Weekly Gold

Is weekly GOLD triangulating? We have to say up front that, while we don't know for sure, something sure seems odd. First, here is a chart of weekly GOLD with the outlines of a potential triangle. The upper trend line is dotted black to show that this trend line is not yet proven.

Weekly GOLD - Potential Triangle

When you look over this chart, you'll notice that the current wave from December, 2016 so far is taking more time than the minor A wave up. And, the weekly MACD, while barely positive, is still as flat as a pancake. That just doesn't seem like the way a strong C wave up starts. So, we have to ask the question, "are we in a weaker C wave, like that of a triangle?".

The minor B wave down stopped just shy of the 78.6% Fibonacci retracement level, and that is a common turning point for triangle-type retracements. So, the potential dotted black trend line of a triangle is shown where a C wave of a symmetrical triangle would also retrace about 78.6%. Price is not there yet.

Next we correctly counted the (a) wave up of C from the weekly chart, above, on a 4-hr chart of GOLD as a Leading Contracting Diagonal - which meant higher waves were to come, and they did. And we correctly called for a longer (b) wave lower - some or all of which did form.

And now that prices have turned higher again. We thought we'd have a look at the latest 4-hr chart, using The Eight Fold Path Methodology, and Neely style counting. Here is that chart.

GOLD Futures - 4 HR - The Eight Fold Path

There are some things to notice on this chart. First, all of the current price movement is confined to a channel. Second, if we look for ways not to chop off any part of a third wave with a line connecting the start and the second wave, this is about the only way to do it. Third, we note that while there certainly does appear to be a third wave, (iii) at the high point of the Elliott Wave Oscillator (EWO), then the waves that immediately precede it are intensely choppy. So, we think that area is better described as the "fifth" wave of the third wave, v, and not the middle of the third wave. That nice big impulse bar, iii, looks to be the middle of the third wave. Fifth, wave (iv) has a good fourth wave look to it, and alternates well with the second wave (ii). Six, because wave (ii) is more than a 38.2% retrace, we are probably not dealing with the situation where the first wave is the extended wave in the sequence. Seventh, the B wave retrace is only 23.6% which is OK for the shallow retrace of a zigzag - since we are likely not dealing with the extended first wave scenario. This is shown by the fact that the third wave is over 261.8% times the first wave, no matter how you measure it.  And, Fibonacci eighth, notice that while price is diverging from the EWO already, there are only 87 candles on this chart - not the 120 - 160 recommended per The Eight Fold Path Method. And that means this wave is likely not forming a true impulse wave up.

All of this suggests that GOLD may only be in a zigzag higher, and while the upward count is not finished, it may either point to a smaller potential interior triangle on the weekly chart, shown in dotted blue, or the larger overall potential triangle shown in black.

As always, triangles are forms that must prove themselves in every detail. And, the best alternate for the potential triangle is the double combination (W-X-Y) where W = A, and X = B from the current weekly chart. Trading above 1,340 would tend to indicate that the double combination was the more likely scenario. In this case, from the four-hour chart A would be 1, and B would be 2, and with the 23.6% pull-back only, then 1 would likely be the extended wave in the sequence. But, that's why this is the alternate case - because there was an initial deep enough pull-back for wave (ii) to allow the extended third wave (iii).

In either case, the up wave does not appear to be quite finished. What would be more convincing of the double combination than of the triangle would be if there were a large gap up next week, that was not quickly retraced, because it is very tough to find one in the chop on the current chart. So keep your eyes on the look out.

Hope this helps, and have a great rest of the weekend!
TraderJoe