by Avi Gilburt, ElliottWaveTrader.net
First published Sat Mar 4 for members of ElliottWaveTrader.net: Three weeks ago, as the GDX was consolidating just below its .764 extension, the market had a clear set up to break out. However, when it did not do so over the following week, I noted in our trading room at Elliottwavetrader.net that I was hedging my portfolio because when a market has an opportunity to break out, and chooses not to do so, the market is often signaling it wants to pullback before the actual break out. This seems to be the path the market has now taken.
In the past, I have noted that when the metals complex is in a larger bullish posture, I will always look towards the more bullish of the patterns as my primary, because experience has taught me this market often leaves people behind with shallow retracements:
“. . . based upon the larger degree perspective, with seeing 5 waves up from the 2015 lows, and then another 5 waves up from the December 2016 lows, I am on the hunt for the heart of a 3rd wave in this complex. When we are looking for a heart of a 3rd wave to take hold, they OFTEN do not provide much in the way of pullbacks. For that reason, I have always defaulted to a more immediate break-out scenario potential, since, otherwise, you can be left in the “dust” (pun intended), wondering where your pullback went.
Along those lines, the market has been consolidating near the highs for quite some time now. And, as I noted last week, when the market has made a number of attempts to break out, and is unable, it often falls back into more of a correction, in order to take another running start at the heart of the 3rd wave. So, with the inability to break out when it had a break out set up last week, I noted towards the end of the week that I would be hedging my account in consideration of that potential, and while we were still right at the highs.