Silver May Try To Drive This Train
By
Avi Gilburt
As I posted yesterday, silver MAY be trying to set up a break out sooner rather than later. Let me reiterate that set up.
“If you have been following my silver chart, you would know that we have been developing a potential 1-2 structure within a wave [3] of [iii]. And, with today’s low, we have potentially completed a c-wave as an ending diagonal within wave 2.
Again, I cannot say that this is a high probability set up just yet, as both the GDX and GLD seem to need a pullback. But, just looking at silver, if we see another 5-wave rally for wave i, followed by a corrective wave ii pullback, and then break back out over the high of wave I, well, that will likely trigger this melt-up set up.”
I have added an 8-minute chart to my silver analysis, and I have outlined what we need to see in order for us to prepare for a major break out in silver. As you can see, we will need to see silver hold the micro pivot on that chart, and complete waves [iii],[iv], and [v] for wave i of [3] of [iii] to put us on break out alert. We would then want to see a corrective pullback in wave ii, followed by a break out over the main pivot overhead. This will likely signal the heart of a 3rd wave rally, which should be pointing us north of 40 over the coming weeks and months.
But, again, right now, this is not confirmed. We really need to see the set up develop as outlined before we begin to trade the upside more aggressively.
Now, should silver actually provide us with this set up, it may mean that we do not see much of a pullback in GDX or GLD. This is why I have added the blue count in GDX, as we may see more of a direct path higher in wave [5] of 3 in GDX. Again, I cannot say that this is my primary count right now, as the pullback seems to be a bit more reasonable still, but that is on a very tight leash right now. And, it is for this reason that I have said many times over that I hold my main positions through this bull market and will only buy protective hedges at points in time when the market could pullback. For now, I am still expecting a pullback, so I am still retaining those protective puts for a bit longer.
Now, for GLD to continue to rally alongside silver – IF it chooses that route, I have notated the 60-minute GLD chart with that potential as the alt1-2, alt i-ii in blue. But, again, I cannot foresee this as the highest probability at this time, as it would represent a VERY tiny wave 2 followed by a tiny wave ii, which is really not what we usually see. So, again, this is really something that MUST prove itself.
Ultimately, I think the predominance of the evidence still suggests that a pullback should be seen. And, as long as that pullback is corrective, then the yellow count remains at the back of the our plans. But, should silver actually follow through with its set up and then trigger that set up, then we will likely have a more direct move higher in all the charts a lot sooner than I expect.
Yet, even if we do see such a direct break out, I want to reiterate two points. First, once we get to the target on the daily GDX chart, I still intend on significantly lightening my load of mining stocks, which were initially bought back in the last quarter of 2015. I can always re-enter positions after a major pullback but I will never be able to sell those highs if that is all we get in those stocks. Moreover, I will be letting the individual mining stock charts drive my decisions, so you may want to check out the analysis for the individual stocks you own in our Metals, Mining and Agriculture (MMA) on EWT to help you in that process.
Second, even if we do continue higher in a more direct fashion, I still foresee one more major correction to be seen (wave [4] in GLD, as an example), with one more major rally to come in wave [5] before this decade long bull market completes.
In the meantime, to summarize, I am going to give the market one more opportunity over the coming days to prove it will provide us with a pullback, but I am going to keep that on a short leash at this time. To that end, I am still retaining my protective puts. And, depending on how silver reacts in the coming days, I may choose to switch to a more direct break out scenario in silver, with a continuation move in GDX and GLD rather than more of a deeper pullback. For now, that is an alternative.
