GOLD Elliott Wave Technical Analysis

By: Lara Iriarte | Fri, Jun 5, 2015
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Downwards movement was expected. The first target at 1,165 was met and exceeded by 2.2.

Summary: It is more likely this downwards wave is incomplete. Confirmation would come with a new low below 1,162.80, with the target at 1,157. Alternatively, it is possible this downwards wave is over now. A new high above 1,179.60 would confirm an end to this downwards movement and the early stage of the next wave up.

To see the bigger picture and weekly charts go here.

Changes to last analysis are italicised.


Bull Wave Count


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The bull wave count sees primary wave 5 and so cycle wave a a complete five wave impulse on the weekly chart.

Pros:

  1. The size of the upwards move labelled here intermediate wave (A) looks right for a new bull trend at the weekly chart level.
  2. The downwards wave labelled intermediate wave (B) looks best as a three.
  3. The small breach of the channel about cycle wave a on the weekly chart would be the first indication that cycle wave a is over and cycle wave b has begun.

Cons:

  1. Within intermediate wave (3) of primary wave 5 (now off to the left of this chart), to see this as a five wave impulse requires either gross disproportion and lack of alternation between minor waves 2 and 4 or a very rare running flat which does not subdivide well. I have tried to see a solution for this movement, and no matter what variation I try it always has a major problem.
  2. Intermediate wave (5) of primary wave 5 (now off to the left of the chart) has a count of seven which means either minor wave 3 or 5 looks like a three on the daily chart.
  3. Expanding leading diagonals (of which intermediate wave (A) or (1) is) are are not very common (the contracting variety is more common).
  4. The possible leading diagonal for minor wave 1 and particularly minute wave ii within it look too large.

For volume to clearly support the bull wave count it needs to show an increase beyond 187.34 (30th April) and preferably beyond 230.3 (9th April) for an up day. Only then would volume more clearly indicate a bullish breakout is more likely than a bearish breakout.

Within cycle wave b, primary wave A may be either a three or a five wave structure. So far within cycle wave b there is a 5-3 and an incomplete 5 up. This may be intermediate waves (A)-(B)-(C) for a zigzag for primary wave A, or may also be intermediate waves (1)-(2)-(3) for an impulse for primary wave A. At 1,320 intermediate wave (C) would reach equality in length with intermediate wave (A) and primary wave A would most likely be a zigzag. At 1,429 intermediate wave (3) would reach 1.618 the length of intermediate wave (1) and primary wave A would most likely be an incomplete impulse.

Intermediate wave (A) subdivides only as a five. I cannot see a solution where this movement subdivides as a three and meets all Elliott wave rules (with the sole exception of a very rare triple zigzag which does not look right). This means that intermediate wave (B) may not move beyond the start of intermediate wave (A) below 1,131.09. That is why 1,131.09 is final confirmation for the bear wave count at the daily and weekly chart level.

Intermediate wave (C) is likely to subdivide as an impulse to exhibit structural alternation with the leading diagonal of intermediate wave (A). This intermediate wave up may be intermediate wave (3) which may only subdivide as an impulse.

This bull wave count sees minor wave 1 a short brief impulse and minor wave 2 now an expanded flat correction. Within minor wave 2, minute wave c has now moved below the end of minute wave a at 1,178.59 avoiding a truncation and a very rare running flat.

It is possible that minor wave 2 is over here. If it is, then minute wave c is just 2.7 longer than 1.618 the length of minute wave a. At 1,288 minor wave 3 would reach 1.618 the length of minor wave 1. If minor wave 2 moves lower, this target must also move correspondingly lower.

Minor wave 2 may not move beyond the start of minor wave 1 below 1,142.82.

After completion of minor wave 2, then a new high above 1,232.49 would eliminate the bear wave count and provide full confidence in the targets.


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There are two ideas in this analysis for this last wave down of minuette wave (v). Both ideas work in exactly the same way for both bull and bear wave counts.

If this fifth wave is over, then it would be just 2.28 longer than equality with minuette wave (i). Because there is no adequate Fibonacci ratio between minuette waves (i) and (iii), it is very likely that this fifth wave will exhibit a Fibonacci ratio to either the first or third.

I have checked the subdivisions of this fifth wave on the five and one minute charts. Within this impulse, the fourth wave corrections are quicker than the second wave corrections (this is actually typical for Gold when it has strong extended fifth waves) giving some of these waves a three wave look on this hourly chart, when they subdivide as fives on a lower time frame.

The middle of the third wave must subdivide as an impulse, and on the one minute chart it does.

Subminuette wave ii was a combination and subminuette wave iv a zigzag. There is perfect alternation.

There are no adequate Fibonacci ratios between subminuette waves i, iii and v. This reduces the probability of this wave count.

