With the metals providing us with the pullback we were expecting in our report last weekend (Aug 12-13), they continued to push higher from that pullback. Moreover, the structure continues to look quite bullish. However, the only question the market has yet to answer is if we see one more drop before the parabolic rally commences, or if we simply begin to rally strongly from here.
Since the market has not done anything unexpected this past week, I have to note that my overall perspective has not changed. My main expectation is still looking for a bit more pullback before we are ready to rally through resistance. Moreover, there is really not much more I am able to provide by way of further analysis to what I have been saying all week:
When dealing with fireworks, all it takes is one spark, and the entire box can be ignited. The metals market is in no different position right now. It does have the potential for a direct break out, and if we should see silver take out its blue box overhead with strong buying volume, do not stand in its way, since it means someone has lit the match, and it will likely have begun the heart of its 3rd wave higher.
As far as GDX is concerned, as I have been saying for the last several weeks, the micro structure is truly messy on this rise. While GLD and silver have been displaying truly ideal Elliott Wave structures, GDX has been an overlapping mess. S o, the question of how to count the micro structure has become a bit of a challenge. Rather than provide you with multiple count potentials, I am going to provide resistance and support levels. Currently, the resistance for GDX resides between 23.60-23.96. As long as we remain below that resistance region, I am expecting another pullback in the complex. However, should we see a direct break out of that region, then you should set your stops just below the 22.83 region, for if it is a true 3rd wave break out from that point, we should not see the 22.80 region again.
In summary, I remain bullish the complex, but am on alert for one more pullback before the market finally breaks out for a rally into the fall of 2017.
The one difference that I can add to this weekend’s analysis is that I am now just a little less confident that GLD can drop down as deeply as the 117-118 region, and it may hold over 118 on the next pullback. It has provided us with a much stronger bullish count in this rally off the July lows, and the pullbacks may no longer be as deep as we have seen in the past. Should this occur, rather than seeing the deeper pullback in the coming week or two, it is a first sign that GLD has changed its “nature,” and shallow pullbacks may now be the order of the day, which is often what we see when this chart begins to act extraordinarily bullish.
Lastly, I have warned many times about analysis that follows simple trend lines, as they have been the most whipsawed type of analysis in the metals market for years. You see, metals usually move towards extreme positions. This means that we have often seen the metals move just outside of trend lines to get those following them either overly bullish on a break out or overly bearish on a break down. At that point, they have then reversed strongly in the opposite direction. We have seen this occur more times than I can count over the last several years. This is likely why you see some of the most bullish analysis on the internet on a break out and the most bearish on a break down, which explains why these folks have been terribly whipsawed at each high and low.
At this point in time, the three charts we follow – GLD, GDX and silver – have all broken out of downtrend channels. And, yes, many of the same people have again turned uber-bullish. And, while GLD has been grinding just beyond the resistance we noted weeks ago, both GDX and silver are still below their respective resistance regions. This is why using Fibonacci Pinball is a much more accurate measure of market movements as compared to any analysis that primarily uses trend lines and channels.
In fact, my resistance on GDX was 23.60-23.96, whereas it seems to have topped this past week within 12 cents of that resistance. Silver still has not been able to move through t he bottom of our resistance, which begins at 17.26, with the high in silver being struck at 17.30 this past week with a spike and reversal on Friday. It has not been able to sustain any move through our resistance level.
So, for now, I am on high alert for another pullback in the complex before the real break out is seen. But, again, if the market is able to overcome these resistance regions noted above, then do not stand in its way, as a 3rd wave is likely in progress.
See charts illustrating the wave counts on the GDX, GLD, and Silver Futures (YI)