I have to admit that the metals have been quite frustrating over the last week. Several days ago, we had a wonderful downside potential set up in a 1-2 structure, especially in GLD and GDX. Since that time, the downside structure has looked more corrective than impulsive. And, as I put out last night, that has me on my toes.
Normally, this type of set up should not be this sluggish. In fact, if you look at my 8-minute GDX chart, we really should be following down to the box to complete wave i of wave 3 to the downside. And, the inability of the market to drop us down to that target does leave me some concern about immediate downside follow through.
When it comes to the GLD, I really have no clear way to even consider it as having begun its 3rd wave down. The structure off resistance has been terribly overlapping and does not give me a warm and fuzzy feeling about immediate downside follow through. But, should the GDX be able to drop down to its wave i of 3 target, it may be able to pull the GLD down with it.
As I noted last night, should the GDX be able to break out over this week’s high, and follow through over 20.51, it opens the door to a larger wave iv rally, which points us to the 22 region. While I still do not think the overall market has bottomed and has a lower low still to be seen, a rally to the 22 region would develop this last c-wave within wave iv in an ending diagonal, since this wave iv would overlap into the wave i down.
When I look at the ABX smaller degree structure, as long as we do not break back below 12.32, it looks like it has a micro 5 wave move off that level, followed by a corrective pullback. This would point the ABX up towards the 15.50-15.60 region for a fuller 5 wave structure off its lows. So, if anyone is intending on playing the long side of the market for a potential upside move, this chart provides very nice parameters for any further extensions higher.
But, should the ABX get that further rally, it could suggest that wave (ii) would be rather deep based upon the higher targets I want to see us hit in wave 1. But, thus far, this was truly the horse to ride off the lows based upon our expectation.
As far as the NEM is concerned, that same move higher would be a 5th wave in the c-wave of wave 4, and complete a very nice flat within our resistance box for this 4th wave.
So, at the end of the day, there are still come indications that the metals may try for another rally before it drops down to lower lows. However, should GDX break down to the target box on the 8-minute chart, it would cause me to lean more immediately bearish, as it would fill in wave i of wave 3 down in the GDX.