-- Published: Tuesday, 13 January 2015 | Print | Disqus
By Avi Gilburt
For those of you that have been following my analysis closely, and especially for those of you that attend my daily live videos, you would likely have picked up two opposing perspectives. So, I want to take some time this weekend to provide a little more guidance as to my overall perspective in the metals.
First, if you remember, I went net long silver and the miners within 24 hours of us striking the bottoms back in early November. I have said many times that this is the first time I have gone net long metals and miners in over 3 years. And, truthfully, I am much more comfortable being positioned in this manner at this time.
Second, based upon the larger degree wave counts, I still do not believe that the lows have been struck in gold or in the miners. For this reason, I am still looking for levels at which I will be hedging my net long position.
Third, I have been warning traders not to trade any downside set ups overly aggressively. Rather, since we are in the final throes of the long term correction in metals, the time for aggressive shorting has passed. Yes, there is likely still some nice downside moves to come, but I am not going to suggest trading for those downside moves too aggressively.
So, the question many ask is how do I synthesize those statements into a trading plan, especially when I give each downside set up the benefit of the doubt?
First, let me explain why I have gone net long in my positioning, even though my analysis calls for lower lows. My own trading plan has me buying initial long-term long positions once a market completes the 3rd wave in a c-wave within that correction. Under my primary count, that bottom of the 3rd wave of a c-wave occurred early November. For that reason, my own trading plan has me buying my first positions, which is exactly what I did in early November. It is for this reason that I am now net long silver and the miners for the first time in over 3 years. And, the main reason I do so is because of the potential for a double bottom or truncated bottom which may occur outside of regular market hours, which then sets up strong reversals overnight. A good recent example is what we witnessed in the metals on the first day of December. But, since my primary analysis suggests that lower lows are still going to be seen, I will still hedge those long positions at resistance levels, or within strong downside set ups.
Yet, you see me give strong preference to downside set ups, as they present themselves. Well, remember, we are still within a long term downtrend without any strong indications that it has concluded. That being the case, if the market provides a reasonable downside set up, I will have to note that and give it primacy in my thinking. And, unfortunately, both the metals, as well as GDX, invalidated their immediate downside set ups this past week. But, there is a difference between identifying downside set ups and trading those downside set ups aggressively. And, I have noted time and again over the last several weeks that there is no downside pattern I have seen yet for which I would be trading aggressively.
While I have discussed this perspective ad nauseam on my daily live videos, I hope this update makes my thinking clear to those that do not join me daily on my live videos.
As for the current set up in the metals, again, there is nothing to suggest that an immediate downside set up is a strong likelihood. As you have likely seen, I will want to wait for a 1-2, i-ii set up to consider it an immediate downside set up. And, right now, the best I can still come up with is a 1-2 set up, and we still have no confirmation that the c-wave in wave 2 has completed. Furthermore, the potential also exists that a larger degree 4th wave is still playing out, which can take silver to the upper 17 region and GLD to the 121/122 region.
So, for those that are still net long of metals and miners, as I am, still have no reason to be heavily hedged just yet. For those that still want to trade the short side aggressively, I still do not have a solid immediate pattern to present to you to substantiate a reason to be aggressively short just yet. At a minimum, I would need a 5 wave structure taking us below GLD 115.75 and 16.12 in silver to even begin considering it. But, please do note that as long as GLD remains below 119 and silver below 17.36, a very reasonable 1-2 set up is in place, with the c-wave of that wave 2 almost completed. So, for those that do trade metals aggressively, there is something to consider for an initial short position with stops below those highs, but not something I would personally be trading aggressively just yet.
See Aviís charts illustrating the wave counts on the metals 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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-- Published: Tuesday, 13 January 2015 | E-Mail | Print | Source: GoldSeek.com