Evil Is As Evil Does

First, I want to start this update by reiterating that I don’t think this correction is over.  Rather, I still think we see lower levels one way or another.  So, even though many are now looking at this as a new bullish leg in the metals, and have begun celebrating, with expectations of direct higher highs across the market, I am clearly not in that camp just yet.  The overlapping structures we are seeing across the complex strongly suggest that there is going to be further downside to be seen once this corrective bounce completes.

Second, the “evil” purple count we have been tracking seems to have gotten even more convoluted.  At this time, I think I can make out a triangle over the last few weeks in gold.  But, that is within an overall expanded b-wave flat – outlined in the purple count – which is actually taking shape as a complex (w)(x)(y) pattern, which I have labeled on the 60-minute gold chart now.

Within this structure, all waves take shape within 3-wave substructures, as compared to the standard a-b-c, wherein the c-wave is most commonly a 5-wave structure, and the a-wave is sometimes a 5-wave structure.  And, within the (y) wave, the b-wave of the (y) wave can now count as a completed triangle.

What this means is that as long as we remain over 4626, we can see a rally back towards the 5050-5375 region, with the more likely target at this time being the lower end of that region.

In silver, we have an equally complex structure as well.  But, what is interesting, is that silver has truly lagged on this correctively rally which can suggest it can outperform if we do get one more push higher in the various c-waves.  

As far as GDX, it has already struck the bottom of its target, so there is potential for GDX to underperform if we do see another rally.  

At this time, I would now say that I am leaning towards the purple count as long as we remain over 4626 in gold.  Should that level of support break, then I have to assume we have already begun the drop towards those lower levels to complete this complex corrective structure. But, needless to say, this overlapping complex structure with which we have been dealing for some time has obscured the path to lower lows, which has made our tracking much more difficult.

Lastly, I want to remind you that those lower lows will present a great buying opportunity.  While I view the greater opportunities for higher highs being presented in various mining stocks (and potentially the GDX as well), I am still quite uncertain whether gold and silver will rally to new major highs or if the next rally from the upcoming lower lows will only be corrective in nature, similar to what we saw in 2011.  That will all depend on the nature of the rally – whether it will be corrective or impulsive.  For now, I am leaning towards the former expectation, as per the 2011 view.  Yet, even though we would have a wonderful trading opportunity to buy the next lows, we can always  sell those positions should the rally prove to only be corrective in nature.  But, that is not something we can determine at this time.