Have Metals Topped?
With the minimum numbers of waves in place for GDX and GLD to have 5 waves off the recent lows, of course our next focus is going to be the pullback. So, have we topped?
Well, clearly, I can count 5 waves up already. But, of course, if the market chooses to extend a bit higher, then I am not going to complain. You see, we have only hit the minimum targets for a 5-wave structure. Yet metals are known for their extensions. So, it clearly would not surprise me if they try to see one more push higher.
In fact, if silver were able to join on a rally to a higher high, we may be able to get to a minimum target for a 5-wave leading diagonal for silver as well. However, as it stands right now, there is a reasonable i-ii downside structure in silver. So, the question now is if silver breaks out over this week’s high before it breaks down below yesterday’s low. Should we break out to the upside, then we have a better chance at seeing a more appropriate leading diagonal structure (whatever that really means). But if we first break down below this week’s low, then it clearly opens a trap door for a drop to a marginally lower low, as presented in red.
If GLD and GDX have indeed topped, I have support boxes presented on the attached 8-minute charts. This would be my expectation for a 2nd wave pullback.
Now, as a reminder, you do not have to look at your purchasing as an all-or-nothing proposition. Rather, it is advisable to layer into positions, using either the region just below the .618 retracement region as your stops, or as deep as just under the .764 retracement. But, please make your plan before you begin buying.
As for me, I will not likely be using options unless the market provides us with a VERY clear a-b-c structure for wave 2. But, I will definitely be using them once we see the waves one and two within wave three take shape off the 2nd wave support region.
But, the overall point is the market may finally be setting up the long trade for which we have been patiently awaiting.