GOLD: Elliott Wave and Technical Analysis | Charts – February 24, 2020
A blow off top continues to form as expected from last analysis. Targets remain the same.
Summary: Targets are at 1,719 (bear wave count) or 1,834 (bull wave count).
Conditions are now very extreme; a blow off top may continue to form for another one to three days, but be aware it could now be over at any stage. Use the channel on hourly charts for earliest indication that a high may be in place.
Grand SuperCycle analysis is here.
Monthly charts were last updated here.
BEARISH ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
Super Cycle wave (b) may be an incomplete double zigzag.
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 wide best fit channel is added in light blue. Copy this channel over to daily charts. Price is now above the upper edge of this channel, which may now provide some support.
DAILY CHART
Click chart to enlarge.
Super Cycle wave (b) may be close to completion. It may end this week.
Within the zigzag of cycle wave y, primary waves A and B may be complete and primary wave C must subdivide as a five wave structure. Primary wave C may be an impulse that may now be close to completion.
Within the impulse of primary wave C, intermediate wave (2) subdivides as an expanded flat, which lasted 8 sessions, and intermediate wave (4) may most likely be a triangle that lasted 25 sessions. There is disproportion between these corrections, which is not typical behaviour for this market; but with other wave counts now invalidated, this wave count remains as the sole explanation for recent movement.
A target is calculated for primary wave C to end.
Within intermediate wave (5), minor wave 4 may not move into minor wave 1 price territory below 1,584.50.
HOURLY CHART
Click chart to enlarge.
Intermediate wave (5) must subdivide as a five wave structure, most likely an impulse. Within the impulse, so far minor waves 1 through to 3 may be complete.
Minor wave 4 may not move into minor wave 1 price territory below 1,584.50.
Redraw the best fit channel about intermediate wave (5) as shown: draw the first trend line from the ends of minor waves 1 to 3, then pull a parallel copy down to contain all of intermediate wave (5) so far. Assume the upwards trend remains in place while price remains within the channel. If price breaks below the lower edge of the channel with downwards movement (not sideways), then that may be an early indication of a trend change.
Price at the end of this session has reached the lower edge of the redrawn channel and bounced up from there. This may be a small indication that the blow off top may be incomplete.
BULLISH ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
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.
Cycle wave I fits as a five wave impulse with reasonably proportionate corrections for primary waves 2 and 4. This resolves a previous major problem with the bullish wave count.
Cycle wave II now fits as a double flat. However, a problem arises with the relabelling of this structure. Within the first flat correction labelled primary wave W, this wave count now needs to ignore what looks like an obvious triangle from July to September 2016 (this can be seen labelled as a triangle on the bear wave count above). This movement must now be labelled as a series of overlapping first and second waves.
Within the first flat correction labelled primary wave W of the double flat of cycle wave II, intermediate wave (B) is 1.69 the length of intermediate wave (A). This is longer than the common range of up to 1.38, but within an allowable guideline of up to 2. The length of intermediate wave (B) reduces the probability of this wave count.
Cycle wave III may be incomplete. A target is calculated based upon a common Fibonacci ratio for cycle wave III to cycle wave I.
Add the wide best fit channel to weekly and daily charts.
DAILY CHART
Click chart to enlarge.
Cycle wave III may be an incomplete impulse. Within the impulse, primary waves 1 through to 4 may be complete and primary wave 5 may be an incomplete impulse.
Within primary wave 5, intermediate waves (1) through to (4) may be incomplete. Within intermediate wave (5), minor wave 4 may not move into minor wave 1 price territory below 1,584.50.
HOURLY CHART
Click chart to enlarge.
Hourly charts are labelled in the same way. Targets are different.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Bullish divergence between price and On Balance Volume has now been followed by upwards movement from price to new highs. This divergence may now be resolved.
The trend is very extreme and RSI is overbought. This trend may be expected to end fairly soon, although extreme conditions can persist for another one to very few weeks.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Conditions are very extreme at both weekly and daily time frames. ADX is very extreme. RSI is overbought.
A blow off top is forming. These can unfold over a few days; they are not necessarily single day events. There is a good example on this chart from 3rd to 8th January 2020. So far this one has now lasted two days.
Look for a candlestick reversal pattern or a long upper wick to signal the end of the blow off top. Today there is a long upper wick, but it is less than the size of the real body of the candlestick, and so it is not long enough to comfortably call a high in place yet.
A small channel on an hourly chart may also be useful as an early indicator of a trend change.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
While Gold has made new highs, GDX has not by a very small margin.
The week has closed strongly suggesting more upwards movement next week. Some weakness is evident in bearish divergence with RSI and overall declining volume, although the last week was stronger than the week prior.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A breakaway gap may now offer support at 30.10. A target calculated from the gap and using the prior consolidation is at 32.37.
If the breakaway gap is closed with a new low below 30.10, then it may be renamed an exhaustion gap and a trend change may be indicated.
Today’s red candlestick does not close well into the real body of the prior daily candlestick, so this is not a reversal pattern. The red body may be a warning that a high may be in place soon.
Published @ 05:45 p.m. EST.
—
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.
—
New updates to this analysis are in bold.
Updated hourly chart:
I’m going to be possibly quite annoying here and run this analysis over the next couple of weeks or so more conservatively.
Both wave counts are expecting a big trend change when the blow off top is over. This bear count a Super Cycle change, and the bull a cycle degree change.
And so I want to see price eliminate the possibility of new highs in the near term before I have confidence in that big trend change.
Also, looking at the last two daily candlesticks there is no bearish reversal pattern. If there was a big Bearish Engulfing pattern I may be less conservative here… but there isn’t.
Intermediate (5) may be not quite over, it may need one more high for minor 5.
The drop today could be minor 4.
The channel is redrawn using Elliott’s second technique.
Ouch – fallen out of the channel already – what now ?
Not sure what channel you’re referring to. since the chart above was published price has moved higher, not lower.
I caught a fair bit of the drop last night, but closed before bed when it looked like it might bounce.
When do we think it’s safe to enter short again?
New highs just for the benefit of silver, or are we done (that’s one hell of a daily candle yesterday)
I’d like to see Silver and GDXJ go above their 2016 highs
When we have some reasonable confidence that there has been a major trend change. A new low below 1,562.37 would do that.
I know that’s very conservative, but I’d rather be conservative than wrong.