From yesterday afternoon:
Cause For Concern and Caution In The Metals Complex
By Avi
For the last few months, we have been tracking a potential bullish set up in the metals complex. But, I have been warning that the set up has been looking less than ideal. To see two 2nd wave pullbacks drop as deeply as seen in GDX is not normally indicative of a very bullish structure. So, while I have been tracking it, I had maintained a certain amount of skepticism.
And, this week, with the market having the opportunity to prove that it will begin a heart of a 3rd wave to the upside, we broke back below our pivot on Friday, which makes the potential for a standard impulsive rally much less likely.
While I do not have anything to be bearish about YET, the market may still resurrect and continue higher in some form of diagonal rally structure. But, the problem with diagonals is that they are less predictable than standard Fibonacci Pinball structures. Therefore, they are not as easy to trade.
As of yet, I have not reason to be bearish. However, if I see a 5-wave decline completed in GDX, then I will likely be buying hedges on the corrective bounce thereafter as it would signal a change of trend, and another leg lower to be seen in the chart. But, for now, I have not been given any reason to be bearish yet, even though the ideal bullish structure has likely been broken.
What is interesting is that although GDX broke back below its pivot, both silver and gold retained solid consolidations that can keep pressure to the upside. But, I must remind you that silver began this rally with less than an ideal structure as well, as its initial move off the December low counts best as a 3-wave structure. So, I am viewing silver with a bit of healthy skepticism as well.
For now, I am still going to track the impulsive potential structure in silver. Moreover, I have moved our pivot up, as we should not be seeing below that pivot box if the market has an intention of completing the next 5-wave rally structure, as outlined on my 144-minute chart. Any break down at this time would be a very strong warning to the bulls, and will have me looking for a short set up.
The GLD chart is a bit of a hybrid of the GDX and silver. And, while I do not see a 5-wave decline having completed, we have yet to take out the micro pivot.
Overall, I am disappointed in the action in GDX this past week. It had a wonderful opportunity to provide us with a massive upside set up, but has since broken below the pivot and only left us with diagonal potential which is much harder to trade from a smaller degree perspective. While silver is still looking good in this current rally, its initial move off the lows really counts best as a 3-wave structure. And, GLD seems to be lagging a bit. This leads me to thoughts of concern about the sustainability of this rally. So, I am going to be much more cautious in the coming weeks. But, I want to reiterate again that, for now, I have not been given a reason to be outright bearish yet.
