What Does Today’s “Pop” Mean?

I know everyone gets so excited when the see the metals rally, but not all rallies are positive.  Some rallies are purely corrective.  And, that is what seems to be the case in the GLD.

Before the market shot up, I sent out an alert than noted that the downtrend channel suggested that resistance is around the 124.50 region, which is exactly where the spike stopped cold in its tracks.  As you can see from the attached 8-minute GLD chart, we are still stuck in that downtrend.  Moreover, it really looks like we only had an a-b-c rally off yesterday’s low, which also is indicative of this being a corrective rally.  So, unless we can see some form of impulsive structure taking us through the 125 region, I have to assume we will see another loop down before this c-wave of (2) completes. 

But, again, this does not mean I am bearish of the GLD.  Rather, the larger degree chart is still pointing much higher.  Yet, we need to see the next break out set up develop before we can get more excited.

But, I must say that silver did have what looks to be a micro 5 wave structure off yesterday’s low.  In fact, if you remember yesterday’s update, I noted that the 144-minute MACD has signaled impending rallies on this chart successfully almost 100% of the time.  And, even with yesterday’s deeper drop, we retained that positive divergence, which portended today’s rally.  If the next pullback is corrective, then we have a chance at heading higher to complete wave I in green.

As far as GDX is concerned, I am sorry to say that there is nothing clear I can yet glean out of the GDX.  But, if I had to be forced to pick one count over the other, I would almost have to give the yellow count a slight edge for now.  And, that is purely because I am still looking for a wave (ii) pullback in ABX.

So, based upon much of what we are seeing, I cannot say that the weight of evidence yet suggests that we are ready to break out.  Rather, it seems there is still going to be some pullback and consolidation left to be seen before the market likely sets up another break out set up.  While silver can certainly take the lead here and move higher to complete wave I in green, I am not as confident that GLD or GDX is yet ready to follow.