Last weekend, I stated that if the market was going to hit higher highs, it was going to have to maintain the current pattern off the lows. Specifically, I stated
I do want to note that a breakdown below the lows we hit last week would make me much more immediately bearish at this time, and move me into the alternative counts that the metals have topped in their respecting 4th waves. This would be confirmed with a breakdown in the SPDR Gold Shares (NYSEARCA:GLD) below 130 and in the Mini Silver Futures Contract below 22.25.
The breakdown of last week’s lows clