Technicals Are Finally Reset In Metals – Prepare For A Reversal

As I outlined over the weekend, we really need to remain on our toes as the market is now ripe for a reversal.  Does that mean we will certainly be ready to break out?  Well, no.  It means we are nearing a reversal and the nature of the next rally will tell us if we break out sooner or later.

If you remember, if the next rally is clearly impulsive, then we will go on “break-out-alert” and I will likely be adding aggressive long positions on a smaller degree 2^nd wave pullback after the initial 5 waves up.    However, if the next rally is clearly corrective, then it will be a b-wave within a more protracted 2^nd wave pullback.

First, please take a look at the MACD’s on the daily GLD and GDX chart.  Clearly, we have finally gotten our reset.  

Next, I want you to take notice of the MACD on the silver chart.  While price is leaking lower, the MACD is not even close to making lower lows.  This is the type of divergence I like to see in the 144-minute chart to suggest we are nearing a reversal.  But, again, it does not tell us whether that reversal will be impulsive or corrective.   

As you can also see in silver, we are at the .500 retracement of the prior rally, and are within a tight diagonal structure.  Clearly, breaking back out through that diagonal would be an initial sign that the reversal has begun.

As far as GDX is concerned, we have finally struck the top of our support box to which we were looking for a 2^nd wave pullback.  And, at this point in time, we would need a reversal back through 30 to suggest that a rally is in progress.  Again, the nature of that rally will distinguish between the alt (b) and the wave [i].  GDX is the only chart that I would say looks best with the more protracted 2^nd wave structure.

Gold is giving me a bit of a tough time in trying to decide the correct wave degree.  It is just barely holding onto the [1][2]i-ii structure, but should we head a bit lower, I think it would be more reasonable to classify it as the larger degree 2^nd wave, similar to the other charts.

So, in summary, I think we are nearing a reversal in the complex.  And, the next question will be whether that rally is impulsive or corrective.  That will give us a much better idea as to whether the 3^rd wave takes hold in as we move into spring, or whether we have to go towards the end of spring before that 2rd wave takes hold in earnest.