GOLD Elliott Wave Technical Analysis

By: Lara Iriarte | Wed, Jan 15, 2014
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Last analysis expected more downwards movement from both the main and alternate wave counts. This is what has happened.

I am swapping over the main and alternate wave counts because the alternate has a better more typical fit. Although at this stage it makes no difference to the expected direction, both wave counts still expect the same direction next.

XAU/USD Daily Chart
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Gold is still within a large fourth wave correction at primary wave degree which is incomplete. To see a full explanation of my reasoning for expecting that primary wave 4 is not over and is continuing see this.

Movement above 1,277.97 would provide confirmation that primary wave 4 is not over. At that stage upwards movement could not be a fourth wave correction within primary wave 5 because it would be in its first wave price territory, and the downwards movement labeled intermediate wave (X) would be confirmed as a completed three wave structure.

Primary wave 2 was a rare running flat correction, and was a deep 68% correction of primary wave 1. In order to show alternation in structure primary wave 4 may be a zigzag, double zigzag, combination, triangle or even an expanded or regular flat. We can rule out a zigzag because the first wave subdivides as a three. This still leaves several structural possibilities.

The downwards wave labeled intermediate wave (X) is now 99% the length of the upwards wave labeled intermediate wave (W). Primary wave 4 is most likely to be a combination or triangle in order to show structural alternation with the running flat of primary wave 2.

Primary wave 4 is unlikely to be a flat correction because if it were it would be a regular flat. These have similar behaviour and a similar look to running flats, and so there would be little structural alternation between primary waves 2 and 4.

Primary wave 4 is most likely to be a combination rather than a double zigzag because of the depth of intermediate wave (X). Double combinations take up time and move price sideways, and their X waves can be very deep. Double zigzags are different because their purpose is to deepen a correction when the first zigzag does not move price deep enough, so their X waves are not normally very deep. Thus intermediate wave (Y) is most likely to be a flat correction, and less likely a triangle and least likely a zigzag. It is most likely to end about the same level as intermediate wave (W) at 1,434 so that the whole structure moves sideways. It may last about 43 to 89 days, depending upon what structure it takes.

If intermediate wave (Y) is a flat correction then within it minor wave B must retrace a minimum of 90% the length of minor wave A, and it may make a new low below 1,180.84.

If intermediate wave (Y) is a flat correction then within it minor wave A must subdivide as a three wave structure. At this stage it looks like minor wave A may be unfolding as a zigzag because minute wave a within it looks like it is unfolding as a leading diagonal which is a five wave structure.

Primary wave 4 may not move into primary wave 1 price territory. This wave count is invalidated with movement above 1,532.90.

XAU/USD Hourly Data Chart
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Within the leading diagonal for minute wave a minuette waves (i), (ii), and (iii) are complete. Minuette wave (ii) was a relatively shallow 44% correction of minuette wave (i). Minuette wave (iii) at 36.83 in length is shorter than minuette wave (i) which was 67.69 in length, so the diagonal is contracting.

Minuette wave (iv) should be shorter than minuette wave (ii). Minuette wave (iv) would reach equality with minuette wave (ii) at 1,225.50, but will most likely end before this price point.

Minuette wave (iv) is likely to end within the normal range of 0.66 to 0.81 the length of minuette wave (iii) which gives us a target between 1,231 to 1,226.

Minuette wave (iv) must subdivide into a single zigzag. Within the zigzag subminuette wave b may not move beyond the start of subminuette wave a. This wave count is invalidated with movement above 1,255.43.

Minuette wave (iv) may not move beyond the end of minuette wave (ii). This wave count is invalidated with movement below 1,218.60.

Within minuette wave (iv) subminuette wave b is unfolding as an expanded flat correction. Within it micro wave C would reach 2.618 the length of micro wave A at 1,246.

I would expect minuette wave (iv) to be over within 24 hours. The upwards trend should resume before next analysis, or close to the time next analysis is done.

Alternate Wave Count

XAU/USD Daily Chart
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This was yesterday's main wave count. It looks at the possibility that minor wave A is unfolding as a flat correction, and within it minute wave a was a double zigzag.

Within the flat correction minute wave b must correct downwards at least 90% the length of minute wave a, and it may make a new low below the start of minute wave a at 1,180.84.

XAU/USD Hourly Alternate Chart
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The subdivisions for both wave counts are exactly the same. For this alternate downwards movement is also expected to continue, but it should continue for a few days yet and must reach 1,188.27 or below.

If the main wave count is invalidated with movement below 1,218.60 this alternate would be confirmed. At that stage I would expect more downwards movement to at least 1,188.27, and it would be fairly likely that price would make a new low below 1,180.84.

In the short term the upper target at 1,246 is exactly the same.

Alternate Daily Wave Count - Triangle

It is also possible that primary wave 4 may continue as a regular contracting (or barrier) triangle.

The expected direction of this next upwards wave is the same, but for this alternate intermediate wave (C) of the triangle may not move beyond the end of intermediate wave (A). The triangle is invalidated with movement above 1,438.83.

Intermediate wave (C) must unfold as either a single or double zigzag. Within it no second wave correction, nor wave B of the zigzag, may move beyond the start of the first wave or A wave. This wave count is invalidated with movement below 1,180.84.

The final intermediate wave (E) upwards may not move above the end of intermediate wave (C) for both a contracting and barrier triangle. E waves most commonly end short of the A-C trend line.

All five subwaves of a triangle must divide into corrective structures. If this next upwards movement subdivides as a zigzag which does not make a new high above 1,438.83 then this alternate would be correct.

Triangles take up time and move price sideways. If primary wave 4 unfolds as a triangle then I would expect it to last months rather than weeks.



Lara Iriarte

Author: Lara Iriarte

Lara Iriarte

Lara Iriarte

Elliott wave is one of the more difficult and complicated technical analysis tools. When done right it can be uncannily accurate.

I have been using the Elliott wave principle to analyse up to five markets a day since 2008. I began Elliott Wave Forex (originally in 2009 to provide daily analysis of EURUSD and GBPUSD, then I began Elliott Wave Stock Market in 2010. Elliott Wave Gold began in August, 2013. Currently I provide daily analysis of Gold on this site, and daily analysis of the S&P 500 on Elliott Wave Stock Market for its members.

I have a science background (BSc) which has trained me to think logically and be evidence focussed. Over the years I have seen no market movement which does not fit into the clear and restrictive rules for Elliott wave structures.

I have members who are fund managers, institutional investors and professional traders.

If you want to learn how to apply the Elliott wave principle to any market my analysis service is designed to teach you, daily, how to do this.

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