First published Sat Oct 1 for members of ElliottWaveTrader.net: This past week, I have been sent several “stories” that the dollar is going to absolutely “crash” on September 30th, which will supposedly cause metals to rally to the moon and beyond. And, as I have noted in my Trading Room oh so often, we have had so many such “stories” in the past, and we will no doubt have many more in the future. But, “stories” are not what drive the market, despite the common erroneous belief to the contrary, as the sky did not fall this past week, and neither did the dollar.
Then we had further “stories” of Deutsche Bank crashing and taking the world financial markets down with it. And, once again, all the “safe haven” gold addicts were harping about how gold was going to soar on this news. While more and more bad news was coming out about Deutsche Bank this past week, more and more were calling for not only the collapse of the company, but also a crash to the markets and a moon shot for gold.
However, not only did our StockWaves analysts at Elliottwavetrader.net call for a low of 11.18 to set up a rally in the Deutsche Bank stock, but our fractal/quant analyst Victor Nguyen issued a “daily buy” at the same bottoming region, just as everyone else in the market was expecting it to crash further. The stock then bottomed at 11.19 (yes, one penny off our analysts’ target), and saw an 18.5% rally off that low. But, the more amazing part of this analysis was this region was targeted by our analysts back in February of 2016. Yes, you heard me right.
(As an aside, we have no confirmation that a long lasting bottom has yet been struck in DB stock, so caution is still warranted until such confirmation is seen).
You see, news is often the worst at bottoms, and best at tops. And, just as everyone “buys” into the extreme negativity of the news, as we so often see, it causes most of the market to be looking the wrong way exactly when the market is just about to turn in the opposite direction.
But, more importantly, take note that gold had no legs at all despite its supposed “safe haven” status. I mean, if the world financial system was on the verge of collapse, why did gold have no wind at its back? Again, this is just another example of how gold is not the “safe haven” to which so many point.
Gold is an asset which responds to its own market sentiment just like any other asset. And, if the market sentiment for gold itself is not ripe for it to go to the moon, then it ain’t goin no-where, no matter what the news of the day is in other parts of the market. Have we not learned enough from QE3?
Lastly, I want to remind you that if you are one of the many who are erroneously looking to the dollar for a cue on the metals, I would suggest you look to the metals charts for the cue on the metals. We have seen many times this year alone where the dollar and the metals rallied together, or even fell together. To rely on an inverse relationship to make your trade can put on the wrong side of the trade.
As far as the actual charts are concerned, I still see nothing that suggests this correction has run its course. Yet, every time the market provides even the slightest rally, many in the market begin getting overly bullish. Yet, many of the sentiment readings I have been seeing in the metals are dropping to levels approaching that which can propel us into the heart of the 3rd wave higher. But, I still think there is room lower in those sentiment readings before a final bottom is struck.
In our charts we have been tracking a b-wave triangle in the GDX and silver, with the potential for the GLD to develop into one as well. With last week’s rally, one could argue that the (e) wave of the triangle completed. But, I have some doubts.
You see, a triangle usually has at least one wave which develops as a complex structure. Thus far, I would classify the initial stages of the triangle as rather simple, one directional moves, which means that we still have not seen the complex structure one “normally” sees within the triangle. This makes it most likely that if we are going to see a complex wave in this triangle, the (e) wave is the only wave left to take this form. So, as long as the lows of last week are not breached, then we may yet see one more wave higher as a c-wave within the (e) wave of this triangle, thus completing this triangle.
So, I will suggest that the market may yet see one more rally before we head to the lower lows to complete the correction which began in August. While it is certainly not necessary, it would seem that it would fill out the triangle more fully, and provide us with the one complex wave ordinarily seen within triangles.
But, as I have pointed out so many times before, there really is nothing of high probability that one can rely upon within the micro-waves of corrective action. That is what makes trading corrective action so treacherous. Yet, at the same time, there is no bullish set up that I am able to identify, which tells me that the ultimate resolution of this pattern will likely be lower, but more whipsaw can still be seen over the coming week.
As far as immediate support levels to watch, last week’s low in GDX and silver are quite important to the continuation of the b-wave triangle. But, ultimately, the line in the sand for me resides at 123.75 in GLD, 25.35 in GDX, and 18.60 in silver. A break below these levels provide us with a high probability signal that we are within our final drop to complete this correction in the metals complex. But, as long as we remain over those levels, we may continue to see whipsaw before those final lows are struck in the coming weeks.
See charts illustrating the wave counts on the GDX, GLD and Silver (YI).
