Upwards movement was expected from last analysis. Volume continues to favour the main Elliott wave count.
Summary: Volume supports upwards movement and not downwards movement. The probability of new highs next week looks good. A new high above 1,303.51 would confirm a third wave up is underway. The target is at 1,477. Risk to long positions currently remains at 1,237.97.
New updates to this analysis are in bold.
Last published weekly chart is here.
DAILY ELLIOTT WAVE COUNT
Click chart to enlarge.
Intermediate wave (2) may be a double combination.
Minor wave W is a zigzag, the first structure in a double. The two structures in the double may be joined by a simple zigzag for minor wave X in the opposite direction.
Minor wave Y may be a running contracting triangle. The triangle is supported by MACD hovering at the zero line here on the daily chart.
Minor wave 2 may not move beyond the start of minor wave 1 below 1,237.97.
The next wave up for intermediate wave (3) should be swift and strong. It must move above the end of intermediate wave (1) at 1,282.68. It must move far enough above this point to allow room for intermediate wave (4) to unfold and remain above intermediate wave (1) price territory.
At 1,477 it would reach equality in length with intermediate wave (1). This target is reasonable because intermediate wave (2) was very shallow.
If intermediate wave (2) is over as labelled, then it may have totalled a Fibonacci 34 sessions.
At this stage, minor wave 2 is relatively deep at 0.53 of minor wave 1 and has been labelled as a complete zigzag. It is fairly likely but not certain that minor wave 2 is over. If the hourly wave count below is invalidated below 1,278.03 on Monday, then minor wave 2 may be continuing further. This wave count remains valid and preferred while price remains above 1,237.97.
HOURLY ELLIOTT WAVE COUNT
Click chart to enlarge.
This main wave count must see the downwards wave labelled minor wave 2 as a corrective structure (the alternate must see it as a five). Downwards movement fits better as a correction.
At 1,375 minor wave 3 would reach 1.618 the length of minor wave 1.
Minor wave 2 fits neatly as a double zigzag. Double zigzags are reasonably common structures.
So far to the upside a five wave impulse may be incomplete. Price found some resistance at the short term cyan trend line.
Within the incomplete impulse, if my labelling is correct, then minuette wave (ii) was an expanded flat and minuette wave (iv) is an incomplete zigzag. There is no Fibonacci ratio between minuette waves (i) and (iii).
Minuette wave (iv) should complete fairly quickly, within a few hours. It may not move into minuette wave (i) price territory below 1,278.03. Minuette wave (v) upwards should follow to a new high above minuette wave (iii) to avoid a truncation.
At this stage, a target cannot be calculated for minute wave i to end because the start of the fifth wave of minuette wave (v) is not known.
Draw a best fit channel about this upwards movement as shown. Minuette wave (iv) may find support at the lower edge. If the channel continues to hold, then after new highs above minuette wave (iii) a subsequent breach of the lower edge of the channel would provide indication that the impulse for minute wave i would be over and another correction for minute wave ii would have begun.
Gold often begins its third wave impulses slowly. Look at the example of minor wave 3 within intermediate wave (1) on the daily chart. Its second wave corrections are slow, time consuming and often deep. Towards the end of a third wave impulse the fourth wave corrections are often quick and shallow, with swift strong fifth waves. This is typical behaviour of commodities. It offers relatively easy entry to join the trend at the start, and a blowoff top offers a high probability marker to exit the trend at the end.
Any members who have entered long positions are advised to hold on at this stage. If this wave count is correct, then the trend is just beginning. Stops may be set at break even, or just below 1,237.97 to allow the market room to move. Always manage risk. Do not invest more than 3-5% of equity on any one trade and always use a stop loss order.
ALTERNATE DAILY ELLIOTT WAVE COUNT
Click chart to enlarge.
It is still possible that intermediate wave (2) is not over.
Normally, the first large second wave correction within a new trend is very deep, often deeper than the 0.618 Fibonacci ratio. The main wave count sees intermediate wave (2) as very shallow at only 0.19 of intermediate wave (1). This is unusual. And so this alternate must be considered.
If any members have long positions on Gold already it is essential that stops are used in case this alternate unfolds.
