Getting Back To Resistance
By
Avi Gilburt
With this rally in the metals complex, all three charts are now approaching their resistance regions.
In GDX, not only are we striking the top of the long-term target box I placed on the daily chart last year, we are also approaching the smaller degree target box which is at the top of the larger target box.
In support of this expectation, the NEM is also striking its 1.236 extension of waves 1-2 in this (c) wave, which is a typical target for a 3rd wave of an ending diagonal (up to as high as the 1.382 extension). Therefore, I have now moved into my alternative count that I presented in yellow, and it is now my primary view. But, it still means that NEM should see a sizeable pullback back towards the 57 region, which is the top of wave 1. Remember that we often see overlap in waves 4 and 1 in a diagonal, so that is the basis behind my expectation.
As I reviewed in my live video this morning, for those that have been with us for some time, you may remember that my expectation for this rally in NEM was that we would reach at least the .618 retracement of the 2022-2023 decline, with potential to even get back up to the prior highs in this b-wave rally. And, the market has now opened the door to reach those levels. But, again, I would expect a wave 4 pullback first.
Gold remains quite complex still. All three paths I have been tracking remain reasonable probabilities. But, the yellow count will have to prove itself once we get to the 3250 region. Should we break down below that support – and follow through below 3207, then it makes it highly likely that gold is heading down to the 2900-3100 region, as that would basically invalidate the yellow count. How low it will take us will depend on whether the green count is operative or if the purple count is operative.
You see, in the green count, we already have waves 1-2 in place, which means all we will need is waves 3, 4 and 5 to the downside in the c-wave. That means the next 5-wave decline is wave i of wave 3. However, if the purple count is operative, then the next 5-wave decline is its wave 1 of the c-wave. This means that the purple count will take us deeper as it will provide us with an added 4-5 at the point where the green count would likely be completing its full 5-wave structure. So, keep this in mind should we break down below 3250 in the coming weeks.
Silver is now approaching its (b) wave resistance target. While I would still like to see it push a bit higher, the structure this week has morphed this c-wave of the (b) wave into an ending diagonal structure. But, I have to reasonably expect it will strike our target in a 5th wave of this ending diagonal.
After the metals complete this current rally, I will be looking for a 5-wave decline in gold, silver and GDX. All primary counts suggest the next decline should be a c-wave, so I will expect a standard 5-wave decline.
As I have noted in the trading room, I have been raising cash for only the 2nd time since I bought the mining stocks back in the last quarter of 2015. I will gladly deploy some of that money once we get that 4th wave pullback. But, in addition to raising cash, I am adding some GLD and GDX protective puts, and may consider a small position in SLV puts as well if we complete this 5th wave. And, as you can see, the resistance boxes will generally be the parameters for my stops, along with the early August high in the gold futures.
