XAU/USD Technical Analysis: Anticipating a Corrective Phase
Updated
1. Market Structure and Elliott Wave Context:
From the images, you have charted Elliott Wave structures across different timeframes. It appears that:
In the 1-hour chart, the market has likely completed an impulse wave (v). This typically indicates the end of a larger wave movement, suggesting that a correction could follow. Impulse waves are characterized by a five-wave movement (1, 2, 3, 4, 5), and wave (v) marks the final phase of this impulse before a corrective phase begins.
In the 4-hour chart, you have marked the completion of Wave 5 of the impulse move, suggesting that a corrective wave sequence (ABC) may follow. After a completed impulse, markets often retrace in a three-wave pattern: an A-B-C correction. The A-leg is typically a sharp move down, followed by a B-leg bounce and a final C-leg continuation to complete the correction.
In the daily timeframe, your wave count indicates the market is nearing the end of a larger Elliott Wave cycle, likely finishing the last wave (5). This suggests that the market is poised for a larger-scale correction once the final wave completes.
Short-Term Outlook (Next 2 Weeks):
The next two weeks could see the beginning of a corrective phase following the completion of the final impulse wave. Specifically:
Wave (a) of the corrective phase should begin shortly, taking the market lower as traders look to take profits after the completion of the impulse.
You have marked key Fibonacci retracement levels (0.5 and 0.618), which are common targets for corrective waves. This suggests you expect the price to retrace to at least these levels, with the 0.618 Fibonacci level being the most probable target for the initial correction.
2. Wyckoff Methodology and Market Phases:
The Wyckoff analysis shows that the market has moved through different phases of accumulation and distribution. You have identified a Phase B in the Wyckoff structure on the higher timeframes, which often represents the upthrust (UT) in a distribution phase. This suggests that the market has completed a markup phase and is now entering a distribution phase, where large players are preparing to sell into strength, leading to a decline in price.
The presence of a Break of Structure (BOS) in the charts further supports this bearish outlook, as BOS events typically signal that a market is transitioning from one phase to another, often from a bullish phase to a bearish phase.
Next Two-Week Expectation Based on Wyckoff:
You expect a continuation of the distribution phase, where institutional sellers are likely offloading their positions. This could lead to a markdown phase in the price of XAU/USD, possibly confirming a “Sign of Weakness (SOW)”, which typically occurs after an upthrust and signals the market is ready for a deeper decline.
3. Fibonacci Levels and Liquidity Zones:
Fibonacci retracement levels are a crucial part of your analysis, with 0.5 (50%) and 0.618 (61.8%) retracement levels clearly marked on your charts. These levels often act as strong support zones during corrections.
In the near term, you expect the price to retest these levels during the correction, particularly around the 0.618 Fibonacci level, as this is a key zone for buyers to step in and absorb selling pressure.
The liquidity zones highlighted on your chart, such as the Buy Side (H) and Sell Side (H), suggest you’re watching for price reactions near these levels. The liquidity sitting above or below these zones could act as magnets for price during the correction.
4. Volume Profile and Market Sentiment:
Your use of the Volume Profile tool reveals that you are tracking key price levels where the highest volume of trades occurred. These are critical areas of support and resistance.
There’s a noticeable divergence in volume compared to price action. Typically, when price moves higher on weakening volume, it suggests that the upward momentum is unsustainable, and a reversal could be imminent.
Volume Insights for the Next Two Weeks:
You are likely expecting a reduction in buying pressure as the market enters a distribution phase. As volume dries up, the potential for a bearish reversal increases, which aligns with your expectation of a corrective phase.
5. Indicators and Momentum (MACD Divergence):
The charts show a clear divergence in the MACD indicator (or similar momentum indicator). You’ve marked this divergence on the chart, which indicates that while price is making new highs, momentum is weakening.
This divergence is a strong signal of a potential reversal, especially when combined with Elliott Wave and Wyckoff’s analysis, which both suggest that a major wave top is forming.
Expected Price Action (Summary):
Initial Correction (Wave A of ABC):
You expect the price to initiate a corrective wave (a) over the next few days, likely targeting key Fibonacci levels (0.5 and 0.618 retracement), which could coincide with liquidity zones.
The first wave of correction might find support around $2,661 to $2,656 levels as part of the retracement process.
Consolidation (Wave B):
Following the initial drop (Wave A), a short-term relief rally (Wave B) could push prices higher, but not beyond the recent high. This is typical in ABC corrections where the B-leg is often a partial retracement of the A-leg, allowing for new short positions.
Final Leg of Correction (Wave C):
The final leg of the correction, Wave C, could take the market even lower. Key levels for Wave C could be the Fibonacci extension or further significant support zones you have identified, such as $2,605 or $2,593, based on historical market structure.
Bearish Scenario Confirmation:
If the market continues to follow your Elliott Wave and Wyckoff outlook, a failure to break above Wave 5 would confirm the bearish scenario. This could lead to a deeper correction that extends beyond two weeks, possibly moving towards lower Fibonacci extensions or liquidity zones around the $2,432 to $2,385 range.
Conclusion:
In summary, you are expecting a corrective wave to take place in XAU/USD over the next two weeks, which aligns with the completion of a fifth Elliott Wave and signals from the Wyckoff distribution phase. The correction could initially target Fibonacci retracement levels around $2,661 and $2,656, followed by a larger decline if the wave count holds true. Volume and momentum divergence, coupled with market structure breaks (BOS), further support your outlook for a bearish correction in the gold market.
