Can Silver See A Lower Low Without Gold and GDX?
In short, the answer to the question in the title is “yes.” And, since we have different pattern potentials in the different segments of the market, we may have to analyze them separately this week.
I want to begin by reminding you of the process we need to follow to determine that a long term bottom has been struck:
From an Elliott Wave perspective, we look for several qualifications to determine a long-term correction has completed, and a bull market has resumed.
First, we need to see the decline complete a full 5 wave structure for the c-wave of the correction.
Second need to see this corrective structure complete into a target region, as calculation via Fibonacci mathematics.
Third, we need to see a 5 wave rally off the bottoming region low.
Fourth, after the 5 wave rally has completed, we need to see a corrective 3 wave pullback into a target region as calculated by Fibonacci mathematics.
Fifth, to place us very strongly back into the bull market, the market must then rally over the high of the initial 5 wave structure off the bottom. This will suggest that the bull market has begun, at least from a high probability perspective.
Right now, neither silver, nor gold nor GDX have confirmed long-term bottoms in place based upon this 5 step process. But, this past week, silver has placed itself in jeopardy of heading to lower lows in the setup it developed. So, let’s start with silver.
For weeks we have been looking towards the 16 level as the point silver could be seen as breaking out. However, silver came right up to the line, but could not muster the strength to push forward. This past week, we saw silver break below our support of 14.80, which clearly is not a positive development.
However, what we also know about silver is that it is the most volatile of the metals and often likes to come on strong from behind. You see, silver is the Secretariat of the metals world.
So, as the market developed more of its structure over the week, I noted that the 14.55 level is a 1.00 extension off the top and the seemingly last line of support that may hold which can support one more attempt to push through the 16 region for silver. That same level is also the 50DMA on my silver futures chart, which would provide support beyond the Fibonacci extension.
At the same time, I can potentially even view silver as being within an impulsive structure to the downside, which would point towards as low as the bottom of our target box at 12.75. So, if silver does break the 14.55 level in the coming week, we could see silver on its way to striking a lower low.
GLD is rather simple in the bigger picture but more difficult on the micro scale. While the smaller degree pattern is looking rather corrective since we struck our recent highs in early February. Our main support in the GLD resides in the 113 region, which can still support a 4th wave flat in the GLD. However, the decline in what would be a c-wave of 4 is not terribly impulsive looking so we may not get that low. Ultimately, as long as we remain over the 113 level, I will be looking for a 5th wave higher towards the 125 region in the GLD. However, if we are able to see a sustained break of the 113 level before 5 waves up completes, it opens the door to a lower low in the GLD.
GDX is actually positioned much like the GLD at this point in time. Very simply, as long as the GDX remains over the 17 support region, which was formerly resistance, I am going to expect one more rally to a 5th wave high, ideally towards the 23 region, but minimally to the 21 region.
As you can see from the daily chart, we have a very bullish (i)(ii) set up, which was very close to completing wave (ii) as of Friday’s close. While I can certainly see more downside follow through as the pattern did not truly look completed from a micro perspective, a strong move through 19, with follow through over 19.35 should have us looking higher in our 5th wave.
Upper support for GDX is between 17.75-18.50, whereas lower support is at 17.05. Again, as long as support holds, I am looking for a 5th wave to higher highs.
See charts illustrating the wave counts on the GDX, GLD and YI at.
Feb 27, 2016
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&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.