There has still not been much change to my perspective (which is based on Elliott Wave
analysis) in the metals for several weeks now. It seems as though the micro alternative count in the metals is playing out, where the bottom to the a-wave of wave v of 3 completed this past week in the Mini Silver Futures Contract, whereas the SPDR Gold Shares
(NYSEARCA:GLD) still has an impulsive structure to the downside, which would make this rise a c-wave in a wave 2 retrace. So, my primary expectation of the metals seeing another low remains.
That would mean that the rise we saw on Friday was the b-wave rise in silver. Ordinarily, b-waves retrace to the .618 level of wave a, which in silver is the 22.53 region, which is just above the level silver stopped on Friday. Clearly, it can retrace to higher levels as well, but the .618 is usually strong resistance, which is why silver was unable to power its way though it on Friday on its first try.
But, in all cases, as long as silver remains below 23.05 and GLD below 137.62, I am still expecting lower levels to be seen in both. The target region for GLD is in the 124.75-127 region, and silver will likely see a 19/20 handle, with a strong support region in the 19.60 region.
And, as I said last week
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.
So, if the market does exceed the cited resistance levels above, we will likely be in the larger degree fourth wave. Please manage your positions appropriately in this potential whipsaw region.
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.