Gold’s Elliott Wave Count Adjustment (XAU/USD)

November 3rd, 2010

4H: The zig zag scenario and count is invalid. The “B” wave is too strong. Looking at the 4H chart, we see that the market instead of going ABC, could not make a lower low in the “C” wave and instead broke above B. Therefore, I think that count is invalid, and instead, a new count should be considered. The market could be done with the correction from about 1385 to 1315 area.
When the market broke above the declining trendline on 10/28, the market may have started a wave 1, and the decline that was supported yesterday from going further down was wave 2. The current rally is strong and fits the description of wave 3. Further confirmation are the RSI breaking above 70 and price level breaking and closing above the previous pivot at 1385 area.
Finally, the market could still be in a flat correction instead of a zig zag. The twisting and turning of consolidation patterns is one of the hardest thing to follow and makes even pure Elliott Wave practitioners cringe, so for a clear signal, I would like to see the market break above the previous all-time high, and then show a decently strong but failed bearish attempt, held above 1350. This is in consideration of the possible expanded flat scenario.
These signs point to further rally for a first target at 1420 area. This is the about 150% expanded retracement as shown in the daily chart below and is a good projection for the current swing.

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