As I have been saying for the last week or so, the overlapping structure seen in the metals and GDX has been a bit challenging on the micro scale. There are a number of ways we can interpret this overlapping structure, but I am “hoping” that the next few days of price action can clarify the bigger structure.
There is a strong point I want to make about the metals and miners. When we have a really bullish move in this complex, it will usually not allow you much of a pullback, as most pullbacks are quite shallow. And, if we really have a long term bottom in place, I am going to put a count before you this evening which you MUST take seriously, which will not allow many in before we hit the 36-40 region in the GDX – yes, you heard me right.
You see, everyone believes the miners are so overheated and they MUST have a pullback. Many are still awaiting lower lows before they buy into the complex. But, this seems to be the environment that can support an EXTREME bullish count, which is noted in blue.
First, I want to present the main count, which has us in a 5th wave in wave I off the lows. As you can see in the GDX charts, we may only be completing wave (i) of wave 5, which would make sense since the 3rd wave was not terribly extended. That means that as long as we do not break below 18.86GDX, I will remain immediately bullish. The target for this 5 wave structure will be 23.20-24.10. The 24.10 region is where the 5th wave would be equal to .618 of waves 1-3. That would be my maximum expectation for a 5 wave structure off the lows in GDX. But, I will warn you that if we see a strong move through 24.10, with follow through over 25.25, my target is going to be in the 36-41 region to complete wave (1) off the lows.
And, with silver consolidating below its long term down trend line for the last month, I can easily support a 1-2, i-ii structure off the low, as presented in blue, which would then take us to my original target off the lows in the 20/22 region.
For now, I believe that GDX has the cleanest levels of support and resistance to work with, so I am going to be keying off that chart. As long as we remain above 18.86, I am going to maintain a strong bullish bias. Any break below that level would take me to a wave ii count. And, 20.20 right now is the micro support, being the .382 retrace of this 3rd wave up we experienced today. Below 20.20 is a first warning that bigger extensions may not be seen.
So, please do not take anything for granted in this complex, as even the bulls seem to be looking down now, along with all those that are still looking for lower lows. While I am not saying that the probability for lower lows is exceptionally low (as I still classify it as approximately 35%), I am saying that we may have an equal probability for upside surprises, with so many looking so much lower. So, watch the levels of support and resistance, and do not pigeon hole your thinking into what you think “MUST” happen. I am going to remain open to the possibilities the market provides to us, and will be focusing on immediate bullish probabilities as long as we remain over 18.86GDX.