First published Fri Jul 3 for members: “Gold is what will save you.” “Gold will protect you from financial calamity.” And on and on. As Greece burned, and as Puerto Rico runs into “issues,” we hear the same drivel from the same culprits week after week, month after month, and year after year. And, I just can’t take it anymore.
At what point do people begin to be honest with themselves? At what point do they take off the blinders? At what point do they attempt to see the truth before their eyes? I am sorry folks, but gold has simply not reacted in the manner in which these oracles have expected. What is worse is that it has reacted in the exact opposite manner.
This brings me back several years when all these same oracles were so confident that gold was going to skyrocket due to Quantitative Easing. I mean, it made so much sense from a “fundamental” standpoint, did it not? The only problem is that no one told gold that it was supposed to rally on fundamental news. You see, gold has been waiting for what normally drives it: market sentiment. And until the market sentiment is ripe for metals to rally, no news or fundamentals will trigger “the rally” for which everyone seems to be waiting.
But, sentiment is still pointing us lower. Last weekend, I noted that “[a]s long as the GLD remains below the 117.70 premarket high struck on June 18th, we are set up to see lower lows in this market in the very near term.” I also noted that if we “should strongly break the 111.65, with follow through below 110.65, then I am looking for the heart of wave iii of (3) down to be in progress, with my next target being the 105 region. And, again, it would take a move through the 117.70 level to make me reconsider this perspective.”
This past week, GLD remained below the noted resistance, and continued to meander lower. However, if you only look at the market hours action, GLD really did not provided us with a strong break of 111.65 (.618 extension of waves (1) and (2)), but it did see a spike and reversal below that region in the pre-market trading. And, at no time did we break below the 110.65 level (.764 extension of waves (1) and (2)). Amazingly, this can still count as the bottom of the red wave i of (3) down, and we can still see a wave ii rally early in the coming week. As I noted last week, the shallow nature of the “rally” we have seen thus far is hard to strongly consider as a wave ii, so I am going to still be open to the potential for seeing an appropriately sized wave ii, as long as we remain over the 110.65 level. A break down below 110.65 puts me in the heart of wave iii of (3), which will have me targeting 105 next.
As for the GDX, it does seem as though it is a step ahead of GLD at this time. With the break down below 17.80, it dropped down to its 1.236 extension, which would place it in wave (3) of iii of 3 down, and as long as we don’t break back over 18.30, we have a nice Fibonacci Pinball structure pointing us to below 16 in the near term.
And, with silver seemingly in its own little world without a clearly defined micro pattern, nothing has really changed for me from last week:
As for silver, while it is in a clear downtrend, there are several counts which can apply to this downtrend, as I noted last week. This makes it much less reliable to provide guidance with regard to specific levels of resistance. But, the clear initial level of resistance is 16.55, and as long as we remain below that level, we are set up to drop to our lower targets.
For those that remember last year at this time, silver was dropping down quite steadily day after day, and many were calling for a strong reversal day after day. And, each and every day I warned at least once, and sometimes many times, that one should not consider the long side of the market until at least some minimal resistance gets taken out. This year may not be any different. We may see the same type of slow steady drop until we reach, and then break, last year’s lows, with daily calls for a strong reversal. So, I would like to reiterate what I said last year: during a steady drop as we are currently seeing in metals, please do not attempt a counter-trend trade until at least some resistance is broken to the upside.
See Avi’s 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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