Silver Leading The Way

With silver breaking out over the past week, I think it will likely lead the way in the coming weeks and months. 

As it stands today, I am questioning “how” silver will continue in this current rally.  You see, the standard pattern I would normally expect is for silver to pullback from the market pivot, as it tops in wave i of [3].  And, if we break back below 17.15, that would confirm that perspective for me, which is outlined in the green count on the 144-minute silver chart.

However, if silver is unable to break below 17.15 in the coming days, and instead sees a direct and strong move through the market pivot, it would suggest that we are already moving higher in wave iii of [3], as outlined in the yellow count on the same chart.  So, the next few days will be quite key in telling us how this silver rally progresses over the coming weeks and months.

This brings me to the GDX.  I cannot say that the micro structure is terribly clear in this chart.  GDX had an opportunity to move strongly to our next target in the 40-43 region, but chose to back off from immediately heading to that target.  As you can see from the attached 8-minute chart, I am contemplating two potential ways we can move higher sooner rather than later.  As long as we hold over the 36.30 region, and then break back out over 38, then we are likely back on track for moving directly to the 40+ region sooner rather than later.

However, if we break below 36.30, it opens the door to drop down to the 35.30 region, which would provide us with a wider wave iv of 3, as shown in yellow.  Yet, if the market is unable to hold that level of support, it opens the door for a much larger wave iv pullback, as shown in blue on the daily chart.  That would likely suggest a retest of the 31 region before we begin the move back up towards the 40-43 region.

So, if you are trading short term moves in GDX, please make sure you know your supports and resistance points.

Lastly, the GLD is still a bit of a problem for me.  The rally we are seeing now off the early May low is not the cleanest of impulsive structures, which concerns me about the potential for the altenative yellow count presented on the 60-minute chart.  Yet, should we continue higher sooner rather than later, then the 170/171 region is going to be a very important resistance point for GLD.  If we cannot exceed that resistance region, then we will likely see another larger degree pullback.  However, the next time we exceed that resistance, it opens the door to rally up towards the 190-197 region.

Overall, I still think the best opportunities reside within the silver and miner charts over the coming weeks and months.