From the images, you have charted Elliott Wave structures across different timeframes. It appears that:
In the 1-hour chart, the market has likely completed an impulse wave (v). This typically indicates the end of a larger wave movement, suggesting that a correction could follow. Impulse waves are characterized by a five-wave movement (1, 2, 3, 4, 5), and wave (v) marks the final phase of this impulse before a corrective phase begins.
In the 4-hour chart, you have marked the completion of Wave 5 of the impulse move, suggesting that a corrective wave sequence (ABC) may follow. After a completed impulse, markets often retrace in a three-wave pattern: an A-B-C correction. The A-leg is typically a sharp move down, followed by a B-leg bounce and a final C-leg continuation to complete the correction.
In the daily timeframe, your wave count indicates the market is nearing the end of a larger Elliott Wave cycle, likely finishing the last wave (5). This suggests that the market is poised for a larger-scale correction once the final wave completes.
Short-Term Outlook (Next 2 Weeks):
The next two weeks could see the beginning of a corrective phase following the completion of the final impulse wave. Specifically:
Wave (a) of the corrective phase should begin shortly, taking the market lower as traders look to take profits after the completion of the impulse.
You have marked key Fibonacci retracement levels (0.5 and 0.618), which are common targets for corrective waves. This suggests you expect the price to retrace to at least these levels, with the 0.618 Fibonacci level being the most probable target for the initial correction.
2. Wyckoff Methodology and Market Phases:
The Wyckoff analysis shows that the market has moved through different phases of accumulation and distribution. You have identified a Phase B in the Wyckoff structure on the higher timeframes, which often represents the upthrust (UT) in a distribution phase. This suggests that the market has completed a markup phase and is now entering a distribution phase, where large players are preparing to sell into strength, leading to a decline in price.
The presence of a Break of Structure (BOS) in the charts further supports this bearish outlook, as BOS events typically signal that a market is transitioning from one phase to another, often from a bullish phase to a bearish phase.
Next Two-Week Expectation Based on Wyckoff:
You expect a continuation of the distribution phase, where institutional sellers are likely offloading their positions. This could lead to a markdown phase in the price of XAU/USD, possibly confirming a “Sign of Weakness (SOW)”, which typically occurs after an upthrust and signals the market is ready for a deeper decline.
3. Fibonacci Levels and Liquidity Zones:
Fibonacci retracement levels are a crucial part of your analysis, with 0.5 (50%) and 0.618 (61.8%) retracement levels clearly marked on your charts. These levels often act as strong support zones during corrections.
In the near term, you expect the price to retest these levels during the correction, particularly around the 0.618 Fibonacci level, as this is a key zone for buyers to step in and absorb selling pressure.
The liquidity zones highlighted on your chart, such as the Buy Side (H) and Sell Side (H), suggest you’re watching for price reactions near these levels. The liquidity sitting above or below these zones could act as magnets for price during the correction.
4. Volume Profile and Market Sentiment:
Your use of the Volume Profile tool reveals that you are tracking key price levels where the highest volume of trades occurred. These are critical areas of support and resistance.
There’s a noticeable divergence in volume compared to price action. Typically, when price moves higher on weakening volume, it suggests that the upward momentum is unsustainable, and a reversal could be imminent.
Volume Insights for the Next Two Weeks:
You are likely expecting a reduction in buying pressure as the market enters a distribution phase. As volume dries up, the potential for a bearish reversal increases, which aligns with your expectation of a corrective phase.
5. Indicators and Momentum (MACD Divergence):
The charts show a clear divergence in the MACD indicator (or similar momentum indicator). You’ve marked this divergence on the chart, which indicates that while price is making new highs, momentum is weakening.
This divergence is a strong signal of a potential reversal, especially when combined with Elliott Wave and Wyckoff’s analysis, which both suggest that a major wave top is forming.
Expected Price Action (Summary):
Initial Correction (Wave A of ABC):
You expect the price to initiate a corrective wave (a) over the next few days, likely targeting key Fibonacci levels (0.5 and 0.618 retracement), which could coincide with liquidity zones.
The first wave of correction might find support around $2,661 to $2,656 levels as part of the retracement process.
Consolidation (Wave B):
Following the initial drop (Wave A), a short-term relief rally (Wave B) could push prices higher, but not beyond the recent high. This is typical in ABC corrections where the B-leg is often a partial retracement of the A-leg, allowing for new short positions.
Final Leg of Correction (Wave C):
The final leg of the correction, Wave C, could take the market even lower. Key levels for Wave C could be the Fibonacci extension or further significant support zones you have identified, such as $2,605 or $2,593, based on historical market structure.
Bearish Scenario Confirmation:
If the market continues to follow your Elliott Wave and Wyckoff outlook, a failure to break above Wave 5 would confirm the bearish scenario. This could lead to a deeper correction that extends beyond two weeks, possibly moving towards lower Fibonacci extensions or liquidity zones around the $2,432 to $2,385 range.
Conclusion:
In summary, you are expecting a corrective wave to take place in XAU/USD over the next two weeks, which aligns with the completion of a fifth Elliott Wave and signals from the Wyckoff distribution phase. The correction could initially target Fibonacci retracement levels around $2,661 and $2,656, followed by a larger decline if the wave count holds true. Volume and momentum divergence, coupled with market structure breaks (BOS), further support your outlook for a bearish correction in the gold market.
Note
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