The Gold And Silver Market Is A Mess And Will Likely Continue To Frustrate You

First published on Sunday Nov 12 for members of ElliottWaveTrader.net:  When I sat down to review how I can update the analysis I provided to our members in my mid-week update, I realized that there is not much more technical analysis I am able to add to what I wrote to our membership in my mid-week analysis, so I am going to repeat it here, with some additional general thoughts below:

While I strive to provide deep insight into the markets I track for you, I am somewhat at a loss in this region with the metals, especially with the various charts presenting quite differently.  

For those that have followed me for years, you know when I am bullish and you know when I am bearish.  And, for the great majority of the time, my bullishness and bearishness have been appropriate to prepare for impending price action.  However, we are now in a region of uncertainty, and I don’t think I can classify it any better than that at this point in time.

In starting with silver, we had a wonderful i-ii set up in the (c) wave of the b-wave higher, as I had been presenting over the last week.  However, the action we have seen this week has stalled and overlapped enough to make this potential much more cloudy now.  While we may still move higher within an ending diagonal, the overall structure has become much more messy.  And, as long as we remain over 16.30, I can still maintain this count, even if we see a more protracted (b) wave.

As far as the GDX, it CAN present as a 5 wave move up off last week’s lows.  But, again, it is not in standard accordance with Fibonacci Pinball, as there is no clearly defined 2^nd wave, and the 4^th wave pulled back much deeper than standard 4^th waves.  So, that makes me question the GDX rally as well.

With regard to the GLD, to be honest, there is no clear “impulsive” structure I can discern, which makes me question whether it wants another lower low, or even potentially to break down.  Remember, my preference was to see a much larger degree b-wave rally, but I see no clearly defined set up for that to take hold just yet  So, again, this leaves me quite concerned about the potential for upside follow through.

Moreover, I want to reiterate my perspective that any rally we see will “likely” be corrective in nature.  This is in line with the fact that I do not have a clear set up across the metals complex that suggests the metals are in a position to imminently break out.  While there are some miner stocks that really do look good, there are others like the ABX which still have more work to do in their downtrends before this pullback has completed.

This now brings me to the ABX.  As you can see from the chart, it looks like we are coming towards the end of wave iii of (c). While it looks like we still need a micro 5^th wave within the 5^th wave of wave iii, I think we should be seeing a wave iv rally beginning over the next week or so.  And, as long as we remain below 15.15, pressure will remain down until we complete this pullback.  So, based upon one of the major component of the GDX, it does support my expectation that this market is not yet ripe for a major break out yet, and we are still probably several months away until we are.

The biggest question with which I am still struggling is if the GDX can still see that bigger decline down to the 17 region or not.  And, as I noted this past weekend, we may have signs that we may not see a break down below the 21 region.  But, as long as we remain below the 24 region, the immediate pressure will remain to the downside, and a break of the 21 region opens the door to that drop to the 17 region.  However, an impulsive rally through the 24 region can set us up in the yellow count, which would set up the next potential 3^rd wave break out early next year.

For now, I still remain quite cautious, and view any rally as corrective in nature, especially as long as the GDX remains below the 24 region.  

Now, at the end of the day on Friday, many left for the weekend quite frustrated and dejected that the metals saw some downside action.   But, as noted in the analysis above, the market has much whipsaw potential in the region within which we now reside.  And, when it drops, you should learn to embrace and accept it with as much anticipation as you do when the market rallies.   You see, with the market dropping a bit more, it allows the ABX, as one example of a leading stock in GDX, to complete this wave iii down, whereas it also brings the other products in this complex closer to the point from which it can begin a REAL rally, which will provide us with much needed clarity in the complex.

Moreover, for anyone who felt dejected about the drop on Friday, I am not sure you have been paying attention to what I have been saying over the last several months since we broke below upper support in September.   The market is set up bearishly for the next few months before it can resurrect a break out set up.  While I maintain an open mind for it to prove me wrong with a strong impulsive structure through the 24 region in the GDX, the overall market still seems to be set up to provide more downside consolidation in the coming months, at least based upon the way it is presenting currently.

And, again, as noted above, while I believe that the wave iv rally in ABX that I expect in the coming weeks will pull the GDX up with it, it still does not seem as though its downside for wave iii is fully complete just yet.  Moreover, there is still nothing that suggests this market is ready to break out until the ABX, as one example component of the GDX, is able to complete its next corrective rally, followed by a final decline to complete this pullback off the August 2016 highs.  And, I have been showing this pattern on the attached ABX chart as an example of late so you can understand what I am seeing in the complex.

Also, that does not mean to say that there are not some individual miners that are not going to see strong moves in the coming weeks.  In fact, we have identified a number of miners that have retained VERY strong patterns and are bucking the trend of the overall market action in our EWT Miners Portfolio.  But, it does mean that the market as a whole does not look ready to break out just yet, and will likely see lower prices in the coming months.    

So, while I understand this is quite frustrating, since we had several break out set ups this past year which have invalidated, I am hoping you can re-direct your perspective and expectations to prepare yourself for further downside, even if we see the rally I want to see in the coming weeks.  And, we can still see a little more downside before that rally takes hold. 

But, please, do not assume we have struck a bottom and expect that we are now ready to break out simply because we see another rally begin in the coming weeks.  The market still has a lot to prove to us, especially since the primary set up we now have on our charts suggest we can see prices that are lower than where we closed on Friday.  But, again, I will certainly maintain an open mind depending upon how the next REAL rally takes shape.

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