Still Not Completely Convinced: Metals
By Avi
I will continue to say it, but the overall view of the metals structure seems to indicate a larger degree bottoming phase. Has that phase completed and the new bull has arrived? Well, I am still struggling with that question.
Let me explain why I am struggling. You see, when we complete a c-wave into a bottom, that c-wave most of the time exhibits as a 5-wave Fibonacci Pinball structure. When it does not, and it provides us something like an ending diagonal into the low, or a corrective w-x-y type of structure, it makes pinpointing a low much more complex. Moreover, since the rallies off the recent lows have not been clearly impulsive either, it certainly adds to the complication of being able to confidently “call” the low.
Therefore, I have reiterated that I am going to need to be a bit more patient, and allow a larger degree 5-wave structure off a low complete, such as a potential leading diagonal in GDX, which we have been tracking. Yet, what adds further to complication is that I do not view leading diagonals as strong and reliable trading/investing signals. So, this leads to my need for further support from the other charts I track. And, to be honest, silver is not exactly blowing it out of the water right now – at least not yet.
Does that mean I am bearish? No. It means I am a bit in the neutral camp and sitting on my hands for now, at least until I see a solid 5-wave rally off the low in the 3 charts I am outlining for you.
Now, gold is doing a very nice job of trying to provide us with a 5-wave structure, as it has broken through its initial resistance region. But, I have been struggling with the appropriate micro count off the low which leads me to a 5-wave structure needing to be completed. So, I have gone to the 8-minute GLD chart to try to simplify my view. While I am still a bit uncertain about the smaller degree wave count, I think the one on the 8-minute chart does look reasonable for now. Moreover, it also aligns rather well with potential we could see in silver if we see a rather immediate break out in silver over its 1.00 extension which has been providing it some trouble this past week.
So, let’s look at the silver chart. Again, I want to stress that it relies upon a very weak leading diagonal potential structure off its recent low, as I highlighted last weekend. And, the fact that we have yet to break out through its 1.00 extension is a bit of a concern. So, if it can break out over the high struck this past week, then we could very well be on our way to complete wave iii of [iii] off the recent low. But, as you can see, there is still a lot of wave structure that has to be completed before I am convinced to buy pullbacks aggressively for the rally I expect in 2023.
Now, GDX seems to be completing its wave [3] of a leading diagonal. Of course, it too can push a bit higher in the coming week. But, we have reached the ideal target for wave [3] in a leading diagonal, which is the 1.236 extension. Yet, it would not at all shock me to see a [3] in a metals chart strike the 1.382 extension. So, I am leaving the door open for all these charts to push higher in the coming week.
But, the one thing that still is not present on all these charts is an initial 5-wave structure off the lows. We have seen this story before, especially over the last several months, with each attempt leading to a failure. I do not know if this one will as well. But, we are tracking the micro counts to make sure we do complete a full 5-waves up off the recent lows in order for us to begin buying pullbacks with confidence.
