Price remains below the invalidation point on the preferred hourly Elliott wave chart. At the end of this week, volume suggests the direction for next week.
Summary: A high may now be in place earlier than expected for the bearish Elliott wave count. Price may continue higher towards 1,565 for the bullish Elliott wave count.
Next week price may come down to effect a back test of support about 1,375. How price behaves if it gets to this point may illustrate which Elliott wave count may be most likely.
A new low by any amount at any time frame now below 1,346.45 would invalidate the bullish wave count and give confidence to the bearish wave count.
The bullish wave count has a long-term target at 1,693 for cycle wave III to end.
Grand SuperCycle analysis is here.
Last monthly charts are here. Video is here.
Overall, the bearish wave counts still have a higher probability based upon Elliott wave structures. However, it would be best to leave price to invalidate either the bullish or bearish scenario before having confidence in which is correct.
BEARISH ELLIOTT WAVE COUNTS
FIRST WEEKLY CHART
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It remains possible that the bear market for Gold may yet continue when cycle wave b is complete, and it is possible that cycle wave b may be complete at the high. Cycle wave b may be a double zigzag.
Double zigzags are common structures, but within them their X waves are almost always single zigzags that are relatively brief and shallow. However, X waves may be any corrective structure, including a multiple.
The maximum number of corrective structures in a multiple is three. This count of three refers to W, Y and Z. To label any one of W, Y or Z as multiples violates this Elliott wave rule. However, X waves may be labelled as multiples and here the rule is met. X waves do occasionally subdivide as multiples.
This wave count sees primary wave X as a complete double combination: zigzag – X – expanded flat.
Primary wave Y may be a complete zigzag. The purpose of a second zigzag in a double zigzag is to deepen the correction when the first zigzag does not move price far enough. This purpose has been achieved.
A new low now by any amount at any time frame below 1,346.45 would invalidate the bullish wave count below and provide some confidence in this wave count.
DAILY CHART
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This chart focusses on the impulse of intermediate wave (C).
Intermediate wave (C) may be a complete impulse; the structure may now be complete at all time frames. There is a bearish candlestick reversal pattern on StockCharts data.
This wave count now requires a new low below 1,346.45 for confidence.
HOURLY CHART
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If there has been a trend change at cycle degree at the last high, then a five down should develop first on the hourly chart and then on the daily chart. The first five down is labelled minor wave 1, and it may now be complete.
A three up for minor wave 2 should develop. Minor wave 2 may be completing as a zigzag. A target is calculated for minute wave c to end. Minor wave 2 may end when price reaches the upper edge of the pink Elliott channel.
Minor wave 2 may not move beyond the start of minor wave 1 above 1,438.43.
The first second wave correction within a new trend for Gold is usually very deep. The 0.618 Fibonacci ratio as a target may not be high enough.
SECOND DAILY CHART
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It is also possible that intermediate wave (C) may be an incomplete impulse and the last three sessions may be another correction within an ongoing upwards trend.
A target is calculated for minor wave 5 to end. About this target intermediate wave (C) would also be closer to equality in length with intermediate wave (A).
SECOND WEEKLY CHART
The second weekly chart published in last analysis also remains viable but will not be continued here in an effort to keep the number of charts manageable. It will be published again if it begins to diverge from the first bearish weekly chart.
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 in November 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, and for this reason two bearish wave counts are still considered above as they have 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 have begun. Within cycle wave III, primary waves 1 and 2 may now be complete. If it continues lower as a double zigzag, then primary wave 2 may not move beyond the start of primary wave 1 below 1,160.75.
Cycle wave III so far for this wave count would have been underway now for 45 weeks. It may be beginning to exhibit some support from volume and increasing ATR. If this increase continues, then this wave count would have some support from technical analysis.
Draw an acceleration channel about primary waves 1 and 2: draw the first trend line from the end of primary wave 1 to the last high, then place a parallel copy on the end of primary wave 2. Keep redrawing the channel as price continues higher. When primary wave 3 is complete, then this channel would be drawn using Elliott’s first technique about the impulse. The lower edge may provide support.
Primary wave 4 may not move into primary wave 1 price territory below 1,346.45.
DAILY CHART
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This daily chart focusses on the impulse of primary wave 3.
Primary wave 3 may only subdivide as an impulse. Primary wave 3 has now moved above the end of primary wave 1, meeting a core Elliott wave rule.
When it arrives, primary wave 4 may not move into primary wave 1 price territory below 1,346.45.
Intermediate wave (5) may exhibit further strength. The target for primary wave 3 is calculated using the most common Fibonacci ratio to primary wave 1.
The structure of primary wave 3 as an incomplete impulse for this wave count is seen in exactly the same way as the incomplete impulse for intermediate wave (C) in the second bearish daily chart.
HOURLY CHART
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Intermediate wave (4) may still be unfolding, and it may not move into intermediate wave (1) price territory below 1,346.45.
