GOLD: Elliott Wave and Technical Analysis | Charts – February 11, 2020
Price remains range bound, although the main Elliott wave count did expect downwards movement for the last session, which is what happened.
Summary: A new low below 1,536.52 would indicate a high was in place on the 8th of January and a downwards trend has begun. This is now the main wave count as price has strongly breached a channel containing prior upwards movement.
A third wave down at two degrees may begin.
Grand SuperCycle analysis is here.
Monthly charts were last updated here.
BEARISH ELLIOTT WAVE COUNT
WEEKLY CHART
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Super Cycle wave (b) may a complete double zigzag. But it is possible that it may be incomplete and may require one final high; this is outlined now in an alternate wave count below.
The first zigzag in the double is labelled cycle wave w. The double is joined by a three in the opposite direction, a triangle labelled cycle wave x. The second zigzag in the double is labelled cycle wave y.
The purpose of the second zigzag in a double is to deepen the correction. Cycle wave y has achieved this purpose.
A new low below 1,374.91 would add strong confidence to this wave count. At that stage, the bullish Elliott wave count would be invalidated. At that stage, targets for Super Cycle wave (c) would be calculated.
A wide best fit channel is added in light blue. Copy this channel over to daily charts. The upper edge of this channel has again been overshot and now price has returned back to within the channel.
DAILY CHART
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It is possible that Super Cycle wave (b) may be complete and the bear market for Gold may have resumed.
A new low below 1,536.52 would invalidate the alternate bearish wave count and add some confidence in this wave count. A new low below 1,473.35 would add further confidence. Thereafter, a new low by any amount at any time frame below 1,374.91 would invalidate the bullish wave count below and add full and final confidence in this wave count. Targets for Super Cycle wave (c) would be calculated at that stage.
If Super Cycle wave (c) has begun, then it should develop a five wave structure downwards at all time frames up to and including monthly.
Minor waves 1 and 2 may be complete. Within minor wave 3, minute wave ii may not move beyond the start of minute wave i above 1,590.31.
Draw a base channel about minor waves 1 and 2. Draw the first trend line from the start of minor wave 1 to the end of minor wave 2, then place a parallel copy on the end of minor wave 1. Lower degree corrections along the way down may find resistance about the upper edge of the base channel.
HOURLY CHART
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Today all hourly charts will show all movement from the low of the 5th of February.
A target is calculated for minor wave 3 that expects a common Fibonacci ratio to minor wave 1.
Minor wave 3 may only subdivide as an impulse. Within minor wave 3, 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 incomplete. Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,576.43.
ALTERNATE DAILY CHART
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The double zigzag for Super Cycle wave (b) may be still incomplete.
Within cycle wave y, primary waves A and B are complete. Primary wave C must complete as a five wave structure. It is unfolding as an impulse. Within the impulse, intermediate waves (1) to (4) may now be complete.
Intermediate wave (2) was a deep 0.79 zigzag, which lasted 8 sessions. Intermediate wave (4) may have been a shallow 0.46 double zigzag lasting 4 sessions. Fourth waves are usually more brief than second waves for Gold.
Within intermediate wave (5), minor wave 2 may not move beyond the start of minor wave 1 below 1,536.52.
Sideways and downwards movement of the last few weeks is now too large to look like a normal part of primary wave C. This wave count now does not have the right look. Its probability is low.
BULLISH ELLIOTT WAVE COUNT
WEEKLY CHART
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This wave count sees the the bear market complete at the last major low for Gold on 3 December 2015.
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. This wave count still suffers from this very substantial problem, which is one reason why the bearish wave count is preferred because it has a better fit in terms of Elliott wave structure.
Cycle wave II subdivides well as a double combination: zigzag – X – expanded flat.
Cycle wave III may now be complete. Cycle wave IV may now move lower over several weeks to months.
Cycle wave II subdivides as a double combination, which lasted 110 weeks. Given the guideline of alternation, cycle wave IV may be expected to most likely subdivide as a zigzag. Cycle wave IV may be more brief than cycle wave II; Gold’s fourth waves tend to be more brief and zigzags tend to be more brief than combinations.
Cycle wave IV may not move into cycle wave I price territory below 1,374.91.
Add the wide best fit channel to weekly and daily charts.
DAILY CHART
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Cycle wave IV would most likely subdivide as a zigzag, which may last several months. Within a zigzag, primary wave A must subdivide as a five wave structure, most likely an impulse. Within the impulse, intermediate waves (1) and (2) may now most likely be complete. Within intermediate wave (3), minor wave 2 may not move beyond the start of minor wave 1 above 1,590.31.
HOURLY CHART
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Hourly charts are the same with the exception of targets.
TECHNICAL ANALYSIS
WEEKLY CHART
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Bullish divergence between price and On Balance Volume is contradicted by bearish divergence between price and RSI. More weight may be given to RSI as this tends to be slightly more reliable, particularly after it has reached extreme. This would support the main bearish wave count.
The upwards trend reached extreme and RSI reached overbought. After reaching overbought, RSI then exhibited bearish divergence. This set up is often (not always) seen at major trend changes.
DAILY CHART
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The last Bearish Engulfing pattern has strong support from volume, which increases the bearish implications. Expect a trend change to either down or sideways.
Now a strong downwards day after Dark Cloud Cover reinforces the view that a sustainable high may be in place.
Upwards movement shows increasing weakness; volume does not support upwards movement and range is declining.This looks like a counter trend bounce.
Today volume slightly pushes price lower compared to yesterday, although overall volume is still relatively weak. The counter trend bounce may not be quite complete.
GDX WEEKLY CHART
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Now two bearish candlestick patterns in a row, the second with support from volume, strongly suggest a trend change here to either down or sideways. The last Bearish Engulfing candlestick pattern has support from volume.
Volume and ATR are both declining as price rises from the last swing low in November 2029. This upwards movement so far has some weakness and looks likely to be a counter trend movement.
GDX DAILY CHART
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A very strong bearish candlestick after an extreme upwards trend, along with closure of the last gap (now renamed an exhaustion gap) and now two bearish signals from On Balance Volume and volume supporting downwards movement and not upwards, strongly suggest GDX has found a high.
The last gap is now closed, so it may now be considered a pattern gap.
Price is range bound. The volume profile during this consolidation is bearish.
Today a long lower wick is bullish, but the lack of volume suggests further upwards movement here may be limited.
Published @ 09:20 p.m. EST.
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New updates to this analysis are in bold.
Hourly chart updated:
Good Morning Lara.
I have a question about the #2 and #4 legs of Gold. According to the EW rules, the second leg should be longer in duration than the fourth leg, no?. Does that count for all time frames?
If we look at Feb 10+11 price action, then we see you have labelled the second leg to be much shorter than the fourth leg. Could you give an explanation for this?
Thanks.
I’m not quite sure which time frame and which wave degree you’re referring to, and so I am deducting you are talking about the impulse of minute i down on the main bear chart, hourly chart?
Within minute i, minuette (ii) lasted 4 hours and minuette (iv) lasted 14 hours.
This is not the usual proportion, but when you look at the movement on the hourly chart it doesn’t actually look too bad.
It’s not a rule that the fourth wave should be more brief, it’s just most common behaviour. The higher the time frame the more important it is to look for and expect this tendency. When we get to lower time frames like hourly and five minute a little more flexibility is required.
When it happens and its big on the weekly chart, that’s a big problem.
Does this make sense?