First published on Sun Sep 3 for members: While the metals refused to offer much in the way of a pullback last week, they sure did provide us some nice sideways consolidations. In fact, they held support almost to the penny, and then continued higher on Friday (Sep 1).
And, while everyone seems so skittish to be bullish, the metals are still setting up to leave the station with many disbelievers watching on the sidelines. But, as I noted in my trading room this past week (of (Aug 28-Sep1), “In metals, you may get scared, you may freak out, you may lose your mind . . . but as long as support holds, there is no reason to lose your position.”
Allow me to show you what I mean from the example of our trading support and resistance over the prior week using the GDX. Once the GDX broke out, I put out a chart showing the support we then had to hold to keep pressure to the upside (GDX1). Moreover, I even highlighted the next target should support hold. In GDX2, you will see that the market held the top part of the support box, and then continued to our higher target, and even slightly exceeded our target by a few cents. So, in GDX3, I raised our support region to point to where I thought the market will likely pull back after striking our target.
Well, for the next two days the market tested our support region, the initial test shown in GDX4, wherein I added our next target for the smaller degree move. And, as we can see in GDX5, the GDX rallied to our next target on Friday, before beginning another pullback, as expected, during the rest of the day on Friday. And, we basically had the same tracking we did on a micro basis with the GLD all week, as it held our noted support in the 124 region.
Thus far, metals have been holding upper support, and not providing the bigger pullback I had ideally wanted to see. So, it does look like the GDX may have left the station.
However, silver is the chart that is still suggestive of a potential pullback, as even in the best-case scenario that I am following, I see it only completing wave i of (3), which means that I am expecting at least a wave ii consolidation/pullback in the coming week or two. In fact, it still has not taken out our resistance box, as it spent most of Friday pushing on the top part of the resistance box.
But, to be honest, most people should not be trying to follow these charts from a micro perspective due to what 2017 has done to the psychology of most investors. Most investors have been trained by the 2017 price action to not believe the metals are able to break out. Everyone seems to be waiting for the next downside shoe to drop, and any small pullback is viewed as the end of the rally. So, my suggestion to those who feel like that is to zoom out and view the market from the larger degree perspective.
As I have been saying since the lows in July, the daily charts are looking incredibly good for upside potential continuation into the fall of 2017. The Elliott Wave patterns are suggestive of significant upside, whereas the technical indicators are supporting that perspective. While that does not preclude another pullback that may be seen over the next two weeks, I would suggest you maintain a larger degree perspective so you are not shaken out if the metals do pullback to support before continuing the rally I expected into the fall.
For this region, I have added a bigger support box on the 8-minute chart, which MUST hold price action or else this rally can potentially fail and head down to lows below those struck in July. We will continually raise this support as we move into the “main event” fight above with the 28 region (discussed below). But, for now, my primary expectation is to see a rally up towards the 26 region, with extensions to the 27 region working out even better for the bigger bullish count.
As far as the GLD is concerned, I really would not want to see it drop below the 124 region. Rather, I would like to see it maintain over 124 and continue to subdivide higher as we head up towards the 130 region next.
Silver is the one chart that is suggestive of a pullback/consolidation in a wave ii, as it seems to be a few wave degrees behind its brethren. So, at this point in time, the yellow count placed on the 144 minute chart seems to be a much lower probability.
Now, let’s move on to the main event, which is presented as the alternative count on the daily GDX chart. Since we have now broken out of the lower consolidation, we are heading higher to test what will be a major turning point in the market. The greatest probability chance that I see this market has in making a low below that seen in July is presented in yellow. That means that the 28 region is going to be the main event “fight” which will decide if this market has truly begun its long term bullish run or not. We will have further confirmation points along the way even higher, but this one will be the main event for 2017. This is the 2017 title bout.
As I have added a market pivot box to the chart, I want to explain that should the market hit the top of the box – or even break through it – it should NEVER break below the bottom of the box again if the long term bull market has truly begun in earnest. That means that once the 28 region is struck, you can simply place your stops at 25, and not worry. Either the market will have begun its long term bull market run to currently unimaginable levels in the coming decade, or you will be stopped out, with an opportunity to re-enter the market in the 17 region. But, before we get ahead of ourselves, I am simply preparing you in advance as to what I will be watching once the 28 region is struck or exceeded.
So, as I have said throughout 2017, I still maintain a bullish bias, but one more pullback/consolidation may still be seen in the coming week or so, as suggested by silver, but silver should then catch up to its brethren. And, later this month, or sometime in October, we will be watching the title bout in this market between the 25 and 28 levels in the GDX.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.