Steady As She Goes

As I peruse other blogs and websites, and skim other articles written by market pros, I see the same theme resonating:  The market is overbought and must” pullback.

Meanwhile, I warned you of this exact scenario potentially playing out:

Third wave action is often breathtaking, and, for most, “unbelievable.”  Some will even view it as almost “impossible.”  But, it forces the shorts to cover, and those not already positioned on the long side to chase.  This is the point of recognition which powers the market up during one of its strongest phases within a 5 wave structure . . .

When the RSI, Slow Stochastics, MACD, or any other indicator you chose to use reaches extreme levels, one assumes that this should be a turning point in the market in the opposite direction.   However, when you understand the dynamics of how a market moves through the Elliott Wave structure, you understand that technicals are supposed to become extreme during the 3rd wave, and remain at those extreme levels until we come to the conclusion of the heart of the 3rd wave.  It is only when we reach the 5th wave in the 3rd wave do we begin to see divergences.  And, even at that point, the market still has higher to go, but will usually rest before it resumes its trek higher. 

So, if anyone is looking at the “overbought” nature of the metals market right now and are considering shorting, I suggest you wait for a break of support before you enter a short side trade.  From my experience, I see shorts as additional fuel for a continued metals run and it would take a break of support for me to consider otherwise.

So, as the market continues to drive higher, and gap up day after day, it continues to reinforce the fact that the heart of a 3rd wave is taking the market higher.

Moreover, I noted that, as silver met its initial targets, it was time for gold to play catch up.  And, this is in fact what we have been seeing this week as the GLD is catching up in its wave 3.

So, for now, there really is nothing to do, but allow your longs to continue to run.  As long as the GLD remains over 125/126, GDX over 28.75 and silver over 19, we are set up to target higher levels to complete wave 3 of iii.

GDXdaily
GDXdaily
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GLDdaily
Silver 144 min
Silver 144 min
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silverdaily
Avi Gilburt is founder of ElliottWaveTrader.net.