Downwards movement continues as both Elliott wave counts expect. The short term target remains the same.
Upwards movement was unexpected and has invalidated the Elliott wave count at the hourly chart level.
Further downwards movement was expected from the Elliott wave count. The target remains the same.
A pullback has continued lower to test support at prior resistance, which is typical price behaviour.
Volume will be used to indicate what is most likely to happen next.
Sideways movement was expected for Friday. An inside day perfectly fits expectations.
A short, sharp wave down to about 1,170 was expected for Friday’s session. This is what happened. Downwards movement reached 1,172.10 before reversing.
Downwards movement invalidated both Elliott wave counts and broke below support.
Again, upwards movement was expected for Friday’s session.
Price still remains above the invalidation point.
Upwards movement was expected for the last session. Both Elliott wave counts remain valid.
Summary: Look out now for surprises to the upside. In the short term, Monday may begin with a little upwards movement to 1,328. Thereafter, price should move lower for a correction to remain above 1,302.93. The target for the Elliott wave count for a third wave to end is now at 1,585.
New updates to this analysis are in bold.
Last weekly charts are here.
Grand SuperCycle analysis is here.
DAILY ELLIOTT WAVE COUNT
Primary waves 1 and 2 are complete. Thereafter, this wave count differs from the two alternates.
This main wave count will expect primary wave 3 to be longer than primary wave 1. Because this is very common, this is the main wave count and it expects the most common scenario is most likely. At this stage, the target for primary wave 3 is removed. A new target for intermediate wave (3) is calculated: at 1,585 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
Intermediate wave (2) may now be complete ending just below the 0.382 Fibonacci ratio of intermediate wave (1) and lasting 40 days. However, prior to a new high above 1,330.01, it must be accepted that intermediate wave (2) may yet move lower. Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,200.07
Primary wave 3 may only subdivide as an impulse.
At this stage, a new high above 1,330.01 could not be a continuation of minute wave iv, so at that stage minute wave iv and minor wave C would have to be over. A new high above 1,330.01 would provide strong confidence in a trend change and the resumption of the prior upwards trend.
Redraw the pink channel now about minute degree waves as shown using Elliott’s first technique: the first trend line from the ends of minute waves i to iii, then a parallel copy on the end of minute wave ii. Draw a channel about intermediate wave (2) using Elliott’s technique for a correction (blue lines). Price is finding support at the lower edge. The lower edge of this channel may stop price from falling further.
With this wave count expecting a third wave at two large degrees to begin, look out for surprises to the upside at this stage.
HOURLY ELLIOTT WAVE COUNT
Minor wave C is most likely to be over, which means intermediate wave (2) is most likely to be over.
Intermediate wave (3) may only subdivide as an impulse. Within intermediate wave (3), minor wave 1 should last a few days at least, so it would be incomplete.
Minor wave 1 would most likely unfold as an impulse, but it may also be a leading diagonal.
A five wave impulse upwards is close to completion. This may be minute wave i. Within minute wave i, so far minuette wave (iii) is 1.57 short of 1.618 the length of minuette wave (i). At 1,328 minuette wave (v) would reach equality in length with minuette wave (i).
When minute wave i is a complete five wave impulse, then draw a Fibonacci retracement along its length. The 0.382 and 0.618 Fibonacci ratios would be reasonable targets for the following correction of minute wave ii, with the 0.618 Fibonacci ratio favoured. Minute wave ii may offer a good entry opportunity to join the trend at an excellent price.
Although this chart has a short straight arrow up to the end of intermediate wave (3), this is an indication of overall direction for price only. Markets do not move in straight lines. There will be corrections along the way.
A new high above 1,330.01 would invalidate the alternate hourly wave count below and provide further reasonable confidence in this main wave count.
Intermediate wave (1) lasted 27 days and intermediate wave (2) lasted 40 days. Intermediate wave (3) may be reasonably expected to last longer than intermediate wave (1) in both time and price. A Fibonacci 55 days would be a first expectation.
No second wave correction may move beyond the start of its first wave below 1,302.93.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
Both hourly wave counts today see minute wave iii over at the low for 30th of August.
Minute wave iv may be unfolding as an expanded flat correction. These are very common structures. Within minute wave iv, minuette wave (b) is a 1.65 length of minuette wave (a). This is longer than the common length of up to 1.38, but within the allowable convention of up to 2 times the length of minuette wave (a).
Within minuette wave (c), a final fifth wave up is required to complete the impulse. At 1,328 subminuette wave v would reach equality in length with subminuette wave i. The target is the same for both wave counts short term because the structure of a five wave impulse up is the same.
How low the following movement goes should indicate which wave count is correct. This alternate has a lower probability.
Minute wave iv may not move into minute wave i price territory. Any movement by any amount on any time frame above 1,330.01 would immediately invalidate this alternate wave count.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is possible that primary wave 3 is over and shorter than primary wave 1. Primary wave 3 shows stronger volume than primary wave 1 (see technical analysis weekly chart).
