Metals Setting Up Break Out

This week, we have seen the metals rally off their lows.  But, most importantly, we have completed 5-wave structures off those lows.  That should put each and every one of us on high alert that the three-year sideways action may finally be coming to a conclusion.

Yet, we have had several break out set ups fail over the last three years, so I clearly want to make sure this one triggers before I get too excited.  Let me outline what I want to see.

First, since we have now completed 5 waves up off the recent lows, we are looking for a corrective pullback.  In fact, it seemed we were completing that 5th wave up as I noted this morning, which had me on alert for a pullback to begin at any time.  Thus far, I would count today’s pullback as an a-wave within wave ii, as you can see from the 8-minute GLD.  However, please take note that what I am counting as the a-b-c of [a] can turn into all of the wave ii. Remember, when the metals finally turn bullish, pullbacks are rather stingy as they can be shallow and fast.

Second, once this pullback runs its course, and as long as it holds the blue box as shown on the GLD chart, it should spark a rally which takes us up over the top of wave i.  That is the MAJOR signal we want to see.  That would suggest that we are FINALLY breaking out in the heart of the 3rd wave, and we are heading up towards our next major target blue box overhead on our charts.

In silver, I have added a notation for the next main resistance region it needs to exceed, and if we are as bullish as I think we can be, silver should blow through that level and can lead the rest of the complex.

So, the market is now providing us yet another break out set up.  While I cannot tell you if this one will trigger, I have outlined what we need to look for in order to know it is triggering.  And, should it trigger, then I will personally be looking towards using some leverage for that rally, once it ignites.

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