By: Avi Gilburt
Last weekend, the important point of note was that silver had basically run out of room. It had a series of 1’s and 2’s set up for it to “melt up,” but it had to do so rather soon. Well, this past week, I would say that silver finally followed through and it took it directly to the level at which I noted on the chart was our next major resistance level. In fact, we were almost able to top tick the high of the week right at our resistance point, at which time I sent out an alert when I suspected that a pullback was imminent. Within minutes after that alert, silver began its pullback within wave iv.
The reason this is a major resistance level is that it is the 1.00 extension off the low we struck in 2018. Oftentimes, this could present us with an a-b-c corrective structure, wherein a=c. And, for this reason, I have been very cautious about silver holding over the 15.90 region. As long as it holds that support, and continues higher, it makes it less likely (but not impossible) that this rally is a corrective rally pointing us down to levels below those struck in 2018 for a final low.
(Please note that I corrected the labeling on silver to maintain consistency with what I discuss below).
So, with some of the questions I have been having about micro structure within the metals complex overall, I spent some time this weekend pulling up “clean” charts and redoing the Elliott Wave counts from scratch - starting with the GDXJ, which I have included this week with a very simple labeling. The conclusion that this chart brings for me – which is similar to what I am seeing across the complex – is that the upside does not yet look to be complete.
In looking at the GDXJ itself, as you can see, it looks very similar to my silver count, wherein the next push higher would complete wave iii of (3). This seems to be a solid count as long as we do not break below the blue box on the chart.
So, as it stands now, it would seem that we will likely have higher to go in the near term in the complex and much of the complex seems to be aligned within the current count. This is now even more so the case with silver catching up this past week.
But, do remember that all charts will not progress equally within the exact same wave count, which is why I harp on viewing each chart on its own. For this reason, our EWT Miners service will be quite valuable to investors who want to track those mining stocks that are lagging the rest of the market. Once certain miners reach their ideal targets, you can then choose to rotate into the miners which have lagged and which will likely catch up.
As far as GLD is concerned, I think we are tracing out an ending diagonal to complete this wave iii, which I outline on the 8 minute chart. But, in the alternative, I will view the GLD as having completed a leading diagonal for wave i of (v) of iii, which would project much higher for this wave degree. As it stands now, the ending diagonal seems to be pointing towards the 139 region. However, if we begin to see the market rally in a clear impulsive structure, and we see a strong break out over 140, then it is likely pointing us to the 144-46 region to complete wave iii of (3) of 3, presented on the daily chart.
So, after reviewing many different charts across the complex, I have to maintain a continued bullish bias until we see some break of support. Until such time, this market seems poised to head higher, as I still do not have any clearly completed patterns off the lows. In fact, even the “possible” a-b-c structure in silver does not have a completed count, and would likely need at least one, if not two more rallies. Therefore, I want to reiterate that as long as supports continue to hold, I am going to continue looking higher over the coming week. Should something change, I will clearly notify you as soon as I can.
Lastly, I continue to be asked where I would get more aggressive and use leverage again. Once we complete wave iii, and see a nice pullback/consolidation for wave iv, I will then be looking for a 1-2 structure off the bottom of wave iv. Once that develops, I will be looking to add some leverage to my account to play for wave v of (3). Until then, I intend on riding my regular positions in the complex.
In the past I have warned many times about looking at the market from an objective standpoint. This has allowed me to be appropriately bullish at the bottoms (despite being practically abused by some for focusing on the bullish potential in the market when we were at the lows), as well as to be able to set aside the frustration we felt over the last 3 years with the prior failed break outs.
So, I am again suggesting we maintain objectivity on both sides of this trade. While there is still some possibility for failure, it is likely that the bull market has resumed in a big way. Yet, we need just a little more structure filled in (mostly to be past the 1.00 extensions) to be much more confident of the larger degree bullish impulsive pattern we are following through the micro wave structure. And, should we be able to continue higher over the coming week or two, then that will solidify this count for me a bit better, which will make me more comfortable in doing more aggressive trading. But, in the meantime, I will likely be watching charts like GOLD to see if the market is going to provide us with more of a pullback before we begin the expected march to much higher levels in the coming years.
GDX-8min
GDXdaily
GLD 8min
GLD-daily
GDXJ
silver144min
GOLD
