GOLD: Elliott Wave and Technical Analysis | Charts – October 23, 2020
Summary: The first and second Elliott wave counts expect upwards movement to 2,160.
The alternate Elliott wave count expects a bounce to end above 2,014.05 but not above 2,070.48 before the downwards trend begins to exhibit strength.
A second alternate wave count looks at the possibility of downwards movement here. Some confidence may be had in this idea with a new low below 1,849.22. A breach of the wide best fit channel on daily charts would increase the probability of this second alternate wave count.
A new low below 1,764.12 at any time frame would invalidate the first daily chart and add confidence in an alternate daily chart. At that stage, a sustainable high would be in place and a new downwards trend to last months may be underway.
Grand SuperCycle analysis is here.
Last analysis of monthly charts is here with video here.
FIRST ELLIOTT WAVE COUNT
WEEKLY CHART
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The bigger picture for this first Elliott wave count sees Gold as still within a bear market, in a three steps back pattern that is labelled Grand Super Cycle wave IV on monthly charts. Grand Super Cycle wave IV may be subdividing as an expanded flat pattern. The common range for Super Cycle wave (b) within a flat is from 1 to 1.38 times the length of Super cycle wave (a), giving a range from 1,920.18 to 2,252.27. The target would see Super Cycle wave (b) end within this most common range.
Super Cycle wave (b) within Grand Super Cycle wave IV may be an incomplete double zigzag. When Super Cycle wave (b) may be complete, then this wave count expects Super Cycle wave (c) to begin and to move price below the end of Super Cycle wave (a) at 1,046.27.
The first zigzag in the double is labelled cycle wave w. The double is joined by a three in the opposite direction, a combination 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.
Primary wave C within cycle wave y may be subdividing as an impulse. Intermediate waves (1) through to (4) within primary wave C may be complete. If it continues any lower, then intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12.
A best fit channel is drawn about primary wave C to contain as much of this movement as possible. Copy this channel over to daily charts.
We should always assume the trend remains the same until proven otherwise. At this stage, Gold is in a bull market.
DAILY CHART
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The daily chart shows detail of primary wave C as an incomplete impulse.
Intermediate waves (1) through to (4) within primary wave C may be complete. Intermediate wave (4) may be a complete zigzag.
The wide beige channel is copied over from the weekly chart. Draw also a small base channel about minor waves 1 and 2, copy this over to the hourly chart.
If it continues lower, then intermediate wave (4) may not move into intermediate wave (1) price territory below 1,764.12.
A target is calculated for intermediate wave (5) that expects it to exhibit the most common Fibonacci ratio to intermediate wave (1).
HOURLY CHART
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This hourly chart focusses on all movement from the high labelled minute wave i.
Downwards movement has breached the base channel drawn about minor waves 1 and 2. Gold will sometimes do this as it forms deep and time consuming second waves, whereas later in the structure it forms brief shallow fourth waves. Gold’s impulses often have a curved look and the early portion does not always fit within a base channel. After minute wave ii may be complete and minute wave iii may be underway, then the base channel may again be useful.
Minute wave ii may be complete as a flat correction. Minuette wave (b) within the flat is a 0.95 length of minuette wave (a), meeting the minimum requirement for B waves within flats of 0.9 and indicating a regular flat.
Minuette wave (c) has made a slight new low below the end of minuette wave (a) at 1,884.40, avoiding a truncation.
Minute wave ii may not move beyond the start of minute wave i below 1,874.09.
ALTERNATE DAILY CHART
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It is also possible that a Super Cycle degree trend change has occurred at the last high. However, we should always assume the trend remains the same until proven otherwise. Assume the upwards trend remains in place and the main wave count is correct until the upwards trend is invalidated with a new low below 1,764.12. At that stage, this would become the main wave count.
Intermediate wave (2) may be an incomplete expanded flat correction. Minor wave B within intermediate wave (2) was a 1.14 length of minor wave A, which is within the most common range of 1 to 1.38 times the length of minor wave A.
Minor wave C within intermediate wave (2) would be likely to make a new high above the end of minor wave A at 2,014.05 to avoid a truncation. Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 2,070.48.