Intermediate wave (2) may be an expanded flat correction. Minor wave A is a three, minor wave B is a three and a 1.28 length of minor wave A. This is within the normal range of 1 to 1.38.
At 1,183 minor wave C would reach 1.618 the length of minor wave A. This would be the most likely target. If price keeps falling through this first target, then the second target would be at 1,108 where minor wave C would reach 2.618 the length of minor wave A.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Click chart to enlarge.
It is very difficult to see downwards movement for minute wave i as a five wave structure, either an impulse or ending diagonal. It does not look at all like an ending diagonal, so I have labelled it as an impulse.
The only way this will work is to see minuette wave (i) over at the low labelled 1,291.39. This sees minuette wave (ii) as an expanded flat, and subminuette wave a within it also an expanded flat. This is possible, but it looks forced.
Minuette wave ii fits as a deep 0.74 expanded flat correction.
This wave count requires a new low below 1,237.97 for confirmation. While price remains above this point, it is a less likely alternate.
TECHNICAL ANALYSIS
Click chart to enlarge. Chart courtesy of StockCharts.com.
Strong volume for Friday supports the rise in price. So far price has broken out (upwards on rising volume) from a consolidation period and then turned to back test support which was previously resistance. Now price is moving away from support on rising volume. This looks like a perfect set up to join a trend at a good price.
ADX is increasing and the +DX line is above the -DX line. ADX indicates an upward trend is unfolding.
ATR does not agree today as it is flat to declining. Some disagreement between ADX and ATR may occur early in a new trend.
On Balance Volume found support at the blue line as expected. This line is long held, repeatedly tested and shallow in slope. It has strong technical significance. Here, it is assisting to hold up the fall in price. With another test of that line, the strength is reinforced.
Neither RSI nor Stochastics are extreme and neither exhibit divergence with price. There is room yet for the market to rise.
Price may find support about the 13 day moving average while the upwards trend continues.
So far the picture looks on balance quite bullish and a good entry for a long position here.
However, the COT report (updated on Friday 3 p.m.) remains overall bearish. Commercials (usually on the right side of the trade) are overwhelmingly short at 413,560 contracts to 90,099 long. Non commercials (usually on the wrong side of the trade) are long 356,491 contracts to 56,595 short.
This evidence indicates any long positions here should continue to be carefully managed to keep risk acceptable.
This analysis is published @ 04:06 a.m. EST on 7th May, 2016.
Expecting a further pullback (short term decline) today likely targets 1253 and lower…..Gold price is top heavy under 1265/pivot.
Price finding resistance at the lower edge of the hourly channel from the hourly count that was invalidated today. i left the channel on my chart and it’s been rejected from that lower trendline.
This downwards movement may be minor wave 2 continuing lower.
Volume still favours a bullish wave count, and so far minor 1 upwards is a five and this downwards move is a three. So far.
This is what it would look like.
Short term it looks like it is either over here or very close. Minuette (iv) may be complete as a zigzag or it may move sideways as a triangle.
Price is right at the 0.618 Fibonacci ratio of minor 1. Minute a and c are close to equality.
Technical Trading: Red Warning Flags Are Waving On Daily Gold Chart
Monday May 09, 2016 11:22
http://www.kitco.com/news/2016-05-09/Technical-Trading-Red-Warning-Flags-Are-Waving-On-Daily-Gold-Chart.html
Did GDX have a wave count that signaled this type of decline? Any price targets or invalidation points to watch?
Main hourly invalidated below 1278.03 at 4:28 am.
See revised hourly chart below and new invalidation point of 1,269.07, which was invalidated today.
See my GDX chart in the May 5 comments. I think GDX may go to the .382 retracement around 21.
This does not look too good. Appears Gold price is heading for a break below 1256…. Ouch~!
I think it bottomed here instead of 1256, a new low of 1262.19 at 12:14 pm.
Hi Richard. A break below 1262 looks imminent. Should 1260 not hold will open up downside risk 1252 i.e. a break below 20dma which will not be so good for the bull cause…. Lets just wait and see where the downside comes to halt; upside appears restricted under 1269/1270…..
Gold is coming back down to test 1263.03 today’s low right now at 12:10 pm
and it just made a new low of 1262.19 at 12:14 pm.
This target of Tham’s held at 1263.02 at 9:45 am. “Minor 2 should reach 1263.05.”
