermediate wave (C) may be over, a breach of the channel by downwards movement would be a strong indication that the triangle for cycle wave b is over and cycle wave c downwards may then have begun.

DAILY CHART – TRIANGLE

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It is possible that intermediate wave (C) may be complete in its entirety. Minor wave 4 may have been very brief as was minute wave iv. This follows a common pattern for Gold.

Reasonable confidence that a high is in place would come with a breach of the taupe best fit channel. Thereafter, strong confidence would come with a breach of the black Elliott channel.

Within a new downwards trend, no second wave correction may move beyond the start of its first wave above 1,347.89.

HOURLY CHART – TRIANGLE

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If there has been a trend change at cycle degree on Friday, then within the new downwards trend minor wave 2 may not move beyond the start of minor wave 1 above 1,347.89.

Minor wave 1 may be a complete five wave impulse. Five steps down should be followed by three steps back. Minor wave 2 may continue a little higher as a double zigzag. Downwards movement within this session, which is labelled minute wave x, will not fit as a five wave structure, so the bounce for minor wave 2 may not be over.

The first second wave correction within a new trend is often very deep.

DAILY CHART – TRIANGLE – ALTERNATE

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It remains possible that intermediate wave (C) within primary wave E may be incomplete. Intermediate wave (C) must subdivide as a five wave structure, and within it minor wave 4 may be complete. Minor wave 5 may now make a new high above the price extreme of minor wave 4.

A target is calculated for minor wave 5 to exhibit a Fibonacci ratio to minor wave 3. Were minor wave 5 to reach equality in length with minor wave 1, it would not move above the price extreme of minor wave 4. This target calculation would see minor wave 5 end before the invalidation point.

If it continues lower, then minor wave 4 may not move into minor wave 1 price territory below 1,288.37. Minor wave 4 may be expected to very likely be relatively brief and shallow.

HOURLY CHART – TRIANGLE – ALTERNATE

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Minor wave 4 may have completed as an expanded flat correction. Within the flat, minute wave b is between the most common range of 1 to 1.38 times the length of minute wave a. Minute wave c has moved below the end of minute wave a at 1,327.34, avoiding a truncation.

A short and sharp upwards breakout would be expected for minor wave 5.

Minor wave 5 may only subdivide as a five wave structure, either an ending diagonal or an impulse. An impulse is more common and so that shall be how it is labelled until and unless overlapping suggests a diagonal.

So far within an impulse for minor wave 5, minute waves i through to iii may be complete. Minute wave iv may not move into minute wave i price territory below 1,328.56. Minute wave iv may be unfolding as any Elliott wave corrective structure. Here, it is labelled a possible triangle but that may change.

WEEKLY CHART – DOUBLE ZIGZAG

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This wave count is identical to the first weekly chart up to the low labelled cycle wave a. Thereafter, a different Elliott wave corrective structure is considered for cycle wave b.

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 may be incomplete.

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 in terms of Elliott wave.

It is possible that intermediate wave (D) may be complete.

If it continues higher, then intermediate wave (D) of a contracting triangle may not move beyond the end of intermediate wave (B) above 1,365.68.

Intermediate wave (D) of a barrier triangle may end about the same level as intermediate wave (B); as long as the (B)-(D) trend line remains essentially flat the triangle will remain valid. This is the only Elliott wave rule that is not black and white. In practice, intermediate wave (D) may end slightly above intermediate wave (B) at 1,365.68 and this wave count would remain valid. If intermediate wave (D) is now complete, then the (B)-(D) trend line has only the very smallest overshoot for the end of minor wave B within intermediate wave (C); this is acceptable.

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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This wave count sees the three waves back now complete at the last major low for Gold in November 2019.

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 and just after 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 waves 1 and 2 may now be complete. If it continues lower as a double zigzag, then primary wave 2 may not move beyond the start of primary wave 1 below 1,160.75.

Cycle wave III so far for this wave count would have been underway now for 43 weeks. It may be beginning to exhibit some support from volume and increasing ATR. If this increase continues, then this wave count would have some support from technical analysis.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

At the last few major highs for Gold (on weeks of 5th July 2016, 5th September 2017, 9th April 2018 and 19th February 2019) the following points are noted:

– Volume was not the strongest for the last upwards week. Some decline in volume accompanied the final high.

– Bearish divergence was seen between price and Stochastics in only two of four of the identified major highs.

– Bearish divergence was seen between price and RSI in only one of four of the identified major highs.

Currently, there is very strong bearish divergence between price and Stochastics: Last week price has made a slight new high, but Stochastics is reasonably lower than it was at the last swing high.

Volume however shows no decline last week. It shows a strong increase. This is rarely seen right at a final high, so some further upwards movement may be reasonably expected. However, a strong bearish reversal pattern on the daily chart today changes this conclusion.

DAILY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

At the daily chart level, there is some decline in volume at the last high for Friday. With both RSI and Stochastics extreme and some bearish divergence between price and Stochastics, some consolidation to relieve extreme conditions would be normal to see after the blow off top.

A strong Bearish Engulfing candlestick pattern fully engulfs the prior daily candlestick of the 5th of June, and closes below the real bodies of the 6th and 7th of June. This candlestick offers some evidence that a high may possibly be in place.

For confidence in a trend change a lower low needs to be seen. The last swing low was at 1,275.10 on the 28th of May.

For the short term, although today’s long upper wick suggests some short-term bearishness, a slight increase in volume for upwards movement suggests the bounce may be incomplete.

It remains possible that price is within a small consolidation prior to a final high after the blow off top. That would be a common pattern for Gold.

GDX WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

The measuring gap gives a target at 23.39. However, this has already been almost met.

GDX DAILY CHART

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The last measuring gap may now provide support. It may remain open at 21.74.

With both Stochastics and RSI extreme and volume declining, this upwards trend is showing enough weakness at this time for extreme caution to be warranted.

The last gap remains open; price has again gapped above it. This looks like a pattern gap as price is moving mostly sideways. GDX may be consolidating. Resistance is about 23.10 and support is about 22.25.

Published @ 7:57 p.m. EST.

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