first majestic silver

Metals Market May Still Have More Surprises

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

First published Sat Jul 2 for members:   Since 2013, many have called me a gold hater.  Many have even claimed that I was a shill for the “manipulators” to provide some smoke and mirrors as to why gold was going down.  Many have continually claimed that Elliott Wave does not work, and that the only reason I was accurate in my predictions was because I had inside information from the manipulators.  But, this past week, and for the first time in many years, someone actually called me a “gold bug.”  Ah, the winds of change are in the air.  Maybe Elliott Wave analysis will become universally accepted next?  Yeah, I know . . .now I am dreaming.

For those that have followed me long enough, you will know that I care not for titles in a market, nor do I care about what other people think.  Rather, my primary focus is to maintain on the correct side of the market.  It also matters not to me whether others believe that Elliott Wave works.   The last 5 years has proven quite well that it does.  It has kept us on the correct side of the metals market (up and down) in excess of 75% of the time, while others have “struggled,” and I am being kind with that classification. Our Elliott Wave analysis got us out at the highs in 2011, back in at the lows just over half a year ago, and called most of the twists and turns along the way down.

The Elliott Wave structure presented this past week on silver is a prime example of how one can have advance warning of a significant price move, and even target where that price move is headed in a very accurate manner. 

Last weekend, my update was entitled “On The Cusp Of A Major Break Out.”  And, the silver market certainly delivered.  As I noted in our mid-week update (before the price explosion), “my expectation is a continued move higher towards the 19.85 region for wave iii of (iii) of 3.” For those that always look to find fault and take me to task, yes, I know, we exceeded my target by 11 cents.

As far as silver is concerned, we have now passed the “point-of-recognition,” as outlined by Robert Prechter.  This is the point in time where traders begin to take notice that shorting the chart is not advisable, as they “recognize” that the chart now has serious upside momentum.  This is the point in time where short covering propels price higher, along with those that have been left behind who begin to chase.  From an Elliott Wave perspective, this is the heart of the 3rd wave.  As I explained last week:

Remember, what will tell us that this is the heart of a 3rd wave, rather than a fake out, is a massive volume move higher, with sideways consolidations and strong upside follow through.  Third wave action is often breathtaking, and, for most, “unbelievable.”  Some will even view it as almost “impossible.”  But, it forces the shorts to cover, and those not already positioned on the long side to chase.  This is the point of recognition which powers the market up during one of its strongest phases within a 5 wave structure.  

And, with the largest weekly upside move seen in years (over $2.00 and 13%), silver has provided us with a strong break out confirmation, and it has done so with above average volume.  As long as silver does not give back this point of recognition, and continues in its long term expectations presented on the attached daily chart, we may not see that region again, as you can see from the daily chart price projections.

However, while price did rise this week in GDX and GLD, I am not YET as enthused.  You see, volume should be confirming the break out in the heart of a 3rd wave, and I just don’t see the volume I should be seeing at this point in time in GLD and GDX. 

Yet, as I have noted before, 3rd waves often see many price gaps as they move through their point of recognition, which means that most of the move occurs overnight, and daytime volume does not always confirm in those instances.  Thus far, since the pullback low in May in GDX and GLD, we have seen 4 upside gaps in price.  While I cannot confirm the move through volume, the gaps are strong indications of 3rd wave action. 

But, the structure tells me that GLD “should” provide some catch-up price action if it is now going to confirm its heart of a 3rd wave, with a strong break out over 129.  For GLD to catch up in wave structure to both GDX and silver, it “should” see a strong imminent move up to the 137 region.  But, for now, GLD is lagging in its wave count relative to GDX and silver and is the last issue I am having with this complex.  This lagging in GLD does give me some reason to still remain a bit cautious.  But, it also gives us a potential opportunity if GLD will now play catch up.

Last week I addressed why the COT reports and direction of the dollar should not deter one from looking higher in the metals.  This week, I am going to address all those that now look at the technicals and believe “we must pullback since we are overbought.”

Again, I go back to why I believe Elliott Wave analysis provides a much better picture of the market than standard technical analysis.  When the RSI, Slow Stochastics, MACD, or any other indicator you chose to use reaches extreme levels, one assumes that this should be a turning point in the market in the opposite direction.   However, when you understand the dynamics of how a market moves through the Elliott Wave structure, you understand that technicals are supposed to become extreme during the 3rd wave, and remain at those extreme levels until we come to the conclusion of the heart of the 3rd wave.  It is only when we reach the 5th wave in the 3rd wave do we begin to see divergences.  And, even at that point, the market still has higher to go, but will usually rest before it resumes its trek higher. 

So, if anyone is looking at the “overbought” nature of the metals market right now and are considering shorting, I suggest you wait for a break of support before you enter a short side trade.  From my experience, I see shorts as additional fuel for a continued metals run and it would take a break of support for me to consider otherwise.

As far as probabilities are concerned, the action in silver this past week, along with the break out through 28 in GDX, takes the probabilities that the lows are in for the complex up to 70% for me.  I will await the strong break out over 129 in GLD to take those percentages up to 75% next.  A strong, high volume break out through 129 in GLD should make the “lower low” crowd join the chase, and provide us with similar price action in GLD as we have recently seen in silver.

A little over two years ago, I began to prepare our members that the metals complex will see a generational buying opportunity in the region of our long term blue box targets (which were finally struck at the end of 2015 and early 2016).  In fact, I noted that we will likely turn out more millionaires from our retail trader clients than potentially any other site on the internet.  And, even though we have been very conservative in our perspective and trades until the long term bottom has been confirmed, we have now received dozens of notes from members thanking us as they hit their million-dollar mark over the last month.  And, we have likely only just begun.

The reason I say this is because there are still many people in the market who have missed this run higher.  But, if we are correct, we are looking at many more years in what we believe will be a multi-decade bull market in metals and miners. And, since markets do not go in only one direction (just ask those that were extremely bullish in September 2011), there will be pullbacks and consolidations along the way. 

As you can see from the daily GDX and silver charts, should we continue in this larger degree 5 wave structure off the lows, our first major correction/consolidation seems to be scheduled for early 2017.  That will likely be your last long term opportunity to enter the market.  So, if there is anyone out there who is looking for the next major buying opportunity that may be setting up as your chance.  Remember, markets and sentiment move in waves, and not just in one direction. 

See charts illustrating the wave counts on the GDX, GLD 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].

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