Silver and Gold: I Really Want to Look Up

For the last several weeks, I have provided you, and, sometimes even entertained you, with my perspective of a very evil pattern to play out in the metals. Such a pattern was supposed to test the 2014’s lows (and potentially even break them), and then rally to the 2015 highs to set up the final decline to the lower lows to end the 3+ year correction in silver.

So far, we have tested the 2014 low in GLD (within 10 cents), broken the 2014 lows in GDXJ, but have come up short in silver and the GDX. So, there has been some amount of inconsistency between the different charts. And, unfortunately, that inconsistency continues as of the close on Friday. In fact, while GDX and GLD look relatively similar at this time, GDXJ and silver appear quite different from those charts.

But, before I begin the analysis of all the charts, I want to state something very clearly, as I have already been asked this 5 times just at the end of the day on Friday: NO, I DO NOT THINK THAT THE FINAL LOW IN THE METALS OR MINERS HAS BEEN SEEN YET. However, I still remain net long this complex, and intend on being fully hedged by the time this rally completes. I have noted my plan, along with regions I will be adding to my hedges, in the trading room at and in my live video this past week.

Now, I am going to start this discussion by saying that I do not believe anyone should be aggressively shorting the metals at this time. There is nothing to suggest any impending strong decline, but a pullback is certainly possible.

Starting with the GDXJ – which was pointed out to me by Larry White, our miners analyst at - it seems to be a clear 3 wave move higher. And, with the after-hours spike seen on this chart on March 11, it puts further questions as to which wave degree this is if it is even an impulse – iii of 3, or all of 3 . . . or even a c-wave within a bigger a-wave. But, it is clearly only 3 waves off the lows as of the end of the day on Friday. So, either this is going to be an a-wave of some bigger rally, and drop down early next week, or this is going to continue higher for a full 5 waves. There is no way to know at this point in time. This is the biggest issue we face within corrective rallies. If this was going to be an impulsive pattern for certain, then there would be no question in my mind that I would need to expect higher early next week.

As we move over to the GDX and GLD, these, too, have questionable patterns off the lows. There are several 3 wave structures, which suggest they could be leading diagonals, or an a-wave of a larger corrective pattern higher. They, too, could continue higher to complete a bigger 5 wave structure.

As for silver, I have the same issue, as it could have completed a 5 wave structure, with an extended 5th wave in a wave 1 off the lows, or just completed the 5th wave in an extended 3rd. The bigger issue with silver is, should it continue higher for a wave 1 off the lows, it would suggest that that 20 region may not contain a full 5 waves off the lows. And when I look at the relative targets I have for GDX and GLD, as compared to silver, it just does not seem to line up from a relative perspective . . that is, unless GDX and GLD will fall way short of their target, or silver will exceed its ideal target by several dollars.

After trying to make consistent sense of this sector through the various patterns, part of me almost wishes that they all drop to a marginally lower low to reset the rally I was expecting, since, at this time, there are too many inconsistencies for me to provide very specific direction. But, “hoping” for another drop is not something that I suggest anyone even consider trading upon. Rather, silver certainly suggests that a bottom is in place – even though it would be somewhat truncated.

In conclusion, much of what I am seeing suggests that I should be looking higher now in metals. All the clues seem to point to the local bottom (not “THE” bottom) being in place – for now. However, I still do not have a solid wave structure upon which I can confidently trade around and will await more information from the market in the upcoming week. As soon as more of the pattern fills in, I will send out a Market Update during the week to all subscribers.

And, yes, the metals are still quite evil. Please don’t EVER forget that, at least until we see our final bottom in this market. Something tells me that the metals have something even more evil in store for us than I can even conceive.


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