GOLD Elliott Wave Technical Analysis

By: Lara Iriarte | Wed, Jul 8, 2015
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Yesterday's hourly Elliott wave chart expected an impulse down to end and be followed by another second wave correction to find resistance at the upper edge of a channel.

This is what happened, with the exception of a small fourth wave not moving higher first.

Summary: The middle of a strong third wave may now be ready to break through support lines. The next target for this downwards trend to be interrupted is now at 1,120.

To see weekly charts go here.

Changes to last analysis are bold.


Bear Elliot Wave Count

old Elliott Wave Chart Daily 2015
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The bear wave count expects that cycle wave a is an incomplete impulse.

Within primary wave 5, the daily chart focuses on the middle of intermediate wave (3). Intermediate wave (3) has yet to show an increase in downwards momentum beyond that seen for intermediate wave (1).

The bear wave count has increased in probability with a new low below 1,162.80. Full confidence may be had in this wave count with a new low below 1,131.09.

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) (to the left of this chart) 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 (to the left of this chart) 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 the downwards day of 9th April which still has strongest volume.
  5. On Balance Volume on the weekly chart breached a trend line from back to December 2013. This is another bearish indicator.

Cons:

  1. Intermediate wave (2) (to the left of this chart) looks too big on the weekly chart.
  2. Intermediate wave (2) (to the left of this chart) has breached the channel from the weekly chart which contains cycle wave a.
  3. 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.
  4. 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.

Minor waves 1 and 2 are complete. Minute waves i and ii are also complete. Gold may be ready to move to the strongest middle of intermediate wave (3).

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

Minute wave ii is now very likely to be over here. If it moves any higher, then it should find strong resistance at the blue trend line.

At 1,093 minute wave iii would reach 1.618 the length of minute wave i. If minute wave iii ends in a total Fibonacci twenty one days, then this target may be reached in another seven days time.

Draw a base channel about minuette waves (i) and (ii) as shown (green trend lines). Look for upwards corrections along the way down to continue to find resistance at the upper edge of that channel. When the strongest part of downwards movement arrives, then it may have the power to break through support at the lower edge of the channel. For now this channel is perfectly showing where price is finding support and resistance.


Hourly Bear Elliot Wave Count

old Elliott Wave Chart Hourly 2015
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This hourly chart, and the alternate hourly below, work in exactly the same way for the bull wave count. The only difference for the bull wave count is the degree of labelling would be one degree lower.

Micro wave 1 finished with a slight new low for submicro wave (5). Submicro wave (5) is just 0.48 short of equality in length with submicro wave (1).

I have spent some time today on the five minute chart to see how submicro waves (4) and (5) subdivide. I am not certain exactly how submicro wave (4) subdivides nor exactly where it ends, but at this stage I think it is more important to see if micro wave 2 subdivides as a completed three or not, so any more time spent to see how submicro waves (4) and (5) subdivide is not necessary (there are multiple possibilities, all which meet Elliott wave rules).

At the five minute and hourly chart level, micro wave 2 fits perfectly as a completed three. With downwards movement now back in submicro wave (A) territory, this cannot be a five up continuing as a fourth wave would be in first wave price territory. Downwards movement is now deep enough to confirm that micro wave 2 is a completed three wave structure, and should be over there as a deep zigzag.

At 1,120 micro wave 3 would reach 1.618 the length of micro wave 1. Because micro wave 2 shows on the daily chart as a red candlestick, it should be expected that its counterpart micro wave 4 will also do so. The end of micro wave 3 may be the next place where the downward trend is interrupted by an upwards day.

Micro wave 3 may have the power to break through support at the lower edge of the green base channel.

At 1,111 minuette wave (iii) would reach 2.618 the length of minuette wave (i). If minuette wave (iii) lasts a total Fibonacci thirteen days, then this target would be eight days away.


Bull Eilliot Wave Count

old Elliott Wave Chart Daily 2015
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This bull wave count looks at the possibility that cycle wave a is a complete impulse and that cycle wave b began back at 1,131.09. Within cycle wave b, primary wave A is incomplete and subdividing either as a zigzag or an impulse.

Pros:

  1. The size of the upwards move labelled here intermediate wave (A) (to the left of this chart) looks right for a new bull trend at the weekly chart level.
  2. The downwards wave labelled minor wave W 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 (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 problem which substantially reduces its probability.
  2. Intermediate wave (5) of primary wave 5 (to the left of this 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). There is also now a second expanding leading diagonal for minute wave i.
  4. Volume does not support this bull wave count.
  5. Intermediate wave (B) or (2) may only be continuing as a double combination. Minor wave X is shallow, and X waves within double combinations are normally very deep. This one looks wrong.

Volume for 8th July shows a strong increase for an up day at 218.9K. It is stronger than all the prior down days since Gold entered the sideways consolidation back on 27th March except for one, that of 9th April at 230.3K.

Intermediate wave (A) (to the left of this chart) 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.

The only option now for the bull wave count is to see intermediate wave (B) or (2) continuing sideways as a double combination. The first structure in the double is a zigzag labelled minor wave W. The double is joined by a brief three in the opposite direction labelled minor wave X, a zigzag. The second structure in the combination is an expanded flat labelled minor wave Y which is incomplete.

Within minor wave Y, minute wave b is a 1.15 times the length of minute wave a indicating an expanded flat. Both minute waves a and b are three wave structures.

Minute wave c downwards must subdivide as a five, and because the first wave within it is an impulse and not a zigzag minute wave c may only be unfolding as an impulse.

Within minute wave c downwards, the third wave is incomplete for minuette wave (iii). At the hourly chart level, this bull wave count sees the subdivisions in exactly the same way as the bear (the bull sees everything one degree lower) so the hourly charts are the same. For this reason I will publish only hourly charts for the bear because they work in exactly the same way for the bull.

There does not look to be enough room for minute wave c to complete as a five wave impulse and remain above the invalidation point at 1,131.09. This is now the biggest problem with the bull wave count.


Technical Analysis

old Elliott Wave Chart Daily 2015
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Weekly Chart: Overall volume still favours a downwards breakout which may now be underway. During this sideways movement, it is still one down day and a down week which have higher volume. On Balance Volume breaches a trend line (lilac line) which began in December 2013, and the breach is significant.

While price has made higher lows, On Balance Volume has made lower lows (green trend lines). This small rise in price is not supported by volume, and it is suspicious. Price is now breaking below support at the green trend line, which is another bearish indicator.

At the weekly chart level, volume is strongest in a down week. Overall volume up until last week was declining, typical of a maturing consolidation. Each series of down weeks includes a week with stronger volume than the following series of up weeks.

Daily Chart
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Daily Chart: ADX is slightly above 15 for Wednesday at 16.77. This may finally be the indication of the early stages of a new downwards trend. Upwards movement is finding resistance just below the upper green trend line, which is now drawn as a channel in the same way as the main wave count.

My only concern for today is the strong volume for an up day. Today's volume at 218.9K is stronger than all prior down days except for one, that of 9th April which is still the strongest down day at 230.3K. That today's up day is stronger than more recent down days indicates we may yet see more upwards movement before the downwards trend continues. If price does move higher, then it should still find strong resistance and end at the upper green trend line.

The candlestick for Wednesday, although it is green, still exhibits a reasonable balance between bulls and bears. The upper and lower wicks are long and about even, indicating a balance and indecision, not necessarily the start of a new upwards trend. This fits with the Elliott wave count as seeing this day as a correction against the trend.

The last low in price for 7th July was not matched by On Balance Volume, which did not quite manage to make a new low. This was slight bullish divergence which may be resolved now by Wednesday's green candlestick.

 


This analysis is published about 06:04 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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