A new high above 1,179.60 is required for first confirmation. At that stage, the next confirmation would come with a clear breach of this best fit channel. Only then would I have full confidence that this impulse for minute wave c is over and the next wave up is underway.

A new low below 1,162.80 would invalidate this idea at the hourly chart level. If that happens then use the hourly bear wave count for this bull wave count. They have would then have exactly the same subdivisions and targets.


Bear Wave Count


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This wave count follows the bear weekly count which sees primary wave 5 within cycle wave a as incomplete. At 957 primary wave 5 would reach equality in length with primary wave 1.

Pros:

  1. Intermediate wave (1) (to the left of this chart) subdivides perfectly as a five wave impulse with good Fibonacci ratios in price and time. There is perfect alternation and proportion between minor waves 2 and 4. For this piece of movement, the bear wave count has a much better fit than the bull wave count.
  2. Intermediate wave (2) is a very common expanded flat correction. This sees minor wave C an ending expanding diagonal which is more common than a leading expanding diagonal.
  3. Minor wave B within the expanded flat subdivides perfectly as a zigzag.
  4. Volume at the weekly and daily chart continues to favour the bear wave count. Since price entered the sideways movement on 27th March it is a downwards week which has strongest volume, and it is downwards days which have strongest volume.
  5. On Balance Volume on the weekly chart recently breached a trend line from back to December 2013. This is another bearish indicator.

Cons:

  1. Intermediate wave (2) looks too big on the weekly chart.
  2. Intermediate wave (2) has breached the channel from the weekly chart which contains cycle wave a.
  3. Minor wave 2 is much longer in duration than a minor degree correction within an intermediate impulse normally is for Gold. Normally a minor degree second wave within a third wave should last only about 20 days maximum. This one is 44 days long.
  4. Within minor wave 1 down, there is gross disproportion between minute waves iv and ii: minute wave iv is more than 13 times the duration of minute wave i, giving this downwards wave a three wave look.

Minor waves 1 and 2 are complete. Minute wave i within minor wave 3 may be incomplete on the hourly chart.

Minute wave ii may not move beyond the start of minute wave i above 1,232.49.

The bull and bear wave counts both see a five wave impulse down either incomplete and requiring a final fifth wave, or complete at today's low.

If this impulse takes price below 1,142.82, then the bull wave count would be invalidated. But only a new low below 1,131.09 would invalidate any variation of a bull wave count and provide full and final confirmation for a bear wave count.

When this five wave impulse is complete, then the bull wave count will expect a third wave up and this bear wave count will expect a second wave correction. At that stage, the bear wave count would be invalidated with a new high above 1,232.49 and the bull wave count would be confirmed.


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Both hourly wave counts work the same way for bull and bear.

This idea expects a final fifth wave down to unfold. At 1,157 minuette wave (v) would be extended and would reach equality in length with minuette wave (i).

There is no Fibonacci ratio between subminuette waves i and iii. It would be very likely that subminuette wave v will exhibit a Fibonacci ratio to either of i or iii, and equality with i at 12.11 in length would be the most likely ratio.

Subminuette wave ii was a quick zigzag. Subminuette wave iv may be a more long lasting flat, combination or triangle. Within it, the B wave is most likely incomplete, may move lower, and may even make a new low below 1,162.80 as in an expanded flat or running triangle. If that happens as part of this fourth wave, then this wave count would be confirmed and the idea presented for the bull wave count which sees this movement over would be invalidated.

This idea expects choppy overlapping movement for a few hours yet before this fourth wave is over. It would then be followed by a swift strong fifth wave down to the target. Please note: the arrow here depicts an expanded flat only because they are very common structures, but subminuette wave iv may be a triangle and may unfold sideways in a much narrower range than the arrow depicts.

Subminuette wave iv is most likely to end within the price territory of the fourth wave of one lesser degree. Micro wave 4's territory is from 1,174.75 to 1,176.74.

At any stage, a new low below 1,162.80 would confirm this idea. Both bull and bear wave counts would then have the same target for the next wave down to end at 1,157.


Technical Analysis


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There is now a full daily candlestick below the lower aqua blue line which began back on 31st March. This may still only be an overshoot. Price has not closed 3% or more of market value below this line and so a bearish breakout is not yet indicated. (3% of market value below 1,178.59 is at 1,143.23) At this stage, it should actually be expected that this downwards swing will end either here or very soon and will be followed by another upwards swing towards resistance.

Stochastics remains oversold. This downwards swing should end soon.

ADX remains flat and below 15 indicating no clear trend still. It is possible that Friday's data could bring ADX up to 15, and if that happens, then a downwards trend would be indicated. For now only Thursday's data is available for ADX.

The slight decrease in volume for Friday is a slight concern. It looks like the market is falling of its own weight.

The long lower wick on the candlestick for Friday is a slight bullish indicator.

This analysis is published about 05:00 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.

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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