Close, But No Cigar

With the crazy machinations we have been seeing of late in metals, I thought it appropriate to write an update a bit earlier than normal.

With the market making a higher high yesterday, I could have made the argument that gold was providing us with a 1-2, i-ii upside set up.  However, the spike low today invalidated that potential.  So, it still leaves us with a potential for a 1-2, as shown in purple on the 13-minute GC chart.

But, at the same time, there is also a reasonable count for 5 waves down in gold and silver.  I have outlined those counts on the attached 13-minute GC and 5-minute silver charts. So, this means that the bigger b-wave rally is still holding on by the skin of its teeth and we still cannot take it off the gold and silver charts.

However, I do have to note that I cannot make the same argument in GDX.  But, admittedly, the GDX’s 1-2, i-ii upside structure is not nearly as nice as gold presents.  

And, as I noted in the trading room today, this typifies the pitfalls of attempting to trade during a corrective structure.  Even potential impulsive structure set ups tend to fail during these types of environments.  So, it does not often provide us with something highly reliable, at least until we are able to be more certain that a b-wave has truly ended.

So, again, I will be watching the gold chart very carefully in the coming days.  If we can see another 5-wave rally for the potential wave i of 3, then I would consider attempting a long trade on a wave ii retracement.   However, if the market only provides us with a corrective rally, and then breaks down below today’s low, then we have a reasonable i-ii downside set up for the c-wave lower.  Please take note that we cannot see that as a higher probability structure until we continue lower in an impulsive fashion and break down below the start of purple wave 1, which would then completely invalidate that potential 1-2 pointing us higher.

Silver also has potential for starting a c-wave down if the next rally is clearly corrective, and then we break down below today’s low in an impulsive follow through.

But, again, it is hard for me to fashion a reasonable downside set up in GDX at this time.  So, I think that fact still has me slightly leaning towards the purple count.  But, PLEASE realize there is a lot of risk on either side of this trade still, as nothing is setting up VERY clearly just yet.

Should GDX be able to break out over the .764 extension in the 99.40 region, you can always choose to go long at that point, and place stops just under the .618 extension.  Should we then move through the 102 resistance region at the 1.00 extension overhead, you can move stops up to the 98.60 region, as that would likely signal we are on our way to the 110-113 region for that purple b-wave target.

So, as you can see, this still has not settled the path the market will likely take in the coming days.   But, I would assume we “should” see a resolution by the end of the week one way or another.