As you know, I have been suggesting that the complex can still see more pullback before the bigger break out we have been expecting takes hold. However, as it stands today, the market now has a set up in place to prove me wrong on that short-term expectation.
While our counts have remained quite bullish through all the machinations in 2017, the current region certainly looked like it would take a bit longer to set up this next (i)(ii) structure before the break out takes hold. However, with GLD breaking out over the April high, and silver providing us with yet another 5 wave move off a recent low, the GDX may now be following the rest of the complex, and preparing for a break out sooner than I had initially expected.
I want to start with the GLD at this time. Currently, the GLD has a potential to simply melt up from here, especially after it took out its April highs. The 120 level is now the upper support I am keying in on. On the upside, I am viewing the 124.55 region as main resistance. However, if the market is able to move strongly through 124.55, with follow through over 125.35, we will be in a melt-up stage in wave (3) on the daily chart with a minimal target of 138, but with an ideal target of 143-145 for wave (3).
But, I must also warn you that there could still be a major shake out in the market should we not be able to immediately break out. You see, with the levels we have now reached in the GLD, this could be considered a b-wave rally, with a break below 120 opening the door to revisit the May low in the 116 region for a bigger wave (2) flat, as shown in yellow.
As far as silver is concerned, it too has a potential (i)(ii) 1-2 structure in place, which would support a major break out phase as well. As long as we hold the 17.20 region as support, we really need to keep this perspective in the forefront of our minds, with a break out over 17.85 opening the door to the melt-up phase in silver. As you can see in the 144-minute chart, I have noted the major resistance box which we need to overcome if we are going to be in a melt-up phase. Should we rally up to the box, stops can be set just below the 17.85 region, as we should not be breaking back down below that region should we rally up to the box.
In GDX, I have slightly lowered my resistance region to trigger the melt-up phase down to 24.35 – as I noted in an update today:
I am lowering my resistance on GDX to 24.35. If we see a strong break out through that region, and you choose to add to your longs at that point, stops can be moved up to just below 23.90. The 24.32 level is the .764 extension for a wave (i)(ii) structure, and breaking out over that would be strongly suggestive of a 3rd wave in progress. Such 3rd wave would only be placed at serious risk if we were to strongly break out over 24.35, and then break back below the .618 extension which is around 23.90.
Should GDX break out strongly over 24.35, and hold support on all pullbacks, the initial target is in the 28 region, with us potentially heading up to the 30/31 region for wave (3).
In conclusion, the market is certainly providing indications that it may want to break out in earnest sooner than I had initially expected However, there still remains potential for one last pullback and shake out before that break out occurs, which has been my preferred path for the last few weeks. But, due to the more immediate bullish potential the market has provided us this week, it means you have to remain flexible for a bit longer, as it may take several days until the market provides us with more clarity as to whether it wants to break out sooner than I had initially expected. For now, you have the levels I will be watching to make the determination in the near term.
So, until the market makes it a bit clearer if we get one more pullback or not, I am going to maintain an open mind for the potential break out sooner than I had initially expected. But, when the market finally does move into this break out, the move will likely be somewhat parabolic, as major chasing will likely occur in the complex.