Initial Break Down Signal

With the various products we have been tracking breaking their initial supports today, the market is suggesting that a pullback/consolidation has potentially begun.  However, the question is what type of consolidation are we dealing with?

I have several issues I am going to address with this additional update, but will only be focused upon the GDX.  I will do a more in depth analysis of the other charts over the weekend, but I at least wanted to send out an additional notice to all our members after today’s initial break down.

To be honest, I would still much prefer to see the much stronger green count still pushing us higher in the coming weeks.  Yet, I have no set up to which I can immediately point which suggests that is the markets near term intention.  However, I am certainly going to be tracking the smaller degree structures, and should some evidence of that potential arise, I will alert all our members.  And, again, I want to stress that this really is my preference since it would fill in the larger degree count in a much cleaner fashion.

However, due to where the market seems to have topped, I am using bounces to hedge my positions for the coming weeks, with a stop to those hedges at the high struck yesterday.  The reason is that I am still uncertain if we will see a more shallow wave (4) – such as I am counting in silver – or a deeper wave ii, as presented in yellow.

But, the main point I want to make with this update is that should we only see the more shallow wave (4) in GDX, it makes me a bit concerned that this rally is only an a-b-c structure off the 2015 lows – which I have presented in red.  Again, I want to note that this is NOT my primary count, but the structure has developed to a point in this region that I have to now track this potential.  Moreover, should we see this pattern develop over the coming months, I will likely significantly reduce my exposure on the rally into the 35-37 region.

For now, I am going to assume that we have begun a pullback/correction.  The depth of that pullback/correction is not yet evidence to me, as I am still uncertain which wave degree with which we are dealing.  I will need to see more evidence of the structure as it develops in the coming week or two to have a better expectation.  And, should we see a more bullish micro structure develop off a low we strike in the near term, I will certainly alert you, and will likely move back towards my “ideal” green count.

In the meantime, I just wanted to at least give you an update on my thoughts.