by Avi Gilburt, ElliottWaveTrader.net
First published Sat Oct 15 for members of ElliottWaveTrader.net: We have many analysts and commenters posting many different perspectives on the metals for years. Some view them as a terrible investment and others view it as the only reasonable investment. I am not going to discuss the merits or fallacies contained in both of their perspectives, but I would like to simplify the potential in the complex for the average investor.
You see, this complex is not that complex at all. Sentiment is what controls this market, and when sentiment reaches an extreme, the market shifts in the opposite direction. That is what we are patiently awaiting at this time.
Currently, our wave structure suggests that we can see one more lower low to complete a 5th wave in a c-wave of this wave ii pullback. While I certainly can be wrong in this assessment, this is my higher probability wave count at this time. And, as long as we remain over support, I will maintain this count and expectation.
But, I will note the potential for more whipsaw in the coming week. While I would like to be strongly viewing us as having started the drop to lower lows to complete this correction, the drop we have seen towards the end of the week is overlapping and within a 3-wave structure. This would likely suggest that either wave iv has not yet completed, and the market will provide us with one more swing higher to complete a larger wave iv, or we are heading to those lower lows within an ending diagonal pattern. And, at the time of my writing this update, I cannot say that I am swayed by either of these potentials.
In simplest terms, as long as the metals remain below Friday’s spike high, the pressure remains down, and we can continue lower to complete wave V in what will likely be an ending diagonal. However, if we are able to move through Friday’s spike high, then wave IV is likely going to extend, and push this correction out until the end of October.
And, as I noted last weekend, as long as we remain below the larger resistance regions noted on the attached charts, I am looking for that one more lower low. In my humble opinion, this is a buying opportunity for investors. For as long as we hold over the larger degree support (ex. 19.80GDX), I view this as a bull market. It would take a break of that bigger support to shake my conviction.
In conclusion, I would like to repost something I posted in our Trading Room on October 9th, as I think it is the appropriate way to approach this market from a risk/reward perspective, no matter what your inclination:
Folks . . where the GDX stands right now is not difficult. This is REALLY very simple. If we are REALLY bullish, we will hold the 19.80 region, and head to 60 . . . if we break 19, then it opens the door to a potential lower low. This is not brain science, but just risk/reward analysis . .. nothing more, nothing less. If you chose to ignore the upside for whatever reason, you lose a HUGE opportunity that CANNOT be gotten back. But, if you get stopped out, then you get to buy at MUCH lower levels and you have not lost anything other than a few points. REALLY SIMPLE when you break it down.
See charts illustrating the wave counts on the GDX, GLD and Silver (YI).
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (http://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.
