first majestic silver

The Market Correction In Metals Is Long In The Tooth But Not Likely Over

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
December 23, 2015

gold stackFor the last five months, the miners have basically oscillated within the same general region, while the metals have made lower lows.  But none of the charts seem to have completed their respective downside structures. 

I think we have all been worn to the nub and are quite tired of these back and forth machinations.  I know I certainly am quite tired of the corrective patterns we have been enduring for the last few months.  But, unfortunately, this is our lot in life until the market choses to make its way to its final lows. So, until the market is able to move up through the lows made in early 2015 in impulsive fashion, we are likely going to see lower lows before we complete this long term correction.

Since before we even topped in 2011, I had been warning that this correction could take us back down towards the $1,000 level, and can even drop as deeply as the $700 region before it is over.  As it stands right now, I am having a hard time seeing any set up which will break the $1,000 level based upon the patterns as they are currently structured.  However, there is a strong Fibonacci retracement target region between the $875-900 region should we break the $1,000 region, with the one below it in the $700 region. 

Yet, my feeling is that if we really do break the $1,000 region it will likely be within an “over-emotional” event, as I have noted before, and that can develop into a waterfall-like event that takes us to our extreme lower target below. So, I am personally saving some amount of “dry-powder” to deploy in that event, or will use it to buy a wave ii retracement once the bull market resumes in 2016 if we do not reach those extreme lower lows.  But, for now, it is hard for me to see any set up that will actually break the $1,000 level, which will likely surprise most market participants since it seems the majority are waiting for that break down below $1,000 to buy into the market.  It is for this reason that I believe that it will either not happen, or the break will be significant and scare many of those waiting to buy below $1,000 from actually buying as it heads down to the “over-emotional” level near $700.

As for the smaller degree patterns, they are truly quite messy.  As I noted last weekend:

From a micro-count perspective, if the metals and miners are not lower on Monday, and immediately on their way to breaking the lows they made on Friday, we are likely heading up much higher in a larger corrective manner. This means any certain bottom call will not be made until 2016.  In fact, this has happened for the last 3 years, where, each time, the metals have had the opportunity to complete this long term correction going into the end of the year, and, each time, they have chosen to prolong it by avoiding a final decline to complete their immediate bottoming pattern.  It is almost like the metals have been teasing us.

So, with the market dropping this past Monday morning, and continuing lower this past week, it has kept alive the potential that the final low can still be seen in 2015.  But, due to the pattern structure, any final low, if seen, will likely be struck in the form of an ending diagonal.  However, such diagonal pattern still needs further up/down machinations into the end of the year, and still needs to take us to lows below the ones struck this past week before we can consider it complete. 

The relevant levels of initial resistance to watch are the 103.30 level in GLD, 14.35 in silver, and the 14.25 level in GDX.  Should all those levels be broken, then it becomes much more likely that a corrective rally will take this complex higher before the set up to the final lows are seen. And, should the market continue higher into the end of the year, then we are likely not going to complete this final decline in 2015, as any rally into the end of the year would be suggestive of the market still being within a corrective pattern which will set up those lower lows into early 2016.

And, please remember, even if we do see those lower lows over the next two weeks, it still means the market must confirm those lower lows as the final lows (and the resumption of the bull market) with a larger degree impulsive rally off those lows.  But, one thing I want to point out is that I am seeing that what many consider as some of the smartest money in the world has begun to move back into this sector.  So, you may want to consider your longer term perspective in this market as we move into 2016, which should see the resumption of this long term bull market.

See charts illustrating the wave counts on the GLD, GDX and YI at https://www.elliottwavetrader.net/scharts/Charts-on-GDX-GLD-YI-201512201016.html .

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, 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].


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