A small inside day leaves both Elliott wave counts valid.
Summary: It is more likely that a second wave correction will unfold upwards from here to about 1,118 or 1,145 (less likely). This would be confirmed with a new high above 1,095.89.
To see weekly charts click here.
New updates to this analysis are in bold.
MAIN ELLIOTT WAVE COUNT
Click chart to enlarge.
Gold has been in a bear market since September 2011. There has been no confirmation of a change from bear to bull. Price remains below the 200 day moving average and below the final bear market trend line (copied over from the weekly chart). The bear market should be expected to be intact until we have technical confirmation of a big trend change. At this stage, all bull wave counts have been invalidated.
The final line of resistance (bright aqua blue line copied over from weekly charts) is only overshot and not so far properly breached. While this line is not breached the bear wave count will remain possible. Simple is best, and the simplest method to confirm a trend change is a trend line.
Minute wave ii is a complete double zigzag and deep at 0.75 the length of minute wave i. It has breached the dark blue base channel drawn about minor waves 1 and 2, one degree higher. When a lower degree second wave correction does this it reduces the probability of the wave count but does not invalidate it. Base channels most often work to show where following corrections find support or resistance, but not always.
At 932 minute wave iii would reach 1.618 the length of minute wave i. If minuette wave (v) has begun as per the main hourly wave count below, then at 938 minuette wave (v) would reach 1.618 the length of minuette wave (iii). It is expected that minuette wave (v) will be a long strong extension. Minute wave iii should show an increase in downwards momentum beyond that seen for minute wave i.
Gold often exhibits swift strong fifth waves, particularly its fifth waves within its third waves. Minuette wave (v) may be explosive. For this wave count look out for surprises to be to the downside.
Draw a channel about this downwards movement using Elliott’s first technique: draw the first trend line from the end of minuette wave (i) to minuette wave (iii), then place a parallel copy on the high of minuette wave (ii).
No second wave correction may move beyond its start above 1,094.27 within minuette wave (v).
Based upon structure, I judge this wave count to have a slightly lower probability than the alternate although this is labelled the main wave count today.
Click chart to enlarge.
This wave count is changed slightly today to resolve the problems with yesterday’s main hourly wave count.
Minuette wave (ii) was a deep 0.65 expanded flat correction lasting six days. Minuette wave (iv) exhibits perfect alternation, if it is seen as a shallow 0.11 zigzag lasting one day. Both show up on the daily chart giving this impulse the right look.
Minuette wave (v) may have begun with a leading expanding diagonal, to be followed by a deep second wave correction.
Because leading expanding diagonals are not very common (the contracting variety, particularly for a leading diagonal, is more common), that reduces the probability of this wave count slightly to below that of the alternate today.
Subminuette wave ii may not move beyond the start of subminuette wave i above 1,095.89.
ALTERNATE ELLIOTT WAVE COUNT
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Everything is identical up to the high labelled minute wave ii. Thereafter, the five wave impulse downwards has been moved down one degree. All subdivisions within recent downwards movement are the same for both wave counts today.
If minuette wave (i) within minute wave iii has just ended, then minuette wave (ii) should show up on the daily chart and may last a total Fibonacci five or eight days. It may be longer lasting, but at this early stage a quicker end should be expected. The middle of a big third wave is still approaching which may force corrections to be more brief and shallow than otherwise.
Minuette wave (ii) should first breach the orange channel containing minuette wave (i). If it ends at resistance at the dark blue line, it may reach only up to the 0.382 Fibonacci ratio of minuette wave (i) at 1,118. Final resistance would be at the final bear market trend line.
This may resolve RSI being oversold.
Click chart to enlarge.
Because subdivisions are all seen in exactly the same way now, only the degree of labelling differs, the only difference in probability for the two wave counts today comes from the diagonal to the last low.
Ending expanding diagonals are more common than leading expanding diagonals. This wave count also has more short term support from regular technical analysis today.
I must remove the invalidation point at 1,074.22. Minuette wave (ii) is most likely to be a zigzag and most likely not to make a new low below 1,074.22. But it does not have to be a zigzag, so if it unfolds as a flat or combination it may make a new low below 1,074.22 for a B or X wave.
If minuette wave (ii) is a flat or combination, then subminuette wave a or w may be a three wave structure. This may be a flat or combination itself, so micro wave B may move below the start of micro wave A at 1,074.22.
If there is a new low below 1,074.22 and downwards movement to the low is a clear three wave structure, then this alternate wave count would still be favoured. However, if a new low comes with a five wave structure, particularly if it shows an increase in momentum, then the main wave count would be favoured.
What is most likely though is that minuette wave (ii) would unfold as a zigzag and not include a new low below 1,074.22. If a five upwards develops, it would be subminuette wave a, and subminuette wave b to follow may not then move beyond the start of subminuette wave a.
This correction may be expected to be quite likely to exhibit a Fibonacci duration. At this early stage, I would expect it to last a Fibonacci eight or thirteen days in total. Minuette wave (1) lasted 20 days, one short of a Fibonacci 21.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,191.66.
