-- Published: Tuesday, 10 February 2015 | Print | Disqus
By Avi Gilburt
After over three years of this corrective market action, I am sure those bullishly inclined are worn to the nub. I am sure you have completely run out of patience. I would not be surprised if you have even yelled at your charts, screen, or investment account at one time or another due to the market action in the metals over the last 3 years.
But, allow me to provide at least some comforting words in telling you that this is completely normal. The job of this corrective decline over the last 3 years is to frustrate you. The job of this corrective decline is to make you want to give up on metals. The job of this corrective decline is to ultimately shake you out of the market. But, as we are getting closer and closer to the end of the insanity, I implore you to stay the course, even though there is likely still more pain to come for the metals perma-bulls. Now is not the time to give up as we approach the end.
So, of course, you are reading this update trying to plan on what you are going to do in the upcoming week. Along these lines, I am going to reiterate my bigger perspective on the metals market. While I still believe a lower low will be seen, since November, I no longer have a desire to be aggressively shorting this market. This is clearly a very different perspective than you have seen from me for the last 3 years, during which I have predominantly focused upon the short side, and we have been quite successful from that perspective.
I also know that many of you recognize that we are expecting a 5th wave down in metals, and that 5th waves are often the most dramatic in commodities. But, after 3+ years of corrective downside, and having gone net-long metals for the first time in November, I am going to be more focused on the long-term long side of the market than the shorter-term short side of this market. For this reason, I have stated time and again over the last several months that I can only short the market with a solid set up in place. That meant that we would either see one more high – which was invalidated this past week – or a clear 5 wave structure to the downside, followed by a corrective retrace. But, if you are looking for someone who is going to aggressively short the metals market at this juncture, I may not suit your desires. I am going to be much more discerning about my shorting entries, as you have clearly seen since November. So, yes, I have now turned from an aggressive metals short trader, to a much more conservative one, with more of a focus on the longer term picture.
As you read this today, I cannot say that I have what I would call a “clear” 5 wave structure to the downside completed. GLD, silver and GDX all seem to be presenting different patterns down, and I cannot say, with confidence, that any of them look like a clear 5 wave structure has completed. So, again, I am left with having to send out a Market Update during the week to subscribers when more clarity presents itself.
As Robert Precther noted in his book, The Elliott Wave Principle, “there are often times when, despite a rigorous analysis, there is no clearly preferred interpretation. At such times, you must wait until the count resolves itself.” This is exactly the point at which I feel I am today in the metals in the short term. So, rather than state something with authoritative definitiveness, for which I have very little confidence, I think I am serving my readers best by stating that I am still unsure as relating to the short term, but that I have strong expectations that we will likely see a lower low in the broader picture.
The main problem I am seeing with the current structure is the overlap in the GLD. The downside structure does not truly look impulsive. That is why I am entertaining this drop as being a (b) wave drop within the larger b-wave in the structure in GLD. This would mean that we may see a bottom soon, which will set up on more run towards the 126/127 region. And, to some extent, I would expect silver to go along for the ride. But, as you can see, I have noted a count which would provide me with a solid 5 wave structure to the downside in silver on the attached 144 minute chart.
But, as I said, I simply have too many possibilities in play right now to be able to provide a confident trade set up based upon what I am seeing at this point in time. I will also note, as I have over the last few weeks, that I have taken the opportunity to set up a 50% hedge for my long positions over the last few weeks, and am looking for the opportunity to add more short side positioning for the run to the final lows. Until that opportunity presents itself, I will likely be waiting patiently for the market to speak to me in clearer terms before I am able to be more aggressive on the short side.
See Avi’s charts illustrating the wave counts on the metals below:
