-- Published: Wednesday, 6 April 2016 | Print | Disqus
By Avi Gilburt
First published Sat Apr 2 for members: I have said many times before that trying to track every twist and turn within corrective action is like trying to throw Jell-O for distance . . . you just won’t be able to get it all.
While impulsive structures under the Elliott Wave patterns are quite predictable, very often down to the penny, corrective action is quite variable, and nowhere near as predictable. Currently, we are likely within a corrective wave two off the lows in GLD and GDX, and the action is quite difficult.
But, the major issue I am now seeing is that silver is still showing signs that it may be setting up for lower lows. In fact, we have a rather clear 5 wave structure down off the recent highs in silver. While we can consider it as an a-wave in a wave ii or even as a c-wave in an expanded flat in a 4th wave, as long as we remain below the recent highs, and the next rally is corrective, I am looking for silver to drop to the 12-12.75 region to make lower lows. The only way for silver to invalidate this potential is to push to a higher high over the 16.18 level, even by a penny. But, as long as we remain below that level in the near term, I am targeting the 12-12.75 region for a lower low. As the pattern develops, I will lower that invalidation resistance level.
Now, while I can also count the GLD as a 5 wave leading diagonal down, I do not trust leading diagonals as trading cues, as they are not terribly reliable, at least in my humble opinion. But, the alternative leaves me with a completed a-wave bottom, and an expanded b-wave flat still in progress – also not the most reliable of patterns. So, while I think silver has a better than 50% chance at making lower lows, I think GLD only has a 35-40% chance at making lower lows. If we can see a solid impulsive structure develop off Friday’s low, it will give significant weight to the expanded b-wave perspective, rather than a set up to lower lows.
So, as long as we hold the 115.50 level in the GLD, I would like to see a rally to the 119.25-121 region in a 5-wave (c) wave, which would complete a b-wave. While I think it is more likely than not that we have seen the final lows in the GLD already – within 2 points of the ideal 98 target I set years ago – I do maintain an estimated 35% probability that a lower low may be seen. Moreover, I do not have a reliable pattern pointing me to a lower low at this point, as I do in silver.
GDX also seems to need a rally before its b-wave is done. In fact, I have quite a wide target for a higher b-wave between 21-22.30, and it will depend on the size of the impending 3rd wave in the (c) wave higher before we can pinpoint the target a bit better. Ultimately, as long as we remain over this past week’s low of 19.32, I see a set up developing for a (c) wave into our target, which may even result in an expanded b-wave high, which can be higher than the top struck for wave i. I think this may confuse many people, and have them view this as a break out in the GDX. But, as long as we remain below 22.30, any higher high is likely part of an expanded b-wave structure, which is what I would prefer to see, as it supports a strongly bullish bias in the GDX. But, keep in mind that as long as we remain below 22.30, it is only setting us up for a drop in a c-wave for wave ii, which will likely be another buying opportunity.
What is interesting is that all three charts seem to be setting up for a rally in the upcoming week, with silver seeing a potential wave 2 rally, whereas GLD and GDX needing a (c) wave in a b-wave rally. These should be followed by a strong decline in all 3 charts in the coming weeks, with silver seeming as though it is the only chart set up for a lower low, that is, as long as remains below 16.18 on the coming rally.
See charts illustrating the wave counts on the GDX, GLD and YI at https://www.elliottwavetrader.net/scharts/Charts-on-GDX-GLD-YI-201604031219.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: Wednesday, 6 April 2016 | E-Mail | Print | Source: GoldSeek.com