It May Take More Time For A True Breakout

First published on Saturday April 8 for members of ElliottWaveTrader.net:   I have read in many places on the Internet that the metals have certainly broken out.  But, as you know, I am not quite convinced.  Now, that does not mean I am bearish.  It just means I still think there could be more downside seen before a true break out is seen.

As I have been noting for the last few weeks, silver has been providing us with the clearest of the patterns.  And, last week, I noted that, under both patterns, silver still looks like it needs one more push higher before it is going to make its decision.  This past week, we got our push higher to complete what is best counted as a 3^rd wave off the March lows.  But, as we know, 3 waves up does not constitute a bullish trend.  Rather, we need 5 waves up to complete. 

Once silver completed its 3 waves up this past week, it had an abrupt drop right into our support region.  And, what silver does in the coming week with this support region will tell us if we are going to re-test the March lows, or if we are going to complete 5 waves up.  But, remember, even in the case where we get 5 waves up, we still will likely see another consolidation in a wave 2 pullback, which can take several more weeks.  So, even based upon silver’s most bullish pattern, I don’t think we see a true break out until at least May.  But, should we break below the support region for a c-wave lower, this may be the last good buying opportunity you may see in this complex.

I think the GLD provides the same perspective as silver.  Take note that the GLD did spike just over the resistance noted over the last few weeks, but came right back down below it.  Moreover, the spike over resistance was not completed in 5 waves, but was a rather clear 3 wave move.  Therefore, I do not classify this as a strong indication that a break out has occurred. In fact, if you look at the micro count, we have the potential for a 5 wave decline off that spike high.  So, as it stands right now, I have no strong indication that we have a full 5 waves up off the March lows in GLD either. However, if GLD can muster a higher high next week, then I may be able to fashion a 5 wave structure off the March lows, similar to silver. 

While I can actually “force” a 5 wave count at this time in GLD (and can even do so in silver), should we begin to break down, I can only use that potential as an alternative count, as there is nothing from a Fibonacci Pinball or proportionality perspective which makes me confident in such a 5 wave structure. In fact, silver came up pennies short of the 1.618 extension off its March lows, which is hardly supportive of a 5 wave move, especially in the metals complex. The probabilities of that being a 5 wave move off the lows is quite low in my humble opinion.

Now, the GDX actually has more bullish immediate potential than the metals themselves right now. But, to be honest, I think that chart has become a bit of a mess with as many potentials as I can make out in the pattern.  I can count a full 5 wave structure off the lows in GDX, as presented in green, and even a very aggressive (i)(ii), 1-2 off the lows in GDX, as presented in purple, as Garrett has been posting all week.   My primary at this time is the green count. This means that if silver and gold do drop in a c-wave lower from their respective highs of this past week, it would seem that GDX has a much better chance of only seeing a corrective decline while the metals may see a 5-wave c-wave drop

So, overall, I would say that I am bit more “bearish” of the metals themselves as compared to the GDX.  But, as you also know, as I have been reiterating for quite some time, I am quite bullish the complex in the bigger picture.  You see, all I am looking for is another decline to take hold before this market can be ripe to see a parabolic rally.  In fact, the type of rally I am expecting after the next drop is similar to what we experienced in early 2016.  For this reason, I note over and over that I will not sell my positions, but have only hedged those positions

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