Three Paths Before Us
By
Avi Gilburt
As the title noted, we have three paths before us in the metals.
The first path is that this correction is nearly completed with the current downside action. GDX has almost reached its .382 retracement region, which is the top of the support box. Gold is approaching its .500 retracement. And, silver is hovering just below its .382 retracement. So, minimum targets have been met. And, if we see a clearly impulsive rally begin, then we will have to begin focusing on the upside again.
The second path – which for now is my favored – suggests that this completes the initial leg lower. In both gold and silver that would be an (a) wave. But, I also want to remind you that this still could be a path to lower lows as both would be a 5th wave lower low within an ending diagonal taking shape as an (a)(b)(c). And, as long as the next bounce is clearly corrective, then I will remain as this being my favored path.
The third path would be pointing to lower lows across the charts. Whereas gold and silver would present as a 5th wave in an ending diagonal, GDX would present as a 5-wave c-wave decline with an a=c target in the 60 region. What adds a bit more weight to this path is that there is potential for the decline off the recent high to be counted as a 5-wave structure. Of course, (a) waves can also be a 5-wave structure in the minority of circumstances. But, this is one of the reasons for my expectation for a corrective bounce next rather than an impulsive one.
And, unfortunately, we are going to have to take this one step at a time as we proceed and rule out certain paths as we move forward. Of course, the first test is going to be whether the next bounce/rally is corrective or impulsive. For now, I am expecting a corrective bounce leading to another leg lower.
While this is going to be a tricky and uncertain environment as we determine which path is going to be taking us forward before the next major rally in the metals complex, I STRONGLY urge each and every one of you to make YOUR OWN plan as to how you would handle each path. While I am making my own, I think you each have to take ownership of your plan going forward rather than relying on my own. In truth, sometimes I get too busy to be able to engage my optimal plan despite my planning. So, asking me what I am doing at any given time may not be the best path for you. Moreover, I likely have a different risk tolerance than many of you. So, again, I am strongly advising you to make your plans and be able to adjust as we move through the various paths before us.
Ultimately, I believe all three will lead to a major rally in the metals complex. Of course, the BIG question is the depth of the current drop before that next rally begins. And, as I say often, I am a simple analyst and not a prophet.
