Looking For A “Bounce”
By
Avi Gilburt
We have seen quite the selloff in the metals complex. When the rubber band is stretched to an extreme in one direction, the snap back can be quite painful. And, I tried to warn quite vehemently about a potential for such a reversal, but too many were busy cheerleading.
While I was able to identify the blow-off top occurring in real-time last week in gold, we are now down to the initial support regions on our various charts.
In GC and GDX, we are now at the lower end of the upper support box. In silver, we almost struck the top of the major support box. And, thus far, all count best as 3-wave declines.
If you remember, my concern for the alt-b in red in silver was that the first decline would provide us with a 5-wave decline, which would provide a strong warning about the potential top being in place. But, since the decline counts best as an a-b-c structure, I view the alt-b in red as a low probability at this time.
The biggest issue I have with a potential top is in the gold charts. We have enough waves in place to consider the top as having been struck last week, and we also concluded that rally with a textbook blow-off top. For now, I am maintaining a count that we still have a (4)(5) left before the pattern is complete. However, should we see a serious lagging in the gold price during the 5th wave in silver, I will quickly change my perspective.
Keep in mind that silver topped in April of 2011, whereas gold took another 5 months before it topped. I would not be shocked to see the opposite occur in the current market.
Speaking of silver, we have dropped in what seems to be a corrective a-b-c decline and have almost reached the top of our support box. If you remember, I noted in a prior update that the 2010-2011 wave (4) correction found support at approximately the .236 retracement of wave (3). But, it also took 4-5 weeks before it completed. Since the top of our support box on the 144-minute chart is the .236 retracement of wave (3), we have almost achieved our target from that perspective. Moreover, the MACD has also reset as it dropped to the “BUY” box, and even below it. So, there is a reasonable probability this can be all of wave (4). However, I think the better interpretation is that this is just the (a) wave of wave (4), and that is my primary count.
However, should we see a CLEARLY impulsive 5-wave rally begin off the low we strike in this region, then I will likely move into the wave (5) count. But, for now, this is my alternative.
I am viewing both gold and GDX in the same way. My preference is that this is only an (a) wave decline, which should be followed by an impending “bounce.” Should that bounce take shape correctively, then I will maintain the count as shown, and expect a (c) wave decline next. However, if that bounce is clearly impulsive, then I will have to adjust and look higher in the coming weeks.
So, in summary, and as the title notes, I am looking for a bounce in the coming week. The nature of that bounce will either keep us in our current corrective pattern for a 4th wave, or we will have to adjust if it is clearly impulsive.
