A downwards session with some increase in volume for Friday supports the first Elliott wave count, which now has a main and alternate.

Price this week remains below both short-term invalidation points.

Summary: The first wave count is bearish for the bigger picture and classic technical analysis supports this view. This wave count expects a multi-year bear market may be in its early stages to end below 1,046.

For the very short term, upwards movement may be a counter trend bounce that may now be over.

The next short-term target is still at 1,647 or 1,634. A long-term target is at 657. 

The second wave count is bullish. A new upwards wave may now have begun. The target is at 2,124.

Grand SuperCycle analysis  and last monthly charts are here.

FIRST ELLIOTT WAVE COUNT

WEEKLY CHART

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The bigger picture for this first Elliott wave count sees Gold as now within a bear market, in a three steps back pattern that is labelled Grand Super Cycle wave IV on monthly charts. Grand Super Cycle wave IV may be subdividing as an expanded flat pattern.

Super Cycle wave (b) within Grand Super Cycle wave IV may be a complete double zigzag. This wave count expects Super Cycle wave (c) to move price below the end of Super Cycle wave (a) at 1,046.27 to avoid a truncation and a very rare running flat. The target calculated expects a common Fibonacci ratio for Super Cycle wave (c).

DAILY CHART

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Within a new bear market, cycle wave I may be an incomplete five wave impulse.

Cycle wave II within the new downwards trend may not move beyond the start of cycle wave I above 2,070.48.

Gold typically exhibits extended and strong fifth waves; this tendency is especially prevalent for fifth waves to end third wave impulses one degree higher. One or both of minor wave 5 or intermediate wave (5) may exhibit this tendency; there may be one or more selling climaxes along the way down. Minute wave iv and minor wave 4 may be relatively brief and shallow.

Draw an acceleration channel about downwards movement. Draw the first trend line from the end of primary wave 1 to the last low, then place a parallel copy on the end of primary wave 2. Keep redrawing the channel as price continues lower. When primary wave 3 is complete, then this would be drawn using Elliott’s first technique and may show where primary wave 4 may find resistance.

Minute wave iv may be complete as a regular flat.

If it continues higher, then minute wave iv may not move into minute wave i price territory above 1,766.53.

HOURLY CHART

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Minuette wave (c) may now be complete. It may have ended with brief short fourth waves for micro wave 4 and subminuette wave iv. It is typical of Gold to exhibit fourth waves that are more brief and shallow than their second wave counterparts, so this wave count still looks fairly typical for this market.

The channel about minuette wave (c) is a best fit that is now breached by downwards movement. A bounce at the end of Friday’s session may be a back test of resistance at the lower edge of the channel. This trend line may again provide resistance for the end of minuette wave (ii).

If it continues higher, then minute wave iv may not move into minute wave i price territory above 1,766.53.

ALTERNATE DAILY CHART

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It is also possible that the flat correction may be labelled one degree higher. It may be minor wave 4.

If it continues higher, then minor wave 4 may not move into minor wave 1 price territory above 1,849.22.

If the first daily chart is invalidated with a new high above 1,766.53, then this alternate would become the main wave count.

ALTERNATE HOURLY CHART

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All subdivisions for this alternate wave count are the same except the degree of labelling is one degree higher. Minor wave 4 may be a complete regular flat. A target is calculated for minor wave 5 that expects it to exhibit the most common Fibonacci ratio to minor wave 1.

If it continues higher, then minor wave 4 may not move into minor wave 1 price territory above 1,849.22

SECOND 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 on 3 December 2015.

If Gold is in a new bull market, then it should begin with a five wave structure upwards on the weekly chart.

Cycle wave I fits as a five wave impulse with reasonably proportionate corrections for primary waves 2 and 4.

Cycle wave II fits as a double flat. However, within the first flat correction labelled primary wave W, this wave count needs to ignore what looks like an obvious triangle from July to September 2016 (this can be seen labelled as a triangle on the second weekly chart on prior analysis here). This movement must be labelled as a series of overlapping first and second waves. Ignoring this triangle reduces the probability of this wave count in Elliott wave terms.

Cycle wave IV has moved lower; it may again be a complete triple zigzag. The rarity of triple zigzags reduces the probability of this wave count further.

If the third zigzag of primary wave Z continues lower, then cycle wave IV may not move into cycle wave I price territory below 1,303.51.

DAILY CHART

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Cycle wave IV may be a complete triple zigzag.

The purpose of multiple zigzags is to deepen a correction when the first zigzag does not move price deep enough. To achieve this purpose multiple zigzags normally have a clear counter trend slope. Cycle wave IV looks normal with a clear downwards slope.

A target is recalculated for cycle wave V. If cycle wave IV continues lower, then this target must again be recalculated.

A best fit channel is drawn about cycle wave IV. If this channel is breached by upwards movement with at least one full daily candlestick above and not touching the upper edge of the channel, then that may provide confidence in this second Elliott wave count.

HOURLY CHART

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Intermediate wave (3) may now have begun. Within intermediate wave (3): Minor wave 1 may be incomplete, and minor wave 2 may not move beyond the start of minor wave 1 below 1,678.24.

Minute waves i and ii within minor wave 1 may be complete. Minute wave iii may be extending. Minuette waves (i) and (ii) within minute wave iii may be complete.

Minute wave iv may not move into minute wave i price territory below 1,729.10.

TECHNICAL ANALYSIS

WEEKLY CHART

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There is a series of lower swing lows and lower swing highs from the last all time high in August 2020. Downwards movement is now beginning to have a steeper slope. ADX now indicates a downwards trend at the weekly time frame.

Neither ADX nor RSI are extreme. There is plenty of room for a downwards trend to continue.

A downwards trend should now be the dominant view until the trend reaches extreme and then a bullish candlestick reversal pattern is seen.

This chart supports the first Elliott wave count.

Within the prior upwards trend, the last major swing low is the week beginning June 1, 2020, at 1,671.70. So far price has not made a new low below this point. If price does make a new low below 1,671.70, then the view of a new downwards trend would be strengthened.

Following a Hammer candlestick pattern, this week completes a small range upwards week that lacks support from volume. This looks like a small counter trend movement.

DAILY CHART

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ADX may reach very extreme (over 45 and above both directional lines) before a trend in this market may end. It is currently declining, indicating no clear trend. But if it again increases, then it would again indicate an extreme downwards trend.

Overall, the lack of volume is concerning, particularly for the Bullish Engulfing pattern. Overall, volume continues to decline. This still looks to most likely be another bounce within an ongoing downwards trend.

The week ends with a downwards session that has push from volume, which is bearish. However, a long lower wick is bullish and contradicts volume. Overall, it looks like the counter trend bounce may now be over.

GDX WEEKLY CHART

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For GDX the last major swing low within the prior upwards trend is the low at 31.06 in the week beginning June 1, 2020. GDX has made a slight new low below this point. This is significant and supports the view that GDX may have had a trend change.

For confidence in a Morning Star reversal pattern the third candlestick should have support from volume. This one does not, so confidence may not be had in this pattern.

Weak volume for the last upwards week suggests this may be another counter trend bounce.

GDX DAILY CHART

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ADX now indicates a new upwards trend. This is possible, but volume is so far not supporting upwards movement; for confidence in an upwards trend to be sustainable, it should have support from volume.

Published @ 06:19 p.m. ET.

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New updates to this analysis are in bold.