Intermediate wave (4) may be unfolding as any one of more than 23 possible Elliott wave corrective structures. Today it is labelled as a triangle. It may yet morph into a combination, flat, or continue lower as a zigzag.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Gold has effected an upwards breakout above multi-year resistance and above the cyan bear market trend line. Look for next resistance identified on the chart.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Gold has broken out of a multi-year consolidation, which saw resistance about 1,375. The breakout has support from volume, so confidence may be had in it.
Price now has some strength with rising ATR. Conditions are overbought. A pullback or consolidation may begin here before the upwards trend resumes.
The bullish signal from On Balance Volume is weak only because the line breached had only 3 tests. However, it is a bullish signal and would tend to support the bullish Elliott wave count.
Look now for strong support about 1,375 for a possible back test.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
After the upwards breakout, it would be typical to see price curve back down to test support at prior resistance. Extreme overbought conditions may be relieved by a back test.
There are now two bearish candlestick reversal patterns. Look in the first instance for a test of support about 1,395 and below that about 1,375. Weak volume today for upwards movement within Friday’s session supports the idea of a back test continuing towards support early next week.
GDX WEEKLY CHART
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The upwards trend continues, but conditions are now overbought. This can continue for a while during a strong trend. At this stage, there are no signs of a reversal.
GDX DAILY CHART
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The last gap is closed, so it is now renamed an exhaustion gap. This indicates the possibility of a trend change. In conjunction with a bearish candlestick reversal pattern in the Dark Cloud Cover, a trend change here may be reasonably likely.
A trend change may be either a 180 degree reversal, or equally as likely a change to sideways as price consolidates to relieve extreme conditions, before continuing the upwards trend.
Published @ 07:35 p.m. EST.
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New updates to this analysis are in bold.
Another idea for the short term for the bearish hourly chart:
After taking a blank hourly chart I have found a solution for minor wave 1 ending at the last low which does not include a truncation. Minute ii is much longer in duration and deeper than minute iv, which looks very normal for this market. This wave count looks right.
If this is correct then it would be reasonable to expect minor 2 to be a fair bit deeper than the 0.618 Fibonacci ratio of minor wave 1, it is common for the first second wave correction for Gold to be very deep.
I’m back home and back to a normal schedule today. Analysis will be published after NY close as normal.
Updated hourly charts prior to NY close:
Bull:
I’m moving the invalidation point up. The last wave down looks like a good three, this should be intermediate (4) over now.
Hourly bear update:
I’ve looked to see if I could move the end of minor 1 down and see the current bounce as minor 2, but that would involve a small truncation and that’s very unlikely. Gold only exhibits truncations after very strong moves, and the last move down doesn’t look strong enough.
So a series now of two overlapping first and second waves may be completing. This is normal. Minute ii may end close to the 0.618 Fibonacci ratio, this too is normal.
Stopped out luckily with a profit, I’m still no wise which chart to use. That was a strong move up. Any body favour one chart over the other more?
At the weekly chart level I’m favouring the bearish wave count still.
Classic TA updated:
The prior trend reached very extreme and RSI reached very overbought. Either a back test to support at 1,375 to 1,360 or a trend change here may be expected. Classic ta should lean towards a back test until proven otherwise, because the breakout above multi year resistance was so significant.
With volume actively pushing price lower today look for more downwards movement tomorrow.
GDX update:
The measuring gap remains open, assume it may continue to provide support until that support is breached. Support from the gap remains at 24.03.
An increase in volume today and price closing near the low for the session suggests more downwards movement tomorrow.
Updated daily chart bearish count:
This looks good. A typical spike may have formed at a major high.
Hourly chart bear count:
Minor 1 and 2 may be complete. Minor 3 may only subdivide as an impulse. Within the impulse minute ii may not move beyond the start of minute i above 1,422.89.
Updated bull wave count, daily chart:
So far intermediate (4) looks reasonably in proportion to intermediate (2), although if this is the right wave count I would have expected intermediate (4) to be over already, to be very brief and shallow as fits normal behaviour for fourth waves within third wave impulses one degree higher.
The invalidation point remains the same. As price continues lower here the probability of this wave count reduces in favour of the bearish count.
Bullish wave count hourly chart updated:
Intermediate (4) may be a compete single zigzag. The invalidation point remains the same though because it could continue lower as a double zigzag, and those are fairly common structures.
Hi everybody. I am flying back from USA to New Zealand today. It’s a 14 hour flight, then when I arrive I have a 3 hour drive to get home.
I will be unable to give you a full updated analysis for the Monday session.
I will post charts for daily and hourly for both bull and bear with a comment here in the comments section, and when I get home I will then have StockCharts data and can give a brief updated classic technical analysis.
Thank you all very much for your patience and understanding. I almost never need to do this as I can usually schedule my travel on weekends, but this time I could not do that.
O.K Lara, no problemo!
Have a good flight back home
Hello everybody, here is an updated hourly chart for the bear count.
Minor 2 may now be over, a target is calculated for minor 3 to end.
Excellent, thanks Lara. Needed advice on where to get out of my short position. 1362 would be perfect if it gets there.