Looking For A Metals Rally To Begin
By Avi
My premise in many of the charts I have been tracking is that we needed a bigger 2nd wave pullback before we can expect any major break out to sustain. And, this past week, the market seems to have obliged. So, let’s look at each chart separately, as there are some nuanced differences I would like to highlight.
I want to start by reviewing the GDXJ chart. I do not normally cover this chart, but when it provides a clearer picture, I will lean into its structure for guidance. Since we bottomed back in late September, I noted that I was able to count a relatively nice 5-wave rally structure off that low. Moreover, as the market rallied to a higher high over the high of wave [i], I was outlining my view that the rally counted best as a corrective b-wave in an expanded wave [ii] flat. And, as of today, I am clearly of the same opinion, as the market has followed through almost perfectly on my expectation, despite much bullishness abound at the b-wave high.
In fact, within this c-wave decline that I expected, the market provided us with a nice smaller degree 4th wave bounce which caused the MACD to rally, and provide us with a positive divergence set up. That means that the MACD rallied off its lows, and did not strike a lower low even though price struck a lower low. That usually signifies the 5-wave of the c-wave in this set up, and tells me to be on the lookout for an impulsive rally off the low to suggest the next rally phase has likely begun. But, for now, we clearly have enough waves in place to suggest that wave [ii] has completed, as I patiently await the next impulsive rally to take hold.
To date, I have been viewing the GDX a bit differently and potentially one wave degree ahead of GDXJ. But, as of today, I am going to adopt the same count as I have been tracking in the GDXJ for the GDX. That means that I am now viewing the current decline as a c-wave in expanded wave [ii] flat, similar to the GDXJ.
And, when we take a peek over at silver, it has also solidified the potential wave [2] pullback I have been seeking in that chart as well. This lines all these charts up with just about completing 2nd wave pullbacks.
What this now means is that we should all be on the lookout for an impending impulsive rally which will set up the break out I have been patiently awaiting in order to add aggressive long positions. I still need to see a 5-wave rally off these 2nd wave pullbacks, followed by a corrective pullback to a higher low, thereafter followed by a break out. That break out is where I add aggressive long positions, and set stops at the secondary higher low. And, should the break out indeed be the 3rd wave I am expecting, then it will not take much time until we are able to raise our stops to lock in profits.
Moreover, once we get the next i-ii structure developed, I will provide targets for the rally I expect upon the next break out.
In the meantime, the one chart that does seem to be a bit ahead in its wave count is gold. So, I am still abiding by the 60-minute GLD chart attached below, and suggesting that a break out over the pivot will set the pivot as our new support, with an ideal target for the next major rally structure pointing to at least the 217 region in 2022.
So, in summary, if my current count is correct, we should be bottoming out in the metals charts quite imminently, and beginning an impulsive rally off those lows. If that is indeed what we see in the coming weeks, then we will begin to prepare for a major rally to take hold in the metals complex, and I will begin to provide upside target for all our charts once we have this current 2nd wave pullback confirmed as completed.
Lastly, I want to remind you again that until we get the break out set up I am seeking and outlining above, it is unwise to take an aggressive posture in the metals complex. Experience has taught me that once can patiently wait for the break out set up in order to lower the risk, even though you may not garner as much profit. But, based upon the manner in which metals run during ta 3rd wave, there is plenty of profit to garner even if you patiently await the appropriate low risk set up. That is what keeps you out of trouble in the metals complex.
