A little more upwards movement for the very short term was expected to about 1,492. Upwards movement did continue but more than expected, reaching 1,504.08. Price remains below invalidation points.
Summary: The downwards trend may resume.
The next short-term target may now be at 1,420 – 1,421. A classic analysis target using the flag pattern is at 1,426.
The bearish Elliott wave count expects a new downwards trend to last one to several years has begun. Confidence in this view may be had if price makes a new low by any amount at any time frame below 1,346.45.
The bullish Elliott wave count expects a primary degree fourth wave is unfolding, forming a large consolidation to end in possibly 5 more sessions. The eventual area of support for the consolidation is expected to be about 1,431.
Grand SuperCycle analysis is here.
Monthly charts were last published here with video here.
BEARISH ELLIOTT WAVE COUNT
WEEKLY CHART
Click chart to enlarge.
It is possible that Super Cycle wave (b) is complete as a 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 new low below 1,346.45 would add strong confidence to this wave count. At that stage, the bullish Elliott wave count would be invalidated.
A wide best fit channel is added in light blue. This channel contains all of Super Cycle wave (b) and may provide resistance and support. Copy this channel over to daily charts.
DAILY CHART
Click chart to enlarge.
Within cycle wave y, the triangle that ended on the 17th of July may have been primary wave B. Primary wave C may have begun there. Primary wave C must subdivide as a five wave structure; it could be a complete impulse.
Within cycle wave y, there is no Fibonacci Ratio between primary waves A and C.
Draw a base channel on all daily and hourly charts about minor waves 1 and 2. Draw the first trend line from the start of minor wave 1 to the end of minor wave 2, then place a parallel copy on the end of minor wave 1. The upper edge of this channel is reasonably likely to be where price may find resistance if this correction continues to be deeper than expected. Along the way down, minor wave 3 should exhibit enough power to break below support at the lower edge of the base channel.
Gold usually fits within base channels at the start of new movements but not always. Occasionally second wave corrections can be deep and time consuming and can breach base channels.
HOURLY CHART
Click chart to enlarge.
Both hourly charts see minor 3 now underway.
For both wave counts, minor wave 3 may only subdivide as an impulse. Within the impulse, minute wave i may be complete. Minute wave ii may not move beyond the start of minute wave i above 1,534.54.
Minute wave ii did not find resistance at the lower edge of the channel drawn about minor waves 1 and 2. The next area of resistance is now the upper edge of the base channel, which is copied here from the daily chart.
Minute wave ii now fits perfectly as a complete double zigzag, ending almost at the 0.618 Fibonacci Ratio of minute wave i. There is a Bearish Engulfing candlestick pattern at its high. It looks likely to be over here.
When minute wave ii is complete, then a third wave down at two degrees should begin. This should exhibit an increase in downwards momentum.
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 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 the bearish wave count is still considered because it has 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. Primary wave 3 has now moved above the end of primary wave 1 meeting a core Elliott wave rule. It has now moved far enough to allow room for primary wave 4 to unfold and remain above primary wave 1 price territory. Primary wave 4 may not move into primary wave 1 price territory below 1,346.45.
Cycle wave III so far for this wave count would have been underway now for 59 weeks. It is beginning to exhibit some support from volume and increasing ATR. This wave count now has some support from classic technical analysis.
The channel drawn about cycle wave III is an adjusted Elliott channel. The lower edge is pulled lower. Primary wave 4 may now not find support about the lower edge, because it would need more room than that allows for its structure to complete.
Add the wide best fit channel to weekly and daily charts.
DAILY CHART
Click chart to enlarge.
Primary wave 4 may be continuing as an expanded flat, which is a common corrective structure. This would see alternation in structure with the zigzag of primary wave 2.
Primary wave 2 lasted 43 sessions. Primary wave 4 may be expected to be more brief; Gold usually exhibits more brief fourth waves than their counterpart second waves. Primary wave 4 may not exhibit a Fibonacci number in duration. It may be about even in duration with primary wave 2. So far primary wave 4 has lasted 36 sessions.
Within primary wave 4, intermediate wave (C) has now moved below the end of intermediate wave (A) at 1,481.91 avoiding a truncation and a very rare running flat.
The target for primary wave 4 is today recalculated to be lower. The structure of intermediate wave (C) needs more room to complete.
Primary wave 4 may not move into primary wave 1 price territory below 1,346.45.
HOURLY CHART
Click chart to enlarge.
The hourly charts are again the same.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
When trends reach very extreme, candlestick reversal patterns should be given weight. The Dark Cloud Cover bearish reversal pattern is given more bearish weight from the long upper wick.
