- Avi Gilburt

While we have been tracking the metals market for the next rally set-up, we have seen some signs that the market may attempt to begin that rally sooner rather than later.  However, I have to be honest in noting that I am seeing more signs that lower levels may still be struck before we are ready for that rally. 

So, as I have been saying for the last few weeks, I am going to still treat the market as likely needing more of a corrective downside structure before we begin the next rally phase – until the market is able to prove otherwise. 

Allow me to begin this update with the chart that probably provides me the clearest perspective of further weakness in the coming weeks.  I have highlighted this chart several times in the past due to the textbook pattern is has been providing to us, as well as an illustration of the type of move I expect in the heart of a 3^rd wave in some of the other mining stocks we are tracking.  The chart I speak of is RGLD. 

While the move in wave (3) on this chart is what I expect to see in the NEM, GDX and GDXJ next, I have to note that this chart is rather clearly pointing to a c-wave lower in this current pullback before we are ready to embark on the next major rally phase.  And, this chart is quite compelling in its simplicity and standard structure.

When I review all the other charts, they all line up reasonably well within this perspective of a needing more corrective downside.  While a bounce can still take hold before this happens, I think the preponderance of the evidence suggests that lower levels can still be seen in the complex before what I am counting as a 2^nd wave pullback completes. 

The one standout to me right now is that the gold price per ounce may actually have already completed its pullback for what I am counting as a wave iv in that chart.

Yet, as I have said many times before, if the market can stage a strong impulsive rally over the coming week or two, followed by a corrective 2^nd wave pullback, with a rally back over the high struck in the initial rally, then I will clearly abandon expectations of further corrective action, and immediately turn uber-bullish.  But, until such time, I am still going to maintain expectations of lower levels to be seen before this current pullback/consolidation completes.

See charts illustrating Avi's wave counts.

 

Originally published on Sat Oct 12 for our ElliottWaveTrader members:  

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.