Leading Diagonals Are Treacherous
Well, after the recent action in silver, I officially moved into a leading diagonal potential for wave i off the lows. And, as the title of this update notes, they are quite treacherous to trade. Moreover, as you probably know, I do not trust them until they are proven.
But, even at this time, I cannot even say that we will get a leading diagonal with a high probability. We still need to rally to AT LEAST the 24.60 region, which would be the absolute minimum expectation I would have for a 5th wave in a leading diagonal. So, in that regard, there is still much to prove.
Moreover, even if we do complete that potential 5th wave higher, I still do not rely upon leading diagonals. So, if we see a CLEARLY corrective a-b-c pullback for a wave ii, then I MAY begin to add some aggressive long positions. But, I really would need to see a CLEAR 5-wave rally for wave 1 of wave iii to turn more aggressively bullish on a wave 2 pullback, as I discussed in my live video this morning.
And, just as with silver, GDX still needs to push a bit higher to get its potentially completed leading diagonal off the lows. And, the same comments I have for silver apply equally to the GDX structure and manner in which I intend to trade the long side.
As far as GLD is concerned, I will simply want to see another push higher to at least the 168-171 region to suggest that we have 5 waves completed off the recent lows.
Unfortunately, the market is not providing us with the most solid of 5-wave rally structures off the recent lows. Yet, we get what we get and we can’t be upset. (Yea, I learned that when my kids went to nursery and kindergarten). And, with what we know about diagonals, at least we have a plan as to how we can layer in for the major rally I still expect in the metals complex as we look towards 2023.