If primary wave 3 is over, then the current consolidation for Gold would be primary wave 4.
Primary wave 2 was a relatively shallow 0.35 expanded flat correction. Primary wave 4 may be unfolding as a deeper zigzag which would exhibit perfect alternation.
Primary wave 4 may not move into primary wave 1 price territory below 1,282.68.
Primary wave 5 would be limited to no longer than equality in length with primary wave 3, so that the core Elliott wave rule stating a third wave may not be the shortest is met. Primary wave 5 would have a limit at 1,477.77.
The hourly charts would be exactly the same except for the degree of labelling.
This week made an important new low, slightly below the prior swing low of 18th of July. Price thereafter bounced up strongly from support about 1,310 – 1,305. This weekly candlestick comes with lighter volume than last week.
To see what is happening here we need to look inside this week at daily volume.
The long lower wick of this weekly candlestick is bullish.
On Balance Volume is giving a bullish signal this week as it found support at the yellow trend line and has moved up and away from that line. OBV may find some resistance at the purple line.
RSI is not extreme. There is still room for price to fall or rise. There is no divergence between price and RSI at the weekly chart level to indicate weakness.
Volume shows a steady increase all week, with Friday’s upwards day showing strongest volume. The rise in price for Friday was well supported by volume. This supports the main Elliott wave count; it is bullish.
Price has found support this week at the lower edge of the support zone about 1,305. The bounce up from there reinforces the strength of this support line.
On Balance Volume gave a bullish signal this week when it came down to touch the yellow support line and then moved up from there. The strength of this line is slightly reinforced. OBV is not up at the purple line which may offer resistance. This may initiate a reaction downwards, which is what both Elliott wave counts expect short term for Monday / Tuesday.
RSI is close to neutral. There is plenty of room for price to rise or fall. There is no divergence noted at the end of this week between price and RSI at the daily chart level to indicate any weakness.
ADX is still declining and the +DX and -DX lines are still whipsawing about each other. ADX indicates this market is not trending. This is a lagging indicator as it is based upon a 14 day average.
ATR for Friday has increased, but one day of increase is not enough to indicate a trend returning. Overall, ATR is still declining in agreement with ADX that this market is not yet trending. ATR is also a lagging indicator as it too is based upon a 14 day average.
Stochastics is returning from oversold. If the market is range bound, then the upwards swing should be expected to continue next week and only end when price finds resistance and Stochastics reaches overbought.
Bollinger Bands showed some small widening this week, but still are reasonably tightly contracted.
During the range bound period, which began back on 7th of July for Gold, it is still the two upwards days of 8th of July and 26th of August that have strongest volume. Volume is suggesting an upwards breakout is still more likely than downwards. This supports the Elliott wave count.
This analysis is published @ 07:48 p.m. EST.
[Note: Analysis is public today for promotional purposes. Member comments and discussion will remain private.]
Downwards movement was expected for the main hourly Elliott wave count, but this is not what happened. However, price remains below the invalidation point, so all three hourly wave counts remain valid.
Downwards movement breached the invalidation point on the main hourly Elliott wave chart but not the alternate.
Sideways movement remains above the invalidation point on the hourly chart.
The short term Elliott wave count is changed slightly. The longer term picture is the same.
The flip side of the title to this post is “don’t trade against the trend”.
The fact that markets trend is why traders make profits. Price is not completely random. Price tends to move in trends.
Trends are often delineated by trend lines.
When price is consolidating it tends to move in whipsaws about a moving average with choppy overlapping sideways movements. Price tends to move from resistance to support and back again, but not in a straight line. Overshoots of resistance and support can also happen yet price can turn back into the consolidation zone. It is impossible to tell exactly when and where price will turn, so if trying to trade a consolidating market losses are inevitable. Mean reverting systems for trading during a consolidating market are suited for the most experienced and nimble of traders only, not at all for beginners or those with only a few years experience.
When price has been consolidating for a while, then horizontal lines can be drawn to show the upper and lower boundaries of the consolidation zone. It then becomes a waiting game. Waiting for a breakout. When price breaks above resistance or below support on a day with an increase in volume, then a breakout is indicated and the market has begun to trend again.
When price is trending it moves in a clear direction, usually finding support (an upwards trend) or resistance (a downwards trend) at a sloping trend line. The clear direction of price movement is what makes profit easier, so the trick is to identify a new trend early enough to allow for profit to be made and then to identify when it is over early enough to exit the trade with a profit. For less experienced traders, it is advised to wait for a clear trend to be evident and then to only trade in the direction of that trend. Profits should be relatively easy as long as the trend is not exhausted.
If staying with the trend is the easiest way to make a profit, then it makes sense to avoid trading when the market is not trending.
It is often the trades that a trader does NOT take which makes the difference between profit and loss. Cut losses by avoiding consolidating markets.
If there is only one lesson that new traders can learn which will improve trading performance, it is to only trade a clear trend in the direction of that trend.