TECHNICAL ANALYSIS
Click chart to enlarge. Chart courtesy of StockCharts.com.
Daily: A small red doji on light volume indicates a correction is most likely unfolding during Friday’s session which fits both wave counts.
ADX still indicates a downwards trend is in place. ATR disagrees, the range price is moving in is on average declining.
On Balance Volume still shows bullish divergence (yellow lines) with price. With RSI currently oversold, the alternate Elliott wave count is better supported by this regular technical analysis. Some upwards movement to resolve RSI may occur about here.
This analysis is published about 08:23 p.m. EST.
Regular TA of GDX:
ADX is flat indicating no trend. ATR is declining indicating likely no trend. Yet price is falling. Overall downwards days have stronger volume than upwards days, the fall in price has some support from volume.
OBV is very bearish, the breach of that blue line is a leading bearish indicator. OBV may find resistance at that line.
Overall the TA picture for GDX looks more bearish than bullish.
I won’t have time to do a write up of GDX but here are updated charts for it.
There is now a three up complete. This is either subminuette wave a or w within the correction.
Because the first wave up is a three there is no lower invalidation point for the b or x wave. It may make a new low below 1,074.22.
If a flat is unfolding then b must reach down to 1,076.62 minimum. If the most common type, an expanded flat, is unfolding then be must reach down to 1,073.
If a combination is unfolding there is no minimum or maximum requirement for subminuette x.
If a double zigzag is unfolding then subminuette x may be brief and shallow.
So far this correction has lasted only two days. It has not yet broken above the channel which contains minuette (i), it should be expected to still do that. Price is finding resistance about the upper edge of the channel.
A further minimum three days for a Fibonacci five should be expected, but more likely this will last longer than that. A total Fibonacci eight or thirteen is my expectation.
Lara…
On behalf of those of us who trade the 3x Miners ETF’s (dust, jnug etc…)
we very much appreciate your additional work with these GDX charts.
It has been said that GDX can be a leading indicator for GLD….
and GDXJ has even been recognized as a leading indicator for GDX…
so watching for divergence is usually a profitable investment of time..
Ted very good points.
I bought a little DUST at $19.95 at the close because of the bearish GDX charts and comments on gold count maybe making a new low.
Thanks Lara for your comments and charts.
If this correction has begun than it may few days.
Lara: “This correction may be expected to be quite likely to exhibit a Fibonacci duration. At this early stage, I would expect it to last a Fibonacci eight or thirteen days in total. “
Lara’s main daily and hourly charts have both been invalidated when gold went above 1,095.89 up to 1,096.31 at 1:01 am EST and confirmed the Alternate daily and hourly charts.
Looks like the main count has been invalidated with a high above 1095.89. Alternate is in play.
Bleak Prospects for Gold – November 15, 2015 – Three gold charts
http://www.gunner24.com/newsletter-archive/november-2015/15112015/
Lara, This idea is thinking outside the box and granted, its a “stretch”, but the sub-divisions fit very well with all the corrective 3’s. However, its a combo of two triangles which motive wave labels as untypical; perhaps not impossible? Primary 4 would be just less than 2.618 of wave 2 in duration. The parameters are extremely tight (>$4 window for wave 4) but if pog ends in this small corner, primary 5 would end at a reasonable level ($944). As of our current count we have several nested 1, 2’s signifying a very deep bottom. Again, its a stretch but interesting if primary 4 is precisely met..
I like this count , 1985-86 similar same move 30 year cycle
John, I like your ingenuity and I’m also concerned about all of the nesting in the current count. But, I think the nesting can resolve itself with several overlapping 4th waves that will keep the pattern from going too deep. Since many of the 2nd waves have been long and drawn out, the 4th waves will likely be quicker and more violent as the bottom of Primary wave a is finalized. That said, I think the overall downward slope of your proposed very large W-X-Y is a challenge for “the right look”‘ not to mention that your target requires a little too much precision for even gold to pull off. We’ll see… Keep up the good work!
I’ve discarded any wave count which sees the wave upwards you have labelled minor wave A within intermediate (Y) as a three.
I cannot get that wave to subdivide as a three and meet all EW rules. See my explanation of why in this video at 10:25
The tragic happenings in Paris on Friday will cause a short-term jolt at market open on Sunday/Monday. My guess is that gold will get a lift up, because of the flight to safety. There may even be a gap up.
NZ stock markets open first globally, they’re already down.
Lara, would you mind posting a $USD update?
One scenario I’m looking at is a continued move up in the dollar and a short term gold reaction up with the Paris events, followed by a dramatic drop in gold.
Thanks.
I agree. The Euro will likely take a hit, which will push the USD up. In this scenario, gold and the USD may well move together. However, gold’s move will be short-lived and more of a knee-jerk reaction to the sad news.
Will do. And will do GDX today later on also.
Fabulous, thank you!
Gold daily chart compares indicators to what happen in recent time when gold came down and was oversold. Gold has down move is not finish. It is at midaway pattern of consolidating and next BO will take it to final Lara’s target.
