As I noted over the weekend, and as the title conveys, it will likely take us several months to re-build the break out set up in the metals again. Until that time, we will likely be spending the next week or two bottoming out before I would expect to even start looking for the next impulsive rally off a bottom.
Currently, my primary count has us trying to bottom out in the 3rd wave of the 5th wave in the c-wave drop. And, while many have turned extremely bearish this complex, the most bearish count I can come up with at this time is that this is still in the 3rd wave in this c-wave, which can project the GLD down to the 105 region, which is presented in the yellow count on the daily GLD chart. So, whereas many in the market are again looking for us to break down below $1,000 in gold, I think they will be left at the train station as they have been at every low since we bottomed in 2015.
But, as I said before, it is likely going to take us a bit of time until the market provides the “break-out-setup” again. If you remember, it means that once this weakness completes, we will need to see an impulsive 5-wave rally in GLD back up towards the 125 region, pullback correctively from that rally, and then break out over the top of the initial 5 wave rally to provide us the break out signal we have been so eagerly waiting for the last year and half. Ultimately, it means that the major part of the rally we are looking for will not be seen until we move into 2019, with the potential to at least begin that rally in the last quarter of 2018. Much depends on how quickly waves (1) and (2) of wave 3 are able to take shape, as presented on the daily GLD chart.
From a more immediate bullish standpoint, if the GLD is able to provide us with an impulsive rally through 118.50, that will give us an initial signal that the current weakness has completed, and we can begin the rally back up towards the 125 region to provide us with our break-out setup. But, for now, I still think that the market may have at least one more lower low to provide to us before I think we can consider that potential.
As far as the miners are concerned, as many of you have seen from the miners we track in the EWT Miners service, there are many individual miners that are exhibiting incredible strength during this decline in the metals. But, the one we have been tracking here – the ABX – has been pulling back in its c-wave of wave (ii), which matches the count in the GLD I am tracking. Within this c-wave, we have struck the .500 retracement of wave (i) today, and bounced. But, I am not convinced that this downside structure has yet completed in this c-wave down. Rather, I think there is one more, and potentially even two more lower lows still to be seen. An impulsive rally through 13.15 would suggest otherwise. But, my expectation is that we may even test the .618 retracement in the 12.10 region before this pullback has run its course. And, as long as that is held as support, I still cannot view this chart bearishly.
And, lastly, as far as silver is concerned, it has broken its immediate positive divergences which I presented over the weekend. However, we still have potential for another one to develop, but we will need to see a bit more of a bounce, followed by at least one more lower low. And, as you can see from the daily chart, I am still viewing silver as being in a wave ii pullback.
So, what I glean from all the action we have experienced since we broke 117.40 in GLD is that we will likely have a bit more time of weakness, but we will likely see at least one more 4th and 5th wave before we finally bottom out, with the potential that we may even see two more degrees of 4th and 5th wave. Once we see the first 4-5 complete, then I will be on watch for an impulsive 5-wave structure to develop off that low. Should that rally only be corrective, then we will be on the lookout for the second 4-5 to complete before a lasting bottom can be expected.
But, overall, while the market has certainly turned almost as bearish as we were back in 2015, I still do not see this drop as projecting to below $1,000 in gold as so many now believe.