Setting Up The Next Leg Down

As I outlined over the weekend, the silver chart was providing us with the clearest path as to how a b-wave can potentially complete.  And, I would say that this is still true.   So, let’s look at the smaller degree chart in silver as our guide.

From the weekend update, we were looking for the market to minimally continue this rally towards the 93 region, which is the .500 retracement of the initial decline off the all-time high in silver.  Today, the market approached the 92 level and has seemingly backed off.  

I am also going to repost alerts that I posted in the room earlier today, as it presents the picture rather well:

10:06AM:  “Silver has filled in quite nicely this week.  We are almost at a point where we have a minimum number of waves in place for this rally.   The question will soon turn to if this rally is merely an (a) wave within a much bigger b-wave consolidation - suggesting that the next decline will be corrective and fill in the blue (b) wave, or if we can still push higher and reach the .618 retracement of the a-wave decline which would make it more likely that this is all of the b-wave.

As promised, I have moved support up again, and the floor now is 84.85.  The next time we break below that level will likely differentiate between these two potentials noted above.  If the decline is corrective then it suggests we are in a (b) wave of a bigger b-wave.  If it is impulsive, then we have strong potential to break down below the a-wave lows, and it could wind up being a substantial break down below there.

In the smaller degree, a corrective pullback that holds over 84.85 can still give us one more rally in a 5th wave.  But, I will warn you that the highest probability segment of this rally is almost done.”

So, at this time, with silver seemingly completing wave 3 of this rally, I have to assume the pullback for wave 4 began towards the end of the trading session.   And, as long as we hold over 84.85, we can reasonably expect one more higher high.    

Of course, we will have to see how high the next smaller 5^th wave rally takes us.  For if we are unable to break out over the 93 region, it could mean one of two things.  Either that we are only completing an (a) wave in a bigger b-wave, or that the next decline could be targeting significantly lower than the a-wave low, as an a=c would target the 35 region.  I know that number may sound shocking to you, but it is what it is.  If the next decline begins with a clearly impulsive 5-wave move, then I have to make the assumption that this is our next target.  And, just to be on the more conservative side, the point where c=.618*a is at the 57 region, so this would be the minimal target I would take into account if we do begin the c-wave decline sooner rather than later.

As far as gold is concerned, I am also going to repost an alert I sent out earlier today:

“Gold has not moved the needle much, but still should push a bit higher as I do not see any clear 5 wave decline yet.  

Take note that gold may be a bit tougher in the coming weeks relative to silver.  It can still maintain a bigger b-wave potential.  And what will make it so difficult is that both paths suggest some form of c-wave decline, so they will likely both begin with a 5-wave decline.

We will have to see how the c-wave takes shape to determine with which c-wave we are dealing. The closer we can push to the .764 retracement in the 5340 region, the more likely this is the bigger b-wave.”

And, as far as GDX, this is rather straight forward as well, as I posted earlier today:

“Because of how high this b-wave has pushed in GDX, I have to now consider the potential of a 4th wave flat, which why I had to move support up.  My preference still remains a return to the 80 region for now.  WE will have to see how the 3rd wave in the c-wave projects to have a better idea.  Clearly, the more the 3rd wave down takes us, the more likely the 80 region will be.”

In summary, I think we are getting close to setting up the next leg lower in the metals complex.   Whether than next leg lower is going to be the big c-wave in both gold and silver is still a question.   But, even if it is not, the next decline could still be quite sizeable in both the metals that it could be enough to support the c-wave down in GDX.  We have to take this one step at a time during this corrective phase.  But, any larger c-waves down can be the next major buying opportunity in the complex.