Silver And Gold: Don’t Have A Reason To Be Bullish

For the last few weeks, the market has been decidedly bearish.  We got out of our long positions at the exact high of the prior rally, but that rally really came up short of our ideal targets.  While we were able to recognize that the market was topping in real time, the fact that it did not generate the significant bullishness that I had wanted to see with a higher move leaves questions in the back of my mind.

Yet, even with those questions, I still have to view the chart as it currently presents.  And, currently, it presents quite bearishly, especially in the GDX.  In fact, not much has really changed from last week in the patterns I am watching:

“The question with which I am now struggling is the exact pattern with which the market will be heading lower. In the most immediate sense, the market could be setting up in a (1)(2)i-ii pattern, as presented in the attached 8 minute gold chart.  This would mean that we would only see a small corrective rally before a waterfall event in a wave iii of (3) to the downside.”

As it stands, in its most bearish potential, the market has begun its wave iii of (3) to the downside.  But, in order to confirm this, we still need to see the last line of support noted last weekend taken out: “silver is going to have to break the 15.50 support level to convince me we are heading to our long time 12.75 target.  In GLD, we will need to see a break of the 110.50 level, and GDX needs to break below 17.80 to signal that we are heading towards the final lows in the 3+ year correction.”

Now, I know many of you review the Commitment of Trader’s report in the metals.  And the current one seems much more bullish.  But, remember, this report does not always provide us with an immediate directional perspective, as the report can become more and more extreme before the market actually turns.  In fact, this report conveys Keynes’ sentiment rather well – “the market can remain irrational longer than you can remain solvent.”  So, I am going to continue to be on the lookout for a bullish setup.  But, until that time, the market is set up quite bearishly, and I need to take my cues from price action.

For now, as long as GLD remains below 114.30, GDX remains below 19.14, and silver remains below 16.19, immediate pressure will remain down, and the potential exists for the heart of a 3^rd wave down to begin.  Should they all take out these lower resistance regions, then the alternative larger degree wave 2 will become my primary expectation.

And, as I noted last weekend, I will be watching very carefully to see if any of these charts develop an impulsive 5 wave structure to the upside which could be an initial warning sign of a bigger rally to come.  Thus far, this market has failed to provide any bullish clues, even on the smaller time frames.  Yet, it is something I will be watching for until the support levels noted have broken, which would be the signal that we are on our way to our lower lows, and the end of the 4 year correction in the metals.

******** 

See Avi’s charts illustrating the wave counts on the metals at https://www.elliottwavetrader.net/scharts/Charts-on-GDX-GLD-YI-20150614744.html