Still Looking For A Rally

I received a message from a member who was unclear about my perspective in the metals of late.  Well, the reason that my perspective may be unclear is because the metals are in a posture of uncertainty, which clearly lacks clarity.  And, I can only offer that which I glean from the market.

So, to make sure everyone understands my position right now, I want to repeat some of the things I said over the weekend:

“. . . I have become extremely cautious of the complex overall, especially if we are unable to see a higher high in the GDX over the coming month.  And, if we are unable to see a higher high, it significantly increases the probabilities that the GDX can drop down towards the 17 region.  For this region, I have urged investors to protect their positions or to even lighten up their positions until the market becomes a bit more clear.  The greater probabilities now suggest that this market is not going to be breaking out until 2018, and since we are still nicely over the lows seen in July, it may be time to cash in some of those profits, especially on a corrective rally back up, which I would like to see begin shortly.

So, as I noted over the last week and a half, I have become much more cautious in the overall complex.  And due to the depth of the pullback in the GDX, it has placed much more uncertainty in the market, with the potential for a very deep drop which still may be seen in the complex.  In fact, as I have noted, if silver will follow through in its most bearish of patterns, it can even drop to a low below that seen almost two years ago. 

While we have often been able to identify most of the twists and turns in this complex, there are times where uncertainty will reign.  Unfortunately, this is one of those times.  And, the market is going to have to show more of its hand in the coming weeks before we will know with more certainty if a much bigger decline will be seen into the end of the year, or if we can simply continue to chop around in the current region over the July lows.”

I want to be clear that the market is now in a posture of extreme uncertainty.  I can maintain a bullish count in the market on the GDX, BUT IT MUST SEE A HIGHER HIGH IN THE 26 REGION TO ME TO EVEN CONSIDER IT.  Until such time, I am still looking for a rally to take hold, but that rally will likely “look” corrective in nature, as I discussed in detail over the weekend.   For that reason, it is not likely we will be able to discern from it being a purely corrective rally in GDX, or one which can take us to a higher high.

For this reason, I suggest people lighten up on their long positions, and hedge that which they want to hold.  If you look at the best case scenario I have on the GDX chart, which is presented by the bullish (1)(2) in green, even if we see a higher high, I still think we will see a deep retracement from that wave (1) high for the wave (2).  Again, this assumes we even see that higher high.  Ultimately, it seems that the probability that we see a direct break out in this posture over the 28 level in GDX is less than 20% in my humble opinion.  And, for this reason, I have become cautious and much more protective.

Personally, I have been and will continue to lighten up on the positions held by my family members, and I will be hedging my own portfolio with two targets in mind – the wave (2), and the potential MUCH lower target in yellow ii on the GDX chart.  So, as we rally, and I add those hedges, I can always release them at the wave (2) retracement IF we get a higher high in GDX, and if we don’t, I will simply hold them until we get to the lower levels for wave ii.  But, again, I want to reiterate that I have become MUCH more cautious in the complex. But, I will NOT aggressively short this market, unless we do not get a higher high, and then break down below the bottom we create before we see that rally.