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Mixed Messages for Metals


 -- Published: Tuesday, 14 July 2015 | Print  | Disqus 

By Avi Gilburt

First published Sat Jul 11 for members:  There are so many that now review the Commitment of Traders’ report that look to it as gospel.  Many have seen the positioning of the players in the market, and are automatically assuming that it is exceptionally bullish for metals in the near term.  Furthermore, many are pointing to the negative GOFO rates, and also concluding that this is immediately bullish. Lastly, many are pointing to the fact that the US Mint has sold out of its silver, and that supply seems to be tightening in the physical market as a clear immediate bullish sign.

But, one always has to recognize that these market conditions can become more extreme before we see a final bottom in metals.  In fact, I would expect much more extreme pressure to be seen in the market before the next bull market phase begins.  Remember that extreme indications can continue much longer, and, as we have seen in the past, they do not always lead to an immediate change in direction in the market.

Now, for those that think that these extreme indications support the long term bottom in the metals and miners as being made, I will not be agreeing with that perspective.  While it can certainly point to a bigger corrective rally, there is still nothing that I have seen which suggests the final low has been seen.

But, this market has been quite treacherous for almost everyone over the last 4 years.  So, can it throw everyone one more curve ball before the final run to lower levels?  Certainly.  As an example, last week, the GLD briefly broke below the 110.65 level, and immediately climbed back over it.  That should not have happened in the more immediate bearish set up I have been tracking, as it should have continued to lower lows.  So, unless we see a resumption of the decline in the upcoming week, the market may be setting up yet another upside corrective surprise before we head to the final lows.

Furthermore, I will warn all those that are attempting to trade this market to the short side that if the ending diagonal pattern we have been watching does play out, there will still be several whipsaws to be seen, and it will make trading the downside much more difficult.  The market patterns down here may become even more complex, which means that those who are not accomplished traders should probably only be preparing their buying list for when we strike those lower lows.

If you are a nervous investor or trader, trying to make money on this last decline may become more difficult than you can handle.  And, after 4 years, if you are now only beginning to trade the short side, my suggestion to you is “don’t bother.” The easy short side trade is done.  Unfortunately, many were not willing to listen to me about shorting the market when the easier set up was in place. Anyone short at this time may consider tight stops on your recent short trades, so as not to give back the profits you do have at this time.  Yes, you may miss more of the final downside move, but if we see a larger rally before more downside, we will likely see another downside set up before lower lows are struck.

As for our levels of resistance, again, the GDX provides the clearest guidelines.  As long as all “bounces” remain below the 17.75-18.03 region, we are likely heading to lower lows in the near term.  However, should those levels be broached, it opens the door to a more corrective upside rally, as presented in the daily chart.

In the GLD, the immediate level of resistance is at 113.23, with the main level of resistance at 115.61. As long as resistance holds, we are looking for the 105 region next.  Over 115.61, and it is much more likely that we are dealing with a larger yellow (b) wave in the GLD which will then set up the next drop to lower lows.

In silver, the lower resistance level resides at 15.85, with resistance at 16.51 over that.  Should we break over the 16.51 level, then it opens the door to a rally back towards the 18 region before we begin the final run to lower lows.

While there are some anomalies within this decline (as noted above in GLD as an example) which do make me question the true impulsive nature of the decline, the market has not taken out even the smallest degrees of resistance during this entire decline since May.  In fact, I noted last week how this resembles the decline we experienced last year at this time:

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.

So, while I do not completely trust this market decline based upon the anomalies I am seeing in the downside structure, and it is quite prudent to maintain stops on short positions at this time, there is nothing the market has actually done yet which suggests it will not continue lower.  So, please do maintain your stops on your short trades, and we will continually lower those stops if the market continues lower.  But, please do not take it for granted that this is the final run to the lower lows we are expecting, as this market has provided many twists and turns on its way down over the last 4 years, and will not likely make it easy to reach those lower lows, especially while so many seem to now be expecting it.

See Avi’s charts illustrating the wave counts on the metals Below:

 Elliott Wave Chart
 Elliott Wave Chart
 Elliott Wave Chart
 

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, 14 July 2015 | E-Mail  | Print  | Source: GoldSeek.com

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