A Proposal in GOLD

I've been looking over the GOLD count several times. It is very compressed, seemingly incomprehensible movement in terms of impulse waves and their corrections. In fact, in one portion of the count - the first portion - there is an impulse and a triangle, which should end a move lower, and yet it continues. This is one clue that the wave downward might be a diagonal of some sort. Looking over the lengths of the wave, provides this possible count.

GOLD (GC) Futures - 2 Day - Plausible Diagonal

Most recently, there has been an impulse wave downward - including a third wave gap. Since it did not make a new low, this suggests that it may be an ((a)) wave. If so, it is possible that perhaps the whole structure will form an expanding diagonal - and perhaps a leading one.

Such a count might occur whether SuperCycle (IV) in Gold is a Flat or a Triangle. I thought of it most in conjunction with a triangle because of the very hesitating nature of the decline so far. Often, not always, such hesitating action is only an (A) wave, and not a larger (1) wave, down. But, that is putting the cart before the horse. 

The first things to see are a) whether a new low beyond wave 3 is made; b) whether wave 5 becomes longer than wave 3 in price, and c) whether wave 5 becomes longer than wave 3 in time. Most importantly, for the down count to succeed, the current upward ((b)) wave - while it might fill the gap - should not exceed the wave 4 high. 

And, there you have it, another potential EW count with a 'clear' invalidation point that can be monitored. So what are the negatives?

First, and most importantly, diagonals - and especially expanding diagonals - are low probability patterns that must play out properly in every detail. Secondly in the negative column, some of the ((a)) waves look like three's because they might have short fourth waves. Yet, they might - in fact - be fives because there are lower lows after them.

All-in-all, the pattern might continue to be whippy and difficult to trade. Such is the nature of diagonals. But, IFF a diagonal pattern forms properly, and a retrace subsequently holds the all-time-high, then a nice impulse lower might follow the completed pattern, if valid. That wave might be more tradeable than this one.

This is the second post this weekend, and if you have not seen the first one, yet, you might want to view it now.

Have an excellent rest of the weekend.

TraderJoe