Metals Bottoming In The Upcoming Week?

Wednesday, May 10, 2017

silver and gold

First published on Saturday May 6 for members of ElliottWaveTrader.net Last week, I noted that we still likely have lower levels to strike in this complex, but that I expect the market to set up a bottom very soon.  I still maintain that expectation as I write this.

In my last weekend update, I noted that we still needed to complete waves 3, 4 and 5 in this (c) wave of wave (2) in the GDX.   We now have the minimal number of waves in place to the downside to consider it complete.   However, we did not strike our ideal target of 20.31, where (a) would equal (c), nor did we see a full 5 waves up off the lows we struck this past week.   So, since we do not have any confirmation that a bottom has, in fact, been struck, it leaves the door open for the market to still strike our target.

The GLD has now dropped below our “ideal” support in the 117 region, however, this seems to be quite typical of the manner in which the market has reacted since we hit the bottom to the market back in 2015.  My theory is that the market is conditioning traders to “expect” deep retracements in the early stages of the bull market, which will cause them to chase when the market returns to its normal modus operandi of providing only shallow retracements in the upcoming strong rally.  But, I digress  I have nothing I see on the chart that strongly suggests that the GLD has bottomed, and it still can drop towards the low to mid 115 region in the upcoming week before a bottom is seen.  A continued move through the 118 region would cause me to rethink this potential.

As far as the GLD is concerned, I want to note that should the market be able to strongly exceed its April high, along with the daily MACD providing a break out signal through its downtrend line, it portends a very strong rally that can take us rapidly up towards the 138 region, if not even exceed it. 

This now brings me to silver, which is a little problematic for me.  Silver has now dropped deeper than makes me comfortable.  Ideally, I would not want to see silver break below the December low of 15.80.  Should we see such a break, it would make me begin to question the larger bull market thesis.  In fact, when the management team of our EWT Miners Portfolio met this past week, we saw dramatic differences in the structures of the gold miners relative to the silver miners.  When we reviewed leading charts, such as ABX, they are retaining quite nice, textbook a-b-c pullback structures in their respective 2nd waves.   However, the silver miner charts, while are also dropping correctively, have not retained the same “pretty,” textbook structures. This does suggest that we should proceed with caution, but I still would expect a bottoming in the near term within the complex.

While we still can see one more 5th wave decline based upon the smaller degree charts I am tracking, I would want to see a bottom struck in the coming week, followed by a strong 5 wave move off those bottoming structures in order to retain a strong long term bullish bias. Moreover, as noted before, GDX probably has the cleanest of the charts, and while it suggests that we should remain over the 20.30 level, a break down below 18.58 would truly shake my conviction in the fact that a long-term bottom has been struck in the complex.

 See charts illustrating the wave counts on the GDX, GLD & YI.

Avi Gilburt

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 S&P500, metals, oil, USD & VXX); interactive member-analyst forum; and detailed library of Elliott Wave education. Visit his website:https://www.elliottwavetrader.net. You can contact Avi at info@elliottwavetrader.net.