GOLD Elliott Wave Technical Analysis

By: Lara Iriarte | Thu, Mar 26, 2015
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Upwards movement was expected, but the target at 1,204 was comfortably exceeded by 15.99.


Summary

I expect a short term correction for the main wave count; minor wave 2 may have begun and the target is at 1,172. This trend change is unconfirmed though, so the channel on the hourly chart must be breached to have confidence in this trend change and the target. The alternate wave count requires strong downwards movement to begin now for a third wave within a third wave. If downwards movement breaks below 1,142.82 the alternate wave count should be seriously considered, and the main wave count would be invalidated at the hourly chart level. A new low below 1,131.09 would provide full invalidation of the main wave count and confirmation of the alternate.


Main Daily Wave Count

Main Daily Wave Count
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There are more than thirteen possible corrective structures that cycle wave b may take. At this stage it is unclear what degree to label this big movement. I will leave labelling as is at primary degree, but it is equally possible that this degree may be moved down one level and primary wave A is an incomplete zigzag.

Cycle wave b may be a single zigzag as labelled, but may also be a double zigzag with the first zigzag unfolding as labelled. It may be a triangle with only primary wave A zigzag incomplete, or a double combination within a zigzag for primary wave W incomplete. It may be a flat correction with primary wave A as an unfolding zigzag. All these structures are equally likely. Of all Elliott waves, B waves exhibit the greatest variety in form and structure and are the hardest to label correctly as they unfold.

When the big zigzag labelled primary waves A-B-C is complete I will have alternate wave counts to manage the various possibilities for cycle wave b. When the big zigzag is complete that does not mean that cycle wave b must be complete, and only means that if cycle wave b is a single zigzag it would be complete there. All other possibilities will remain open.

A new high above 1,308.10 would invalidate the alternate and confirm this main wave count at primary and cycle degree.

The upwards wave labelled primary wave A fits only as a five wave structure, a leading expanding diagonal. Within a leading diagonal the first, third and fifth waves are most commonly zigzags, and the fourth wave should overlap first wave price territory. I have tried to see this movement as a three; if it is a three then wave A would end at the high labelled intermediate wave (3) within primary wave A. That would see wave A a leading contracting diagonal, but within it the third wave would be longer than the first. This violates the rule for wave lengths of contracting diagonals so that idea is not a viable wave count. This leads me to the conclusion that primary wave A is a five wave structure and cannot be seen as a three.

Because primary wave A subdivides as a five, primary wave B may not move beyond its start below 1,131.09.

At 1,320 primary wave C would reach equality in length with primary wave A. This would complete a 5-3-5 zigzag trending upwards. At that stage alternate wave counts would be required to manage the various possibilities for cycle wave b.

At 1,429 primary wave C would reach 1.618 the length of primary wave A.

Because primary wave A is a diagonal then it is highly likely primary wave C will be an impulse in order to exhibit alternation. Primary wave C may end about the upper edge of the channel drawn about cycle wave b.

This wave count sill has problems of structure within primary wave 5 of cycle wave a:

It is for these reasons that I will retain the alternate until price confirms finally which wave count is correct and which is invalidated.

XAU/USD (Hourly) Chart
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Minute wave v passed the target and equality in length with minute wave i. It has most likely ended with no Fibonacci ratio to either of minute waves i or iii.

Minute wave v exhibits a short sharp increase in upwards momentum, with an increase in volume on the daily chart for this session. This looks like a fairly typical "blow off", a fifth wave typical of commodities. I had not expected to see this after a fourth wave triangle, but it is still typical behaviour for Gold.

The fifth wave overshoots the Elliott channel which also looks typical.

MACD shows persistent divergence: while price trends higher MACD trends lower. This supports the idea of a trend change, but it is not definitive.

This trend change is unconfirmed. The channel needs to be breached before confidence may be had in this change. Depending on your risk appetite you may also want to wait for a new low below 1,186.78 before you have confidence in this trend change and the target.

1,186.78 is the end of minute wave iv and the start of minute wave v. When price moves below this point it may not be a second wave correction within minute wave v, and so at that point minute wave v must be over.

Minor wave 1 lasted seven days, one short of a Fibonacci eight. Minor wave 2 would most likely last either two or three days, and at the most it may last a Fibonacci five. It is most likely to be a zigzag or multiple zigzag, and it is most likely to end about the 0.618 Fibonacci ratio at 1,172.

There is no upper invalidation point at the hourly chart level for minor wave 2. It may be a flat or combination, which may include a new high above its start at 1,219.99. Although this is possible it is less likely.

Minor wave 2 should see MACD return to the zero line. It should be a clear corrective structure, a clear "three".

Minor wave 2 may not move beyond the start of minor wave 1 below 1,142.82. If this invalidation point is breached in the next few trading days, by any amount at any time f rame, this wave count woul d substantially reduce in probability at the daily chart level.


Alternate Daily Wave Count

XAU/USD Alternate Daily Wave Count
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This alternate wave count sees Gold as still within a primary degree downwards trend, and within primary wave 5 intermediate wave (3) has begun.

At 956.97 primary wave 5 would reach equality in length with primary wave 1. Primary wave 5 may last a total Fibonacci 55 weeks. So far it is now in its 36th week.

The maroon channel about cycle wave a from the weekly chart is now breached by a few daily candlesticks and one weekly candlestick. If cycle wave a is incomplete this channel should not be breached. The breach of this channel is a warning this wave count may be wrong.

This wave count still has a better fit in terms of better Fibonacci ratios, better subdivisions and more common structures within primary wave 5, in comparison to the main wave count above.

Within intermediate wave (3) minor wave 1 is a long extension. Within minor wave 1 minute waves iv and ii are grossly disproportionate, with minute wave iv more than 13 times the duration of minute wave i. This also reduces the probability of this wave count.

Although the invalidation point is at 1,308.10, this alternate wave count should be discarded long before that price point is reached. If the maroon channel is breached again by one full daily candlestick above it and not touching it then I would discard this alternate wave count.

A new low below 1,131.09 would confirm that intermediate wave (3) down is underway.


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This alternate sees upwards movement as a completed zigzag. Unfortunately, sometimes waves are ambiguous: they are not clearly either threes or fives. With the many subdivisions within this upwards movement it is possible to see it as both a three and a five.

This alternate also expects downwards movement from here. Minor wave 3 should show a clear strong increase in downwards momentum. This is a third wave within a third wave which should gather momentum over the next few days. At 1,055 minor wave 3 would reach equality in length with minor wave 1. This target expects minor waves 1 and 3 to be both extended, so minor wave 5 to end should be shorter.

This wave count also requires confirmation of a trend change in the short term with a breach of the channel about minor wave 2 before any confidence can be had that minor wave 3 has begun.

For this alternate downwards momentum should be strong; MACD should cross well below the zero line. If this wave count is correct then we should see it confirmed within one or two weeks most likely.

While the trend change is un confirmed it must be allowed for that minor wave 2 could move higher. If it does it may not move beyond the start of minor wave 1 above 1,308.10.

 


This analysis is published about 03:52 p.m. EST.

 


 

Lara Iriarte

Author: Lara Iriarte

Lara Iriarte
elliottwavegold.com

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 ForexInfo.us) 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.

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