For those that remember the bottoming in metals in late 2015 and early 2016 (when we began to load up on long positions), we began the rally with an amorphous pattern off a bottoming in the complex which eventually led to a massive break out. So, it is quite possible that wave 3 may have begun in the same way.
Silver is probably the best example of this recent amorphous bottoming pattern, which turns up into a break out. As I have noted for the last few weeks, there are several ways to count this bottoming in wave 2, and it even can turn into a truncated bottoming. But, as long as silver held over the 15.85-16.01 support, I continued to note that the bigger pattern was more bullish. And, the best way to count the bottoming is indeed as a tranced c-wave of 2.
Also, since the micro patterns have turned very sloppy over the last few weeks, I have attempted many times to force you to focus on the bigger picture in the complex:
Overall, I still think we need to be much more focused on the bigger wave degrees rather than the smaller movements, as it seems to frustrate too many of you. In fact, at the recent lows from which we began this recent rally, many were throwing their hands in the air in frustration, and complaining how this market will never break out. Oftentimes, that signals a bottoming of sorts in the market, especially when people post in such an emotional manner.
I know it has been a very long consolidation, and it still may take a bit more time, but there is nothing we are seeing on the bigger picture that suggests we should not continue to expect a massive move up in the complex this year.
While the GLD has been solidly bullish all year, and has tried several times to break out through its 2016 high, we have simply been consolidating correctively below that level, while it seems that silver is trying to catch up.
But, the bigger problem is still the uncertain pattern in the GDX. Again, it is quite possible that the GDX is starting out similarly to 2016 with an amorphous overlapping pattern off the low. Normally, one would view such a pattern as a corrective structure setting us up for another drop. But, until we see support break in the metals charts (below 21.20GDX), it is hard to view the action in many of the miners we follow as anything but bullish.
Moreover, as we can see from the ABX chart, we have broken through the MACD downtrend line formed since the top of the X-wave was struck over a year ago. While the pattern off the lows in the ABX is clearly not the cleanest of impulsive structures, it still does give me some amount of concern. But, as long as this strength continues, I am looking for the next major test in the 14.50 region for the ABX. Once through that level, we should be well on our way to completing wave 1 of wave iii, as noted on the daily chart.
So, as we move forward, I want to see silver holding over the 16.90-17 region, and continue a break out through the market pivot. That would be the strongest statement the metals can make in the near term. Should that occur, then 17.35 will become support. Yet, it is still quite possible silver can consolidate below that market pivot a bit longer before breaking out, but as long as we hold cited support over the next few days, it should set up that break out within the next week or two.
Again, when silver was near its recent lows, we saw many throwing their hands in the air, and loudly complaining about this complex. That has been one of the best indications of the metals bottoming that we have recently seen. While I still cannot tell you if the metals are going to take advantage of this set up, I would imagine if we start to see people get too bullish about these metals, things may reverse.
But, as long as we remain over recent support, we have another set up in place for the metals to finally break out in a strong way. And, as long as a there is a bullish potential on this chart, I will give the bulls the benefit of the doubt due to the larger degree patterns. Since the patterns to the upside have been more bullish whereas the downside movements have been clearly corrective, this also suggests I need to give the bulls the benefit of the doubt. Lastly, with as many individual miners set up to break out, it also suggests that I need to give the bulls the benefit of the doubt.
Lastly, I will not be “emotionally” worn down due to the amount of time this has taken, as such complacency will leave people behind in the same way it did in early 2016. But, while I am allowing the bulls to prove themselves again here, I am going to do so quite cautiously until silver is able to break out through its pivot and catch up to the rest of the complex.