GOLD: Elliott Wave and Technical Analysis | Charts – January 7, 2020

A fourth wave correction was expected, but it has not arrived yet. Upwards movement has continued a third wave.

Summary: A consolidation to last about two weeks and find support about the upper edge of the wide best fit channel on weekly and daily charts is now expected. Thereafter, more upwards movement may be a final thrust before a bear market resumes.

If price makes another new high and invalidates the short-term hourly charts in the next few hours, then the next target for a third wave to end would be at 1,635.

A bullish wave count expects a third wave is ending here or very soon. The target is 1,635 or 1,693.

Grand SuperCycle analysis is here.

Monthly charts were last updated here.

BEARISH ELLIOTT WAVE COUNT

WEEKLY CHART

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Super Cycle wave (b) may still be an incomplete double zigzag, requiring one more high.

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.

After the structure of cycle wave y may be complete, then a new low below 1,374.91 would add strong confidence to this wave count. At that stage, the bullish Elliott wave count would be invalidated. At that stage, targets for Super Cycle wave (c) would be calculated.

A wide best fit channel is added in light blue. Copy this channel over to daily charts. Today the upper edge of the channel has been breached. It may now provide support if price turns down here for a back test.

DAILY CHART

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The double zigzag for Super Cycle wave (b) is incomplete.

Within cycle wave y, primary waves A and B are complete. Primary wave C must complete as a five wave structure. It is unfolding as an impulse. Within the impulse, intermediate waves (1) to (3) may now be complete.

Today intermediate wave (3) has continued higher with a very strong end. It is possible that it could continue further before intermediate wave (4) begins. If intermediate wave (3) does continue further, then a next  possible target for it to end may be about 1,635 where intermediate wave (3) would reach 6.854 the length of intermediate wave (1).

Intermediate wave (2) was a deep 0.79 zigzag, which lasted 8 sessions. Given the guideline of alternation, intermediate wave (4) would least likely unfold as a zigzag and most likely unfold as either a flat, combination or triangle. Intermediate wave (4) would most likely be shallow. It may last about a Fibonacci 5 or 8 sessions.

Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,473.35.

Drawn an Elliott channel about primary wave C. The lower edge may provide support to intermediate wave (4). Copy this channel over to hourly charts.

HOURLY CHART

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Intermediate wave (4) would most likely unfold as one of either a flat, combination or triangle. Within all these corrective structures, the first wave down would subdivide as a three, most likely a zigzag. Within this wave down, no second wave correction nor B wave may move beyond the start above 1,579.02.

When a zigzag down may be complete, then the upper invalidation point would no longer apply. If intermediate wave (4) unfolds as any one of an expanded flat, running triangle or combination,  then within it minor wave B or X may make a new price extreme beyond the start of minor wave A or W.

If price continues to make a new high and invalidates the short-term idea that intermediate wave (4) has begun, then use a target at 1,635  for intermediate wave (3) to end.

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, which is one reason why the bearish wave count is preferred 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 through to 4 may now be complete. Primary wave 5 may be complete at any stage now; this would complete the whole structure of cycle wave III. Cycle wave IV may not move into cycle wave I price territory below 1,374.91.

Add the wide best fit channel to weekly and daily charts.

DAILY CHART

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A target for cycle wave III is calculated also now at primary degree. If price reaches the first target and keeps rising, then the second higher target may be used.

Primary wave 5 may only subdivide as a five wave structure, most likely an impulse. Within primary wave 5, intermediate waves (1) through to (3) may now be complete. Intermediate wave (4) may not move into intermediate wave (1) price territory below 1,473.35.

Draw an Elliott channel about primary wave 5. Intermediate wave (4) may find support at the lower edge.

This wave count for the next few weeks remains essentially the same as the main bearish wave count. Both wave counts are seeing a fourth wave unfold, to then be followed by a final fifth wave up.

Now that the upper edge of the wide blue best fit channel is breached and price has closed above it, look for this trend line to offer support for any pullbacks.

HOURLY CHART

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Hourly charts for the main bearish and this bullish wave count are the same.

TECHNICAL ANALYSIS

WEEKLY CHART

Click chart to enlarge. Chart courtesy of StockCharts.com.

Upwards movement continues. A bullish signal from On Balance Volume and some support last week from volume suggest upwards movement may continue further to resistance above at 1,565.

DAILY CHART

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The Shooting Star candlestick has been followed by a downwards day. With price continuing higher after the New York close (not shown on this chart as StockCharts provide New York session only data), the bearishness of this candlestick pattern has been resolved.

Conditions remain extreme. A consolidation or reversal may be expected soon, but first another bearish reversal pattern or divergence may be expected.

GDX WEEKLY CHART

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A shooting star with declining volume last week suggests a consolidation may develop here for GDX.

Friday saw price move very strongly higher for Gold but overall lower for GDX. This is a perfect illustration of the lack of positive correlation between these two markets and why it is dangerous to assume that they must move in the same direction. The correlation co-efficient is added to the bottom of this chart to illustrate the data shows that any correlation that these two markets may have is unreliable.

GDX DAILY CHART

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For the short term, now GDX looks bullish with long lower wicks. Upwards movement may be limited though because ADX is now extreme and RSI is nearing overbought.

Published @ 10:05 p.m. EST.

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New updates to this analysis are in bold.

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