Metals Are Doing Everything Right . . And Then Some
By
Avi Gilburt
As I posted earlier this week, there was potential for silver and gold to attempt a 5th wave off the July lows. And, as of my writing this update, gold has seen a higher high, but silver has been lagging. There is still potential for it to do so, so we will watch that carefully.
GDX has not only given us 5 waves up, but the 4th wave was extremely shallow, as it hovered around the .236 retracement of the 3rd wave. And, with this extension higher now, we have the minimum number of waves in place for 5 waves up, which is exactly what we wanted to see to make it a higher probability that the next major rally has begun.
In fact, I would have a very hard time coming up with an alternative bearish count now in GDX since we got 5 waves up. I would assume that this could just be a bigger and very convoluted b-wave, with a c-wave decline to the 60-64 region still on tap. But, I would have to give that a very low probability at this time. Of course, if the GDX begins its next decline as a 5-wave structure, then we may have to be a bit more concerned about this. But, as long as the next pullback is clearly corrective, then it will be an ideal time to add to your positions before the 3rd wave rally takes hold.
Once we complete all 5 waves up, I will add a support zone for the expected wave (2). And, for those that want to protect your positions, as we are completing 5 waves up for wave (v) in wave i, you may want to consider a hedge again.
As far as gold and silver, I want to remind you again that my initial premise was that they would only see a corrective b-wave rally. And, if they do complete 5 waves up off the recent lows, then that could weaken that premise. But, since a-waves are not terribly common as 5-wave structures, if we do complete 5 waves up, it does open the door to both silver and gold seeing higher highs as well. But, I am really not as confident of that potential as I am in GDX.
For now, the smaller degree counts are a bit convoluted for gold and silver, and I am leaving the alternative counts on. I assume the smaller degree counts will clear up in the coming week or two. But clearly, the action in GDX is suggesting that lower lows have become lesser probabilities at this time. What we will still need to see to confirm that view is that we will need a CLEARLY corrective pullback, followed by a rally back over the high we strike in the very near term. That would probably seal the deal on whether the low is in place or not in gold and silver.
For now, I think it is reasonable to assume we are now on our way to completing the initial rally stage off the July lows in the complex. Therefore, it is also reasonable to assume we can see a more sizeable pullback in the coming week or two. But, as you know with metals, they can be a bit more unpredictable. So, I am holding all my positions and will simply buy some hedges. As long as the next pullback is clearly corrective, I will be deploying the cash I have held in abeyance for a potential lower low into the wave ii correction. If you remember, this was the plan all along.
