Metals Are Certainly Not Making This Easy

For the last several weeks, I have still had some concern about lower lows being possible due to the lack of positive divergence at the recent lows, along with the lack of clearly full bottoming structure.  This has kept me cautiously optimistic for weeks now.

Moreover, of late, I have been signaling the potential that silver may be taking shape as a leading diagonal for wave [i] off the lows.  And, today, the GLD seems to be following silver’s lead.

While I would certainly have preferred a standard impulsive structure to make our lives easier in the metals complex, alas, the metals have refused to be compliant.   Rather, they are choosing to make this as complex as possible, even after not providing us with our standard bottoming structure and divergence.  You would think they would at least make the rally off that low much easier.  But, today the GLD seemingly signaled that it shall not be.

So, let’s start with the GLD chart, as that likely caught most people’s attention.   The high we struck thus far is the 1.236 extension of waves [1] and [2], as highlighted on the 60-minute chart.  As you can also see from this chart, GLD has clearly broken out from its downtrend, and may be attempting to re-test the broken channel from above on this pullback.

In fact, if this is indeed a wave [4] in wave 1 off the recent lows, then we normally would see some overlap within waves [1] and [4], which makes me suspect we can see another loop lower to test the 176 region and even slightly spike below it to give us the overlap we normally see within diagonals.  But, as long as we only see a spike of 176 followed by an immediate reversal, then I can still maintain an expectation for another rally in wave [5] to complete wave 1 off the recent lows in the GLD.  

And, clearly, a further break down below 175 would suggest that a lower low may yet be seen, yet I do not suspect that is a high probability at this point in time.

As far as silver is concerned, this is one I have been angling towards viewing as a leading diagonal.  That also means we would likely be in wave 4 and it also can see another loop lower to complete its 4^th wave.  Keep in mind that when silver moves down, it often spikes, so you really need a cast iron stomach to trade silver.  But, as long as we hold the 25 region, I am still going to be focused on hitting our next target box to complete a 5 wave structure for wave [i].

Lastly, we now have to deal with the GDX.  This one still has some push pull from various underlying charts, as I highlighted over the weekend.  But, most interestingly, GDX has not yet broken its standard impulsive count we have been tracking.  In fact, today we pulled back right into our pivot, and thus far, have held it.  As long as we hold today’s low, then I can still maintain this count.  But, as I am sure you can surmise, if the other charts are going to see another c-wave decline to lower levels, it is likely that we will have to view the GDX as a leading diagonal as well if it will retain its bullish structure.

What is also interesting is that not only did the GDX rally to its standard target for wave [3] of [iii] within the 1.00-1.236 extension of waves [1] and [2], we also hit our head on the downtrend channel seen on the daily chart.   So, while the GLD and silver have long since broken out over their respective declining trend lines, it would make sense that we can maintain the same expectation for the GDX.  But, again, I have a question as to whether we do so based upon the standard Fibonacci Pinball structure and holding the micro pivot, or if we morph into a leading diagonal.

So, in the end, I still remain cautiously optimistic.  But, the market has made it exceptionally difficult in identifying a clear bottom in addition to providing us with a 5-wave rally off that low.  So, while my concerns noted for weeks regarding the lack of divergence and incomplete downside pattern remain, I am still trying to give the bulls the benefit of the doubt for now.