Super Cycle wave (c) would be likely to make at least a slight new low below the end of Super Cycle wave (a) at 1,046.27 to avoid a truncation. If price provides confidence in this wave count with a new low below 1,764.12, then a target would be calculated for Super Cycle wave (c) to end.
ALTERNATE HOURLY CHART
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Minor wave C must subdivide as a five wave motive structure, most likely an impulse.
Minute waves i and ii may be complete. Minute wave iii may have begun.
Minute wave iii may only subdivide as an impulse. Minuette wave (i) may be complete. Minuette wave (ii) may be a complete regular flat correction.
Minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,874.09.
SECOND ALTERNATE DAILY CHART
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It is possible for this alternate wave count that a series of four first and second waves may be complete. A third wave down may begin to develop strength.
A breach of the green Elliott channel at the daily chart level would increase the probability of this second alternate wave count. A breach may be defined as a full daily candlestick of downwards movement below and not touching the lower edge of the channel.
Minute wave ii may continue higher as a double zigzag. Minute wave ii may not move beyond the start of minute wave i above 1,971.34.
A new low below 1,849.22 would add initial confidence to this wave count. A new low below 1,764.12 would add reasonable confidence.
SECOND 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.
Cycle wave I fits as a five wave impulse with reasonably proportionate corrections for primary waves 2 and 4.
Cycle wave II fits as a double flat. However, within the first flat correction labelled primary wave W, this wave count needs to ignore what looks like an obvious triangle from July to September 2016 (this can be seen labelled as a triangle on the first wave count above). This movement must be labelled as a series of overlapping first and second waves. Ignoring this triangle reduces the probability of this wave count in Elliott wave terms.
Cycle wave III may be incomplete. Minor wave 4 within primary wave 5 may not move into minor wave 1 price territory below 1,764.12.
A best fit channel is drawn about cycle wave III in the same way as the channel as on the first wave count.
DAILY CHART
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Cycle wave III may be incomplete. The daily chart focusses on primary wave 5 within cycle wave III.
Minor wave 4 may be a complete zigzag. Minute wave b within the zigzag may be a complete triangle.
If minor wave 4 continues lower, then it may not move into minor wave 1 price territory below 1,764.12.
HOURLY CHART
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A target is calculated for minor wave 5 to end intermediate wave (3).
Minor wave 5 must subdivide as a five wave motive structure.
Minute waves i and ii within minor wave 5 may be complete.
Minute wave iii must subdivide as an impulse. Minuette wave (i) within minute wave iii may be complete. Minuette wave (ii) may a complete regular flat correction. Minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,874.09.
TECHNICAL ANALYSIS
WEEKLY CHART
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Price has broken out downwards from a small triangle. Look for next support about 1,800.
At the last high were two bearish candlestick patterns with overbought RSI exhibiting double bearish divergence. It is possible there may have been a 180° trend change at the high. A new swing low below 1,671.70 would add confidence in that view.
Price continues to find resistance about the lower edge of the small triangle trend line. On Balance Volume is at resistance. A small range inside week this week does not change this analysis at the weekly chart level.
DAILY CHART
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A flag pattern may have formed. A target calculated from the flag pole would be about 1,774. A downwards breakout from the flag would be required before confidence in this target may be had. A downwards breakout does not require support from volume for confidence; but, when volume does confirm a downwards breakout, it is impressive.
The best performing flags and pennants complete within 15 or fewer sessions. So far this possible flag pattern has lasted 20 sessions. The usefulness of this possible flag has now declined as it has lasted beyond 15 sessions.
An upwards breakout by On Balance Volume suggests the flag may fail.
GDX WEEKLY CHART
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Overall, the choppy nature of downwards movement looks like a pullback within an ongoing larger bull market for GDX. This pullback may move lower before it is complete. A new low below 31.22 of the 1st of June would indicate a trend change.
GDX DAILY CHART
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A flag pattern may be completing on GDX. The pattern lasted 19 sessions, so the reliability of it is reduced. There has been a downwards breakout from the flag with a close below the lower edge which has support from volume. The target calculated from the flag pole is at 33.08.
Published @ 07:35 p.m. ET.
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New updates to this analysis are in bold.