Precious metals have finally given us a breakdown, and my primary expectation, according to Elliott Wave
analysis, remains the same: It is most likely that this decline is a wave v of 3.
But, one of the most difficult things to analyze is how to distinguish where an ending diagonal for a fifth wave of a third wave has ended and where a fourth wave has begun. The reason is that since both are overlapping patterns, it makes distinguishing between the two extremely difficult.
So, ideally, if the Mini Silver Futures Contract maintains below 22.83, then I will maintain we are in the c-wave down, with the potential to drop to the 19.80 region. Alternatively, this could simply be just the a-wave of the wave v of 3, which means that I will not be able to view the larger wave 3 as complete until silver takes out the 23.05 level. A move over 23.05 will tell me we are in the larger wave 4 already.
As for the SPDR Gold Shares
(NYSEARCA:GLD), it must maintain below 137.62 for me to view this as wave v of 3, with targets remaining between the 124.75-127 region.
Although my larger degree count is still calling for one more corrective rally before a final drop later this year, I will still be adding to long-term positions on this drop, as well as intermediate-term long positions. This is not only due to the wave count we have on the table, but the technicals on the daily chart are providing us some ridiculously bullish positive divergence at this time in the RSI and the MACD. So, when this larger rally does begin, it will be extraordinarily powerful, in my humble opinion.
See charts illustrating wave counts on silver and gold here
Editor's note: Avi Gilburt is author of ElliottWaveTrader.net, a live trading room and member forum focusing on Elliott Wave market analysis. Avi emphasizes a comprehensive reading of charts and wave counts that is free of personal bias or predisposition. His Elliott Wave analysis appears frequently on several financial news sites.
No positions in stocks mentioned.