However looks like a 2nd wave down from 1267.93 at 11:01 am is hard on GDX and NUGT.
Gold just hit the 30 minute and 1 hour bottom trend line on http://www.pmbull.com
With the drop below 1269.07, the chances are that Minor 2 is not over but continuing as a double zigzag 1237.84-1268.87-1295.63-?
Minute C might have completed its third subwave at 1266.48 just now. At C=A, the final destination should be 1260.66. At 0.618 retrace, Minor 2 should reach 1263.05.
I would expect Minor 3 to reach at least 2.618 X Minor 1, approximately 1436, depending on where Minor 2 lands. The alternative is that the minor waves are shifted down one degree. As I was out of my positions last Friday, I can’t wait to load up.
Thanks Alan. Was wondering if you were here or lurking in oil.
Am praying this is not the alternate hourly– minor C in intermed (2)
I was also monitoring S&P. It would make a lower high pretty soon, and I could join the trend down.
Oil would be pretty volatile today due to the replacement of the Saudi oil minister. I will let the volatility die down before making a decision there.
By the way, I would not consider the alternate until 2134.72 when the main count is completely invalidated.
Anyone got a handle on this? Does it look like a 3rd wave down to you?
Gold just made a new low below Thursday’s low now down to 1266.48 at 9:22 am.
Did it just finish a count down then and time to buy bullish?
Main hourly invalidated below 1278.03 at 4:28 am.
Morning low of 1271.29 at 8:21 am.
If the hourly wave count below is invalidated below 1,278.03 on Monday, then minor wave 2 may be continuing further. This wave count remains valid and preferred while price remains above 1,237.97
With gold dropping to ~ $1,271 at 8:20 EST and nearly reaching the updated threshold Lara mentions at $1,269.07, does anyone have tips on setting stop losses that would trigger in the after hours world? From Friday close until this morning, gold has dropped steadily.
I like dsprospering’s question as well.
Thanks!
It looks like my analysis of minute wave i was wrong. This downwards movement is too big to be a fourth wave correction within it, it looks like it was over at Friday’s high.
So far downwards movement has reached 0.618 of the prior wave up. If this is minute ii it would be likely to stop here.
If price breaks below 1,269.07 then for the main wave count it would be minor 2 continuing.
The risk to any long positions entered here is at 1,269.07.
Thanks Lara for the update.
So if this were to be minor 2, what would that look like in terms of structure yet to go and invalidations. Would we be looking at potential movement to 1237.97 per daily?
It could get that low, yes.
Or it could be over now at the 0.618 ratio
Another good read on interpreting the COT
“Overall, the CoT is one of a handful of tools we use and we learned how to interpret and analyze it the hard way. Remember, the speculators drive the trend and it’s best to judge their position in terms of open interest. I do not see anything in the CoTs or price action of the metals or the miners that says they are about to endure a large correction. That will change at some point but for now weakness or consolidation is a buying opportunity.”
http://thedailygold.com/misreading-the-cots-again/
Thank you very much Dreamer for the link. That does help.
This is likely a better way to interpret the COT
http://tsi-blog.com/2016/04/the-true-meaning-of-golds-cot-data/
That’s most helpful too, thanks Dreamer.
More technical analysis supporting Lara’s 1,477 target
http://www.talkmarkets.com/content/investing-ideas–strategies/gold-market-a-front-row-seat?post=93762&page=2&uid=23288
Off Topic:
Lara, you might find this interesting…
http://www.huffingtonpost.com/entry/kelly-slater-wave-pool-surfers-test_us_572bce0ae4b016f378954508
Oh yeah, I find that really interesting! I’d love to surf that wave. I think it’s in fresh water too which would be weird and nice.
A barrel that goes on for that long… bliss.
One of my time wasters is to sit online and watch surfing videos. I’ve seen a lot of the rides of that wave. I like the smile on Stephanie Gilmore’s face after she came out…. she said she was in the barrel for ages, and thought maybe she should get out and do a turn… but nope. If you’re in the barrel, that’s exactly where you want to be 🙂
Lara, It was partly your analysis of gold that got me into NUGT a few days ago, and it is doing very well so far. Looking forward to a nice ride, even if it is a wild one!
Excellent 🙂