first majestic silver

2015 Was The Year Of Insanity In The Metals Market

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
January 6, 2016

gold bars and coinsThey say that insanity is doing the same thing over and over, but expecting a different result.  So, according to this definition, this 4+ year correction has clearly afflicted this market with a bout of insanity, and much of it has culminated in 2015.  So, do you want to join the insanity, or rise above it?

Let’s start with an example of a recent 2016 metals prediction I just read:

Forecasting today's volatile, high-frequency machine driven and manipulated futures markets using fundamental analysis is futile, as a great many precious metals bulls will attest. To complicate matters, an obsession with Fed policy dominates all markets. Officials at the Federal Reserve are often less than forthcoming and are just as bumbling as the Soviet bureaucrats when it comes to centrally planning our economy.

Nevertheless, beneath all of the artificial influences and all of the leveraged paper, the gears of the physical market for gold and silver still turn. We can be sure prices will reflect actual supply and demand for physical metals at some point, even if we do not know when. With that in mind, here is a look ahead to 2016.

So, please allow me to highlight the key points:

1 – The metals are manipulated

 2 – Fundamentals have meant nothing

 3 – The Fed controls the market

And, they then conclude the second paragraph with saying that they have no clue as to how the market works or will finally bottom.  Yet, they proceed to provide their 2016 prediction anyway. But, based upon what?  Yes, that’s right.  They base their prediction on the same fundamentals which they noted in the first paragraph have not worked for over 4 years.

I then read another prediction article which began as follows:

After looking over all the figures, it seems as if something broke in the U.S. Silver Market this year. By that, I mean the normal supply and demand forces no longer make sense.

Yes, something is broken indeed and something certainly does not make sense . . . but I can assure you it is not the metals market.  I read articles like these, and I simply want to scream.  Is this what has become of analysis in the metals market? 

The presumption with which all these “insane” perspectives begin is that fundamentals control this market.  This is the reason behind their failure.   

As I have said so many times over the last 4 years, fundamentals do not control this market.  And, anyone that has attempted to trade or invest in this market based upon fundamentals has felt nothing but pain.

Yes, yes, I know what you are all thinking:  “Eventually, fundamentals will control.”  This is exactly what the article quoted above noted too, even though it claimed that following fundamentals is “futile.”  But, isn’t that the same as saying that “much of the time, fundamentals don’t control the market.”

And, if fundamentals only control sometimes, does it not mean that they really are not in control at all? So, when the metals move in line with your fundamental perspective then it is just coincident with the fundamental perspective and not controlled thereby.  If they really controlled the market, then they would ALWAYS control the market and not just sometimes.  If you are honest with yourself, that is the logical conclusion to which you must come.

This is why you have never heard me analyze the metals by referencing fundamentals, and you never will.  Rather, the technicals have guided us quite well.  Now, I am not going to claim that we have been perfect over the last 4+ years during this corrective action.  The nature of corrective action is quite variable, and is not easily predicted.  But, I can confidently state that we have done better than most in this market.  In fact, our Miners Trading Service at, run by Larry White, had total returns in 2015 exceeding 400%.  And, I can assure you that Larry did not use a single “fundamental” perspective when earning those returns.

From a technical perspective, the metals have a lower low still likely to be seen before we can call the end to this 4+ year correction. Moreover, the set-up is in place for us to head down to those lower lows post-haste.  And, that set up is most clearly seen in the GDX chart. 

As long as the GDX remains below 13.90, we have an impulsive structure in place to head down below 12.  While the set-up is not ideal, since it relies upon a leading diagonal down for wave (i), I still have to recognize the potential as long as we remain below 13.90.  But, if we take out 13.90 resistance, then it opens the door to a more protracted corrective rally before the final lows are struck.

Both silver and GLD also have a similar type of set up.  And, if they follow through on a standard impulsive structure, both are projected to levels a little lower than the “ideal” targets we set for the final low in this market over 3 years ago.  I have highlighted the target regions on the smaller degree charts attached below.

I don’t think it will take us long to know if we are heading down to those lower targets sooner rather than later.  In fact, we will probably know Monday or Tuesday of the upcoming week if our immediate downside impulsive patterns will follow through.  Either the heart of the wave 3 down will take hold quite immediately, or the market will likely break this downside set-up.  There is not much more room for the market to hesitate if it is going to head down in the current set-up sooner rather than later.

See charts illustrating the wave counts on the GLD, GDX, and YI at

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: [email protected].

Gold is still being mined and refined at the rate of almost 2,600 tonnes per year.
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