As I read through many different sources on metals, I am actually somewhat amazed that many are still quite bullish on the metals. Many are still claiming that this is an excellent buying opportunity and many are quite confident, once again, that the bottom has been seen. To me, this is still seeming too bullish for a true bottom to have been struck. Such widespread confidence is not likely to be seen at major bottoms, especially in the metals. So, I still reiterate my perspective that I do not believe we have a long term bottom in place in the metals just yet.
In the short term, there is no question about it; the action in the metals has been nothing short of messy and unreliable. That is, until this past week. This last week provided us with better parameters for the potential set-up which can take the metals to the lower targets we have been looking towards for quite some time.
If the metals are going to drop and drop hard, it will likely be seen in the upcoming week. The set-up is now in place to take the metals down in the heart of a 3rd wave, and the question is if the metals will actually take the bait. The only open question to me about the set-up is that we do not have a clearly matching set-up in the GDX.
For now, both GLD and silver have a 1-2, i-ii set up in place, which are pointing directly to the long term downside targets we have maintained for quite some time. While it is possible that the wave ii of 3 has completed in GLD and silver, it truly looks best as only the a-wave having been completed. This means it can still take us Monday, or even into Tuesday, before this wave ii has completed, and wave iii of 3 down takes hold.
So, of course, due to the truly messy structure in the GLD, as well as the unwillingness of the GDX to play along, we have to consider where this set-up invalidates. If GLD were to break out over 116.25, AND silver were to break out over 16.46, then we will have to re-assess the overall pattern. But, as I said on Friday, a strong break down below the Friday lows will likely open a trap door in the metals for wave iii of 3 to take hold, and take GLD down to the 109 region and silver to the 14 region quite quickly in this wave iii of 3.
See Avi’s charts illustrating the wave counts below:
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.
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