Let’s Bring Down The Emotion

With the metals, and especially silver, pushing up strongly, I think everyone needs to take a breadth, and realize that we are not beyond the point of another bigger pullback.  The market has not made its decision just yet.

For those that may recall, we noted a series of 1’s and 2’s set up in silver over the weekend, and the market has thus far followed through.  But, to be brutally honest, it has not extended anywhere near as strongly as I would normally want to see in the heart of a 3rd wave.  In fact, if I had my druthers, we would continue on to the 16.50 region for just wave iii of (iii) of 3.  Remember, the 3rd wave itself has targets we normally strike and the 1.236 extension is a minimum target for me on a silver rally for wave (iii) of 3.  And, in order to get there, we need to continue to extend higher here.

This leaves us with two possibilities if we are unable to extend directly higher.  The first is presented on the chart in yellow, with us topping in a leading diagonal for wave (i) of 3.  In fact, we are slightly beyond the region that is the ideal target for a wave (i) of 3, as we have just moved beyond the .764 extension.

This brings me to another potential which I have noted months ago we would have to consider.  This is the LAST pot hole I can see for the metals market at this time.  And, that is if we complete 5 waves up into the 1.00 extension on silver, and then drop back down below the market pivot I have now added to my chart, then we could have a strong warning about a bigger decline to be seen.  While I do not have this labeled right now – as I see it a low probability – I am going to suggest that everyone place their stops just below the pivot once we strike the 1.00 extension in silver. 

You see, if we strike the 1.00 extension, and then break back down below the .618 extension (the bottom of the pivot), that would suggest this rally was corrective in nature, and point us down below the levels struck in 2018.  So, while I do not want to alarm anyone as I do not see this as a high likelihood, we still need to practice risk management at all times.  But, for now, we need to practice a bit more patience and see how silver reacts in this region before there is anything we need to do.  Micro support now resides between 14.55-.65.

Now, I find it somewhat interested how gold has “underperformed,” at least in my eyes.  We have not even take out the high we struck earlier in July.  And, there can be a very bullish reasons for this. 

As I have noted before, the only metal that I have seen commonly double top is silver.  So, it is not likely that we are seeing this in gold right now.  Rather, I am hypothesizing that gold may be developing a i-ii structure after the completion of the triangle, which will set it up for yet another strong rally in the coming week or two.  Clearly, maintaining over this week’s low is going to be the key to this potential.  And, this still leaves the door open to the much more bullish count I have on the daily chart.  Ideally, with the manner in which gold normally extends, it should point us to 140+.

As far as the GDX is concerned, I want you to focus on the daily chart.  What you should first notice is that price has now moved solidly into the more accelerated upper channel.  This is typical of what we see during the heart of a 3rd wave.  In other words, as long as we hold over 26.50, the potential is quite real for us to head back towards the 2016 highs for wave iii of (3) of 3.  A break of 26.50 would suggest a bigger pullback can be seen in the coming weeks/months. 

So, as of this moment, there really is not a lot we should be doing other than letting the market direct us as to which path it is going to choose in the very near term.  We are now at the point it will have to make a decision, and once it does, we can adjust.  But, until then, I intend to take the words of Jesse Livermore to heart:

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”

silver144min
silver144min
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GLD 8min
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GLD-daily
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GDXdaily
Avi Gilburt is founder of ElliottWaveTrader.net.