Silver And Gold: The Running Of The “Bull"

I am hard pressed to find a single article calling for lower lows in the metals. Everywhere I look, there is consistent certainty that the final lows have been struck, and the bull market is back in full force. To me, market sentiment can be summed up with a Yogi-ism – “it’s déjà vu, all over again.”

Unfortunately for those that have believed such bullish calls for the last 3 years, this is likely not the first time you have bought into this perspective.  Each and every time has resulted in significant pain for metals bulls.  And, so far, I have nothing that is proving to me this time is going to be any different.

Each and every time we have seen similar rallies in the last several years, I have felt so alone while standing within the bearish breach.  Even though I have quite an accurate history over the last 3 years – starting with my top call in 2011 – many have thought me to be quite foolish to expect lower lows each and every time we have seen such a strong rally off the lows. 

Each and every time, many have been so certain that the correction has run its course.  And, each and every time, I have been proven right for maintaining my stance for lower lows yet to come.  I don’t think this time will be any different.  Of course, I can always be wrong.  But, I simply do not have enough of a completed pattern to the downside to confidently state that the long term correction has completed.  Rather, I need at least one more lower low to confidently state the lows are in. Otherwise, I need a 5 wave structure off the November lows, followed by a corrective pullback to confidently state that the long term lows are in place.  At this time, we have neither.

Yet, I still have to maintain an open mind that a bottom may be in.  To that end, I am tracking the GLD for a pattern which can suggest that a bottom has been struck, despite the corrective start off the lows.  In the bullish case, the GLD has completed a wave iii of 3 off the lows, or, in the bearish case, a wave iii of (c) of a b-wave off the lows.  (As you can see, I have moved to Garrett Patten’s (lead analyst for our World Market’s service and contributing analyst to our Stockwaves service at Elliottwavetrader.net) GDX and HUI count, which has this entire c-wave decline in waves of 3.) And, as long as it maintains over the 119.50-121.75 support zone for wave iv of 3/(c), there should still be another rally to be seen before we can differentiate between a 5 wave rally off the lows or a 3 wave corrective one.  A break down below 119.50 from this point forth suggests that the (c) wave has topped. 

In silver, I also modified the count slightly into an ending diagonal for the 5^th wave.  This places us in the 4^th wave of that ending diagonal.  For the bullish case to take hold, the minimum target I would need to see to convince me of a bottom in silver would have to exceed the 22 region in 5 waves off the recent bottom, as that is the region of a 2.00 extension off the lows.  However, it is quite rare for silver to only see a 5 wave structure taking it to the 2.00 extension.  So, ideally, silver should exceed the 23 region, and strike the blue box for wave i in the bullish green count.  Remember, the bullish count is not my preferred count at this point in time, but I will not ignore it should the market prove itself in 5 waves up to the target box. And, as I noted last weekend, an impulsive break down below 16.70 would get me much more immediately bearish.

See Avi’s charts illustrating the wave counts on the metals:

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Courtesy of ElliottWaveTrader.net