-- Published: Tuesday, 15 September 2015 | Print | Disqus
By Avi Gilburt
First published Sat Sep 12 for members: For the last several years, many of you may remember that my downside target box for the GLD was within the 98-105 region (with an ideal target of 98), for silver it was between 12.75-14 (with an ideal target of 12.75), and the GDX was within the 9.60-13.21 region. I also noted that in an extreme overreaction, the GLD could drop as low as 75, and silver could drop down to the 11 region. But, also remember that I was putting out these targets as our primary targets when silver broke the 26 region, and when GLD broke the 150 region. And, despite much disbelief from most of those that read my analysis, we now find ourselves in those target regions.
So, of late, I am getting questions like “what do we do now?” And, my answer is to do what the blue box says: “buy, buy, buy.” We have to understand that while we want to nail the exact bottom at the exact time we bottom, there is a difference between analysis and investing. And, what we are looking to do now is not analyze, or trade the metals. Rather, we are now building a long term investment portfolio as we enter our long term bottoming target region.
As an example, let’s go back to 2011. From an analysis standpoint, I was looking for gold to top at the $1915 level. But, I sold 2/3 of my long term holdings in gold once I saw a print of 1900, as I was not going to wait to squeeze the last penny out of my long position. I am now taking the same position on the downside.
Also, if you remember, back in 2011, I had two targets in mind on the downside, which I identified before we even topped. Once we hit the initial downside target $400 lower, I opened my mind to the potential that gold could have bottomed. I had written that I was looking for evidence that the market had bottomed, and that we were ready to extend to levels well beyond $2000 from there. If we would have received the confirmation which I outlined in my analysis at the time, I would have issued a “buy” recommendation in the metals again. However, the market never provided me with confirmation that a bottom had been struck, which means that I was never able to issue any long term “buy” recommendations at the time. Furthermore, this lack of confirmation then made it clear we had to look much lower towards our secondary targets, upon which I began focusing.
Now, we have come to my larger degree secondary targets. So, I have two choices. Either I am going to believe that silver and the miners are all going to zero, or I am going to take a much more reasonable approach and recognize that we are hitting the top of my ultimate downside target after 4 years of decline. And, as I have said many times, when we got to my “buy, buy, buy” regions, I was going to do exactly that . . . buy, buy, buy. So, for the first time in 4 years, I have now been buying back into the gold, silver and miners positions I sold 4 years ago. I also want to advise you that maintain a healthy amount of cash on hand so that you may add to your long term positions when we get the lower lows that I still would like to see. But, I believe the time for sitting on the sidelines is now over.
Additionally, for the last several months, we have been preparing for the roll out of our EWT Miners Portfolio in September. And, as we were hitting the lows in miners this past Friday morning, Zac Mannes, the lead analyst in our StockWaves service, was busily posting our initial entries into the specific miners which hit our first buying targets within our portfolio. In fact, one of our entries that day not only completely reversed off the lows at which we bought, but it ended the day up over 14%.
While we believe we will have the opportunity to be buying the remaining positions over the next several months at even better prices, our plan was to begin buying at the bottom of the wave v of 3 of the final 5th wave down, which has either bottomed on Friday, or has one more nominal lower low to be seen next week. (But, we intend to provide guidance as to when we suggest you to hedge your holdings when we move into our next potential topping region). Furthermore, as you can see, the GDX has finally moved into our long term target bottoming box, just as silver and GLD have, which provides us further confirmation that we need to start buying into long term positions.
For those of you that have read my analysis and articles over the last several years, you know that I have been much maligned for the perspective I have taken when it comes to metals. Most market participants have maintained a FOMO (fear of missing out) perspective all the way down from the 2011 highs. And, when I published articles stating that I was clearly awaiting my long term targets to be struck before I moved back into the market, the most common comment stated that I was going to miss the next leg of the bull market.
Well, our patience and persistence have now paid off, and paid off handsomely. Not only have we earned a significant amount of profits from shorting this market over the years, but we have now placed ourselves in the enviable position of buying metals and miners at bargain basement prices with those profits. Of course we recognize that “cheap” can still become “cheaper.” In fact, we actually expect it. But, I believe that we have finally come down to the region where anyone who is serious about this complex has to begin buying very long term positions.
As for the specific wave counts, it seems that the metals and miners have either bottomed for the time being, or have just a little lower to be seen over the following week before the next corrective rally takes hold.
In the GDX, the market made it quite clear that wave v of 3 had not completed the prior week, and has progressed as an ending diagonal within the 5th wave of wave v of 3. When ending diagonals complete, we often see a very strong reaction off the bottom, which then carries price back through the top of the downtrend channel rather quickly.
On Friday, at 11:21am, just as the GDX was hitting its lows, I sent out a Wave Alert to members that suggested that if the diagonal was going to prove itself as completed, it would do so from the region we are now hitting. As we now know, the market struck 12.62 for a low at exactly the time I sent out my Wave Alert, and then turned up strongly. But, without breaking out through the top of the diagonal (and the 13.30 level I was noting all day as resistance) we do not have confirmation yet that all of wave v of 3 has completed. Rather, if the market is unable to move through this region early next week, then all we have is a 4th wave in this wave v of 3 ending diagonal, and a lower low will be seen over the next week which should then complete this ending diagonal for wave v of 3 closer to the next lower Fib level at 12.37.
As for silver, we will maintain our perspective for this being a b-wave pullback in a (b) wave of the final decline phase. Within this b-wave, the micro count suggests that a lower low into the 13.90-14.15 region will be seen next week to complete this decline. A break out through the 14.75 level would suggest that a bottom to the b-wave has already been struck.
In the GLD, last weekend, I noted that a break down below 107 will have us targeting the 103-105 region. On Friday, the market struck the 105.27 level and began to rally. And, just as with GDX and silver, the possibility still exists that a lower low will be seen early in the week. However, it sure seems as though the GLD, along with silver and the GDX, are getting ready to begin a rally in the near term. My expectation is that the impending rally will only be corrective in nature, setting us up for the run to the final lows in this market which should end this 4 year correction.
Now, there is one last caveat I want to include this week. If you remember, as we came into the final quarter last year, the market was as equally bearish as we are now. And, the market had an immediate set up to drop to complete this 4 year correction at that time, but chose a larger rally which extended this correction into 2015. We are now faced with a similar type of situation.
Currently, the market has a pattern in place to take us to the final lows within the next month or two. But, as you can see on the silver and the GLD charts, I have a much higher b-wave target listed as an alternative potential for the rally I am expecting. If that larger rally should play out, this would again extend the timing for the end to this correction, as it will likely take us until at least the first quarter of 2016 until the market potentially bottoms, as the bearishness may be too high at this time to even get us to our target bottom in 2015.
See charts illustrating the wave count on the GDX, GLD & YI at https://www.elliottwavetrader.net/scharts/GDX-GLD-YI-20150913824.html.
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, 15 September 2015 | E-Mail | Print | Source: GoldSeek.com