ADX – D1 red needs to turn up, the +D1 green is not low enough and Black line has turned and pointing up and not to the level it was when gold bottom last ( at 50). AND many more on the chart. Gold is not oversold here compared to last time in the week of Jul-Aug.
RSI can stay oversold for long time while price keeps going down.
Alternate scenario
Yes It could be ????
Lara, Daneric states that EWI thinks the ending diagonal is likely the case. While I know that you don’t believe in such a count, the bottom line of the proposed diagonal may offer some strong support (around 1040?). Was hoping you could add that trendline to your daily charts so that we can see where that trendline actually will come into play. Thanks!
Danerics statement:
“Gold count. Elliott Wave International (click on my links left hand side of blog) suggested that a wave (5) ending diagonal triangle is likely the case and yes it does make sense as that count. Look for “overthrow” of the lower wedge line and then a sharp rebound higher. Gold sentiment is very low so it makes sense that this is a final wave down.”
What is the target for wave A??
Wave counts are same Lara’s wave count. A final wave down in the motion. Silver is going to take the whole PM sector down.
I am very curious as to how EWI and Daneric have resolved the problem of the possible second wave in that diagonal. I can’t get it to subdivide as a zigzag and meet all EW rules.
Anyway, that’s a good idea. Will add that trend line to my charts. Whether or not the ending diagonal is correct (and its my contention that it isn’t a valid EW count) that line still should offer strong support.
What I may do is chart the ending diagonal count (since its so popular!) and tack it onto the end of my analysis, with an explanation of what rule it breaks. If price turns out to complete the possible ED and shoot up from there, maybe I’m wrong. Maybe there’s something I’m missing? Or maybe the rules for diagonals need to be rewritten to include “sometimes a third wave within a diagonal may be the longest”. That is something I have wondered about in the past.
I’ve found another problem with this possible ending diagonal.
Look at the wave lengths:
The first wave is from 1,345 to 1,130 so it’s 215 in length.
The second wave is from 1,308 to 1,130 so it’s 177 in length.
The third wave is from 1,130 to 1,072 so it’s 236 in length.
The fourth wave is from 1,072 to 1,191 so it’s 119 in length.
The third wave is longer than the first indicating an expanding diagonal. But the fourth wave is shorter than the second indicating a contracting diagonal. The trend lines converge indicating a contracting diagonal.
This diagonal does not meet the rules for wave lengths as written in Frost and Prechter. Its not a valid wave count.
How on earth have they reconciled this breach of rules? What’s the point of doing Elliott wave if you don’t follow the rules?? Why are EWI breaking their own EW rules? If they’ve rewritten the rules why have they not published new rules?
I do not know the answers to those questions. If the market unfolds as I expect it should according to the rules then an impulse down for primary wave 5 would answer them. Otherwise the diagonal rules need to be rewritten to include “sometimes a third wave may be the longest”.
I subscribed to EWI for about a year – and lost alot of money in the process.
Irrespective them being well aware about bias (and warning about it all the time), some of their analysts seem to hang onto a count with no regard to alternatives (which are sprung upon you when they are proved wrong), so it is not a suprise to me that their count may break the rules. I suspect that is why your counts are right alot more often than my prior experience of their counts (their intraday guys did seem less biased than their daily guy). Often preferred counts of different analysts within EWI were totally different (even on a medium term) – which was confusing to say the least.
Past performance is of course no guarantee of future performance but you seem to be doing something right.
I have seen EWI analysis only for short periods during their “open house” weeks for their pro services. Your comments just confirm why we are all here…. Because Lara is consistent with unbiased analysis and will provide more than one analysis when the market direction is not clear. Her analysis is also more detailed and more accurate than EWI. Thanks for sharing your thoughts.
Thanks for your thoughts. I do hope that the “final” count will further strengthen the existing rules and not have them in question. Time will tell. For now, seeing how that bottom trend line fits into your count should prove beneficial.
No positions for me yet. I was waiting all week for the corrective bounce that never came. I am starting to become skeptical that a bounce of any size will actually occur. If this is the last big wave down, I am thinking it may not let many in who are looking for bounces to short. Look at oil for example.
I will decide on Sunday/Monday, but I am thinking of picking up some longer dated ITM GLD puts, small position, that will pay off if there is no bounce before the drop, and also if there is, I could add to the size to lower basis.
Look at the stock market this week. So many people were looking for 38%, 50%, and 62% retraces that never came. The wave 4’s over the past several days were small and quick. We just had a week in gold with little to no price movement, just sideways consolidation.
“Sideways consolidation”….With the Bollinger Bands on the 2 hour chart contracted as they are a volatility breakout is a high probability trade….do you do spreads?
I was looking at a few spread possibilities last night…. Shorter term OTM GLD call and longer term ITM GLD put.
Paris attacks happened between 3:00 and 4: 00pm EST Friday….GOLD traded from 3:00 until 5:00 in a continued narrow range….NO FLIGHT TO SAFETY or FEAR TRIGGERED BUYING in response to a major terrorist attack in a major world capital…Sunday night/Monday morning gold trading will be most telling.
Thank you Lara
You’re most welcome.
Potential NUGT target Zone