Damn Manipulators

As the metals market dropped today, I am quite certain the evil manipulators have become the talk of the town once again.  No one speaks of them when we are rising, because that is how the market is supposed to move (cough, cough).  But, now that we have dropped, it is “clear” that it must be manipulation.

The problem with this perspective is that the market tipped its hand yesterday for this supposed manipulation, as represented by the chart pattern I posted yesterday – which is attached.  As I noted, the pattern was clearly on the chart for a strong break down today, and we event hit the 2.00 target I had for this decline set up. 

While the market had not yet followed through on any downside set ups since we bottomed in January, the pattern for this drop was clearly in place for all to see, but I was unsure if the market was going to follow through.  But, as I noted in the trading room yesterday morning, and in my live videos yesterday, I was entering a short trade for this eventuality.

Again, I want to reiterate that this is not manipulation, but simply market forces asserting themselves in their natural course, for which the market usually provides advance warning.  It is a truly a rare event wherein a market will see a large move without some advance warning in the way of an Elliot Wave set up. 

As I have been saying for months now, we need to continually look higher in the market, until the market itself tells us otherwise.  And, yesterday’s downside set up gave us indications that we may need to be looking down, at least in the short term.  But, thus far, important support has not yet been broken.  We have thus far held support in GDX, silver and GLD.  And, until support does break, I will maintain our prior expectations for our next higher targets.

But, of course, due to the current drop, I will consider an alternative count, which I am presenting on the GDX chart in blue.  It, too, is still big picture bullish, but it suggests this is actually wave 2 of iii, and can pull back to the 25.75 region.  But, in order for me to take this count a bit more seriously, we need to at least break down below the 27.70 level.  Silver has its main support still at 19, but can be pushed as low as 18.70 in the current structure.  And, as I have been also suggesting, I want to see GLD outperforming GDX and silver to catch up on its Fib extensions higher, and today’s outperformance in GLD is what the doctor ordered.  So, nothing has broken support as of the close of business today.

I think tomorrow is a very important follow through day.  Today’s low CAN represent the entire pullback for the market.  The micro count, as presented on the current 8 minute GDX chart, suggests that we may still see one more iv-v before we complete this drop.  If you see the positive divergences on the 8 minute GDX chart in both the MACD and the RSI, that is usually suggestive of bottoming in the 5^th of the iii, or as noted, it can be that the entire drop has completed.  I need to see a break out over resistance to signify that the drop has completed, rather than needing another iv-v, as currently presented.

In summary, even though it felt very bearish today, and the GDX dropped stronger than we have seen in a long time, no support has been broken, and all upside patterns have thus far held.  While I am relatively confident that the market will continue to provide us indications of any further downside over the coming weeks if that is the market’s plan, I will not be aggressively trading downside until support breaks and set ups develop, such as the one seen yesterday.  For now, I am staying the course.   

See charts illustrating the wave counts on the GDX, GLD and YI at https://www.elliottwavetrader.net/scharts/Charts-on-GDX-GLD-YI-201607201321.html .

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.