Metals Trying To Make A Decision

With the further decline this week, the market is trying to make a decision as to whether this pullback will remain relatively shallow, or if we are going to see a deeper pullback in the coming days.  

Starting with silver, I have tried to outline my view in an alert I posted in the trading rooms yesterday:

“I am going to resign myself to two counts as I have run through the rest and I think these are the two most likely at this point in time.  But, take note that I am counting the last moves up last month as an extension to wave (1).  Therefore, I am viewing this as wave [2], so it is one degree lower than I had before.  

But, it really does not change the parameters I have presented in the 8 minute chart.  Should we break down below 30, then the pivot is going to be the BIG key.  If we break down below the pivot and follow through below 30, then as long as we remain below the pivot, then we are in the yellow alternative.  Should the market break back over the pivot in impulsive fashion before breaking down below 29.15, then I am going to be moving into the (1)(2) as a strong primary count. 

So, to sum this up, as long as we remain over 30, then I am going to stay with the wave (2).  Should we break down below 30, then I have to apply the yellow count, UNLESS the market recovers back over the pivot in impulsive fashion.”

Ultimately, the question is if the market can break down below the pivot, and then remain below the pivot on the bounce thereafter.   That would be the yellow count pointing down to the 26-27 region.   However, if the market maintains high support or breaks down below the pivot but then comes back up through the pivot in impulsive fashion, then we have the green count.  And, right now, while it looks like we are trying to bottom in the green [2], I have no 5 wave structure off the low making this the much higher probability.

When I look at NEM – as my proxy for GDX – it also looks like it is trying to bottom in its wave [2], especially based upon the MACD.  Yet, I am still looking for a 5-wave rally off a bottom to confirm this.  Until that happens, then pressure can still remain down in its yellow count as well, but that c-wave may be an ending diagonal.

In GLD, the MACD on the 60-minute chart is trying to provide us with a bottoming sign with positive divergences.  But, as with NEM and silver, we still have no clear indications that a bottom has indeed been struck, which is a 5-wave rally off a low.

So, while there is potential for the market to bottom out sooner rather than later, I still have no clear evidence that this is indeed the case.  And, until such time, I am going to remain somewhat protective.