First published on Sunday Nov 19 for members of ElliottWaveTrader.net: While I would love to believe that the rally we saw on Friday is the start of the next larger degree break out in the metals complex for which many have been eagerly awaiting, there are many signs that suggest it is only part of a corrective rally.
As I noted in my update last weekend:
“But, please, do not assume we have struck a bottom and expect that we are now ready to break out simply because we see another rally begin in the coming weeks. The market still has a lot to prove to us, especially since the primary set up we now have on our charts suggest we can see prices that are lower than where we closed on Friday. But, again, I will certainly maintain an open mind depending upon how the next REAL rally takes shape.”
Now, the question that I still maintain in my mind is if this is even the “real rally” that I have been looking for over the last few weeks. And, yes, I am still questioning it.
While my primary expectation has been looking for a larger b-wave rally to take shape in gold and silver, many of the stocks I track in the mining complex do not look ripe for the major break out to begin.
First, I want to focus on the metals. The attached 144-minute silver chart is quite representative of the “mess” we have been experiencing in the metals of late. My primary expectation is that we should see a rally in the metals, but I am still not quite certain if we will see one more spike down before the larger b-wave rally I am expecting takes shape in earnest. Unfortunately, due to the messy structure of late in the charts, I have no high probability perspective that suggests we have begun that rally with the move on Friday. In fact, we still have potential for one more spike down before we are able to strike our targets overhead.
But, I think the bigger perspective is that, whatever rally we see, it seems more likely than not that the rally will only set us up for a c-wave down before the market will be ripe for a break out set up into 2018.
That now brings me to the miners. And, I am going to again begin with the leading miner I watch, the ABX. As I have been noting for the last several weeks, the ABX has not likely bottomed. And, I do not believe that the complex is going to be ready to run when one of the largest holdings in the GDX is not ready to run. It will certainly act as a major weight upon the GDX.
As you can see from my daily chart, I am patiently awaiting a wave iv rally in the ABX. But, the micro structure suggests that we could have one more spike down before wave iii has completed. While it is certainly “possible” that the wave iii ended with a truncated bottom, it would take a move through the 14.20-14.30 region to convince me of that potential. As long as we remain below that resistance region, we can still see one more spike down in wave iii before the wave iv rally takes shape. So, in effect, this is presenting in the same way as I view the metals themselves right now. Again, another reason as to why I have been tracking the ABX a bit more closely of late.
So, for now, I am still looking for a rally to take hold in the overall complex. But, I think the jury is still out as to whether the rally seen on Friday is the start of that move higher, or just a head fake before the real rally takes hold.
And, again, I would like to reiterate that any rally that is seen in the coming weeks will likely be followed by a bout of weakness. I see that weakness as a c-wave down in wave (2) in the metals, which could also be something even a bit more bearish in GDX, depending on whether GDX can exceed the 24 region in impulsive fashion to fill in the yellow count or not. My expectations on GDX is supported by the fact that I do not believe we will be ripe for a GDX break out until the ABX completes its waves iv-v, which suggest the ABX will see a lower low below that created in its current wave iii down. A break out in the ABX through its resistance could change that expectation.
Lastly, anyone who can take a longer term perspective on the metals complex would realize that the market is now giving you one last opportunity to board the train which will likely provide us with an extraordinarily powerful rally which will likely begin in early 2018.
See charts illustrating the wave counts on the Silver (YI), GLD, GDX & ABX.