The risk of a major high and a trend change or a large time consuming consolidation continuing here is very high. These two scenarios effectively follow the main bearish wave count (major trend change) or bullish wave count (a large time consuming consolidation).
A weak bearish signal from On Balance Volume adds confidence to this analysis.
Last week completes an upwards week with a higher high and a higher low, but the candlestick has closed red and the balance of volume is down. Volume is pushing price lower. The longer upper wick on this weekly candlestick is also bearish.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A target calculated from the flag pole would be about 1,426.
A bounce may find resistance here at the lower edge of the flag pattern. On Balance Volume and volume also suggest the bounce may end here.
GDX WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Last week saw price move higher with a higher high and a higher low, but the candlestick is red and the balance of volume is down. The longer upper wick is also bearish.
GDX DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
A target would be at 23.87. The breakaway gap for Friday’s open should offer resistance now at 28.09.
For the short term, today GDX looks less bullish than Gold. The bounce may be over here.
Published @ 08:52 p.m. EST.
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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.
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New updates to this analysis are in bold.
Final comment before I get into today’s analysis:
My advice would be to exercise patience at the start of a new move from Gold. Allow room for this market to move, be aware second wave corrections can be deep and time consuming. Right now use resistance at the upper edge of the base channel, but be aware that may not be generous enough as Gold does not always fit neatly into base channels.
EW psychology of second waves is that they tend to convince us there has been no trend change, and they do it best right before a third wave takes off. Gold seems to be particularly good at this.
Now of course, I could be wrong. My wave count could be wrong, which is why I provide invalidation points.
Hourly charts updated (both bull and bear are the same at this time)
Sill room for this to move higher before it finds resistance at the upper edge of the base channel, but again, it could be over here. Minute ii now fits as a triple zigzag. That’s not a common structure, but I have seen a few.
Thank you.
Heck this one’s got us all on the ropes 😂😂
Maybe that’s a sign we’ve got a big change coming … 😄
thanks Lara! Nice to see a 5 wave impulse off the lows on SPX today. Gives me a better feeling about the Gold/GDX short
Gold will normally exhibit deep and time consuming second wave corrections at the start of a new trend.
Looking at what happened off the 3rd December 2015 low, the first two second wave corrections were very deep; the first was 0.96 and the next was 0.68.
In the beginning of the bear market from the all time high in September 2011, the big second wave correction there was 0.68 and it was 13 times the duration of the first wave down.
The thing to look for is strength in the first wave, and weakness in the second wave correction. If that is seen then some confidence can be had.
Thanks very much for all the input. Staying patient!
GDX appears to be a much clearer chart right now, right to Lara’s target and the .5 fib
https://www.tradingview.com/x/RtjqvOal/
The up spike in gold seems to be holding up somewhat. Doesn’t the bullish scenario expect a change in direction some time this week?
Yes, both do. There is still however room for this bounce to move higher. Look for resistance at the upper edge of the base channel.
Bonds having hard time holding their gains. Silver lagging gold.
A move up like this morning’s is the reason I play options on the downside. Limit the risk with a big potential reward if the 3rd of a 3rd kicks in to take GC lower.
I think unfortunately tomorrow’s NFP data will be a big event. If bad, then I think GC holds 1500 and its heading back up. If ok or good, then I think gold enters the big part of the 3rd wave down. Either way, I’m holding through the print.
GLTA
stopped out of shorts – Lara when you can comment on the most likely count I’d appreciate it – thank you
We are still below invalidation, so the count remains the same (I guess) … but yes, its starting to get scary ….
thank you, either way I’m in wait and see mode. Too bad, I had a feeling to be long after looking at the GDX ascending triangle pattern – but I ignored it. GDX hit target, so let’s see what happens next.
Yeah, I had a large Silver, and small Gold long until I flipped to short Gold …
I’m trying to ride it out, as I have belief it will come down, but I’ve ridden it out to an uncomfortable level, and just hope it turns soon.
I know that feeling! I may jump back in short today, but these whipsaws need to calm down first.
I agree. But I’m not budging unless week break of the channel to the upside.
Scary, my limit is the top of the spike.
lucky you! mine was tighter. I reentered short again tho, no problem
Ill open a position on Gold when it moves below 1490. The 200 period EMA is at 1496ish on the 4 hour and 1 hour charts so I feel a move below that could trigger a torrent of selling. Got my account setup to do an auto sell at the 1490 level. ( way less stressful)
Thank you – and also for the silver comments
Hi Lara. Would you mind updating the oil chart? It seems like your main oil daily charts have broken (maybe) and is all we’re left with is the alternate?
The triangle looks good. I shall post updated charts in Oil and Lara’s Weekly just to reassure members that the count remains valid.