Gold Price And Silver Price: Is this Rally For Real?

For years now, each time the metals rallied, most in the market believed that the bottom was in.  However, the lower we get, it seems that the crowd of those believing the bottom has been struck continues to shrink.  Many more are still calling for lower lows even after the current rally we have seen.  And, this is exactly what should be happening.

You see, at the market highs, everyone was convinced that higher levels would be seen, yet the market continued to move lower in the face of such optimism.  But, now, as we have dropped lower and lower in this 4 year correction, less and less are going to believe that a bottom has been struck, as most will believe that even lower levels will be seen.  And by the time the bottom is actually struck, most will think that any rally will only lead to lower lows.  This is that type of market sentiment which will leave most behind once the final bottom has been struck, and then make them chase the market much higher.

For the last two weeks, I have been traveling and have not had a lot of opportunity to provide updates.  But, when I finally got back into the office this past Friday, I sent out a Wave Alert in which I noted that the market is in between two potential counts due to height which we have attained in this last rally.  My question is if the market is going to see only one more lower low, or will it see two more lower lows.  But, ultimately, I concluded that “it leaves me with an easy decision. . . that the next decline is to be viewed as a VERY STRONG buy, and can represent the bottom of the 4 year correction.”

So, it seems I will now be joining the FOMO crowd on the next decline.  For those that don’t recognize that acronym, it stands for Fear Of Missing Out.  Yes, I am now “fearing” that the next decline may conclude the 4 year correction we have seen since 2011.  And, I am strongly suggesting to those that follow my analysis to be a buyer at the next lower lows.  Remember, we can always hedge those longs should we only see a corrective rally after the next lower lows.

Now, over the last few months, the markets have provided rather good signals.  If you remember, back in November of 2014, I suggested to long-term investors to begin buying into very long term positions in mining stocks for the first time in 3 years.  Recently, our StockWaves analysts have even highlighted certain mining stocks which could have seen their final bottoms already, even though most of the market still needs a lower low to complete their corrections.

Furthermore, back in May and June, I was suggesting to market participants that the market was setting up a shorting or hedging opportunity.   And, as you may remember, at the end of July, I noted in our Trading Room at Elliottwavetrader.net that I was cashing in almost all those short positions bought in May and June.  Since that time, those that have followed me have been riding their long positions higher on the recent break out.  And, now the market has reached a point at which it can turn sharply down.  But, I will likely await a signal that a turn down is in progress to lower lows before I attempt to short again.  That means I will looking for the first 5 wave structure off the recent highs we have seen.

As for the wave counts, this is where I have questions in my mind as to whether one or two lower lows will be seen.  You see, both the GLD and GDX can still “technically” be considered as a wave iv in wave (3) of this final 5 wave move down (as posted on the GDX chart).  While the GLD is really higher than one would normally expect for a wave iv in (3), the GDX is still within reason.  But, with silver really coming up too high to consider it a wave iv in (3), and with as long and as stretched as this 4 year correction has become, I am going to err on the side of FOMO by counting this rally as all of wave (4), with the next lower lows being counted as the final lows to be seen in the market.  Of course, if one buys the next lower lows, we can always hedge those longs should the next rally only develop correctively.

There is one more issue I would like to address in this update.  Again, I am being asked why I am so sure that the lows have not yet been struck.  I want to preface my answer by saying that my analysis is probability based.  While it is possible that the final lows have been struck, I don’t think it is probable. 

As for why I don’t think the final lows have been struck, they are basically the same reasons as to why I did not believe the final lows have been struck in the past.  First, most specifically in the GDX, the last bottom was made on what counts best as a 3 wave decline.  That is a strong signal that the bottom has not likely been completed.  Second, if you look at the volume on the rally – specifically on my daily silver chart attached – you will see that the buying volume on this rise is only average volume.  To me, this is more suggestive of a short covering, corrective rally than the actual buying conviction one would see at the final bottom.  And, third, we do not yet have a completed pattern to the downside.

So, while I can clearly be wrong for expecting lower lows, the weight of evidence seems to suggest that at least one more lower low will be seen over the next several months.

EWT Miners Portfolio

As Larry, Zac, Garrett and I continue to prepare for the final bottom in the miners, we continue to review and re-assess our initial picks for our miners portfolio for Elliottwavetrader.net.  Zac and Larry have been continually posting analysis on those miners which have the potential for having bottomed already.  So please review those, as the next decline, which may represent the final lows in many other stocks, may only represent a wave 2 off the final lows in those stocks, setting them up for a powerful 3^rd wave higher.

For those that may not know, we are creating our own miners portfolio within our StockWaves service at Elliottwavetrader.net, with the goal of outperforming the GDX.  We are analyzing all the stocks within the GDX, and taking out the ones that we feel will underperform, and replacing them with stocks we expect to outperform, once the bottom has been struck.  Furthermore, our “committee” will be regularly reviewing all the stocks within the portfolio every two weeks to assure that we maintain an outperforming portfolio.  

And, since my expectation is for bottoming to occur no earlier than September, we should have our list and allocation percentages completed by our roll out in September.  However, due to many of the other projects going on behind the scenes, we may have to delay the publishing of this portfolio until right after Labor Day in September.

Lastly, we continue to thank you, our membership, for constantly pushing us for this over the last year.  Ultimately, we expect this will place us the enviable position of having recommended exiting the market at the exact top in 2011, and attempting to time the publication of our managed miners portfolio right around the time of the expected bottom.

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See Avi’s charts illustrating the wave counts on the metals at https://www.elliottwavetrader.net/scharts/Charts-on-GLD-GDX-YI-20150823801.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.