When The Facts Change

John Maynard Keynes was once asked why he changed a prognostication they he published months before.  His answer to his questioner was “when the facts change, I change my mind.  What do you do, sir?”

I have seen several people note that they were upset that I have had to change my views on metals recently when the market failed to take advantage of the break out set-up we were tracking a few weeks ago.  Well, my answer to you is that if the market fails to take advantage of a break out set up, there is nothing I can do other than provide you with what that means to me based upon the charts.  I simply cannot force the market to follow through on a set up.

Yet, when the market failed to break out in that former set up, it opened the door to a much bigger decline in furtherance of the consolidation/pullback we have been experiencing for the last year and a half.  And, when you zoom out, you will see that we really have not lost any ground during the last few months of me giving the market the opportunity to break out, as we have been consolidating in the same region now for many months.

But, now we have a downside set up in place.  

Over the weekend, I said that the charts were suggesting we have a bounce to be seen.  And, I want to note that the GLD chart is probably the cleanest of the three I am tracking.  Therefore, I am going to be primarily focusing upon that chart for cues.  In fact, there are issues I have with both the GDX and silver charts, but I am assuming they will fall in line and follow the gold chart.  But, if those charts are able to exceed their November highs (or at least see GDX break out over its January high), then that will likely cancel my immediate, near-term bearish perspective.

In focusing on GLD, we are now getting that wave [ii] bounce I was looking for at the end of last week.   In fact, the ideal target for this wave [ii] bounce is in the 170.50 region, which is the .618 retracement of wave [i] down, and has confluence with multiple targets below.  So, I am looking for a c-wave rally over the coming days to take us to that target.  

But, the next time we break down below the wave [i], that will open a trap door for the metals market.   And, if we continue with a break down below the pivot, then the market steps into that trap door.  If we are unable to move back over the pivot thereafter, well, it keeps pressure down towards the 140 region for this larger pullback in the coming weeks and months.

So, for now, the market is presenting us with a bearish near-term potential.  And, I will always retain an open mind, so if the market shows me some signs of bullish life, then I will certainly inform you.  But, as it stands now, the failure of the prior bullish set up has now opened the door to a more bearish near-term expectation until the market is able to invalidate this set up.