More Bullish Signals

I believe the market action over the past week was quite significant due to the break out we experienced in silver. This latest action provides further support for the potential that a long term bottom has been struck in this complex. So, while more evidence seems to amass that the long term bull market in the metals complex has returned, it does not mean that a pullback cannot be seen over the next several weeks.

Last weekend, the market presented us with a possible set up in silver which could take us to lower lows. Silver was the last hold out in the charts to suggest that the long term bottom may have been struck. However, with the move through the 16.18 level, it has significantly increased the potential that its final lows have been seen, and has now joined the GDX and GLD charts in very bullish structures off the lows. In fact, it now matches the GDX chart in bullish potential.

The primary question on my charts right now are a matter of bullish degree. While I still view the potential for lower lows as not inconsequential, and being at approximately 35%, I still am waiting for the next break out to provide higher probability confirmation that the long term bottom has been struck.

For those that have been with us at for a number of years, you will know of the
“BUY BUY BUY” box which marked the recent lows in this market. Since we began this rally, I have tried to present a secondary “buy box” for the wave ii pullback. While I am still hopeful that we see a retracement back down to that region, there is potential that the market may not pull back that deeply, which I will explain. You see, when the metals are in a very bullish posture, they do not provide much in the way of pullbacks, which causes those that have missed the bottom to chase once they recognize the market as passed them by.

Moreover, when our team of analysts which runs our model miner’s portfolio at reviewed the charts of our individual miner’s holdings, we see strong evidence of this more immediate bullish perspective, especially since most of our picks have outperformed the GDX. So, I am going to maintain an open mind over the next few weeks, and will update you as soon as I see strong evidence of any of the perspectives I am about to present.

I am going to use the GDX count as my primary guide (which is also supported by the silver chart), and juxtapose that against the GLD chart, which suggests the bigger wave ii is still in progress.

In both the GDX and silver charts, I still need the market to make higher highs in order to take me to a much more immediately bullish i-ii, 1-2 count. For now, we only have a clear 3 waves up, especially in the GDX, which tells me that, if no higher high is made, we only have a b-wave top in an expanded wave ii. For now, that is how it is being labeled, which means that is my primary count as I write this today. However, should the market make a higher high, and complete another 5 wave structure off the last lows, then my primary count will become the more bullish i-ii, 1-2, as shown now in blue, with my alternative count then viewing that high as the top of a larger wave i. And, again, the same perspective will be taken in silver.

But, in the GLD, the rally we have seen of late is really looking corrective, which suggests that wave ii is still ongoing. The recent smaller degree rally we have seen is likely only the b-wave of wave ii, which matches both silver and GDX, but if another rally is seen in GLD, I am going to consider that a larger b-wave of wave ii, with a c-wave down still to be expected.

So, after going through all the Elliott Wave analysis above, what it comes down to is that I still think we will have at least several more weeks before we can consider the market as completing its corrective action before the next major break out may be seen. So, I am going to maintain some amount of patience so we can develop a much clearer understanding as to how the micro count will play out so we can ascertain if we are still in wave ii, or if we are in a more bullishly aggressive i-ii, 1-2 already.

The relevant level to watch is 17.10 level in silver, as a break out through that level will suggest we are in the heart of wave iii higher, with an ultimate target for all 5 waves up in the 21/22 region. And, in the GDX, a break out over 26 suggests we are likely heading to 40. But, I am simply noting these levels to watch, as my primary expectation is that we will still need more downside consolidation before the market will be ready to break out.

Lastly, I want to reiterate that I still do NOT have “confirmation” that the bottom has been struck. While I am still at an estimated 65% probability that the bottom has been struck, the potential for a lower low is not inconsequential at an estimated 35%. It will take the break out in the next 1-2 set up to confirm that the long term bottom is likely in and take my percentage of probability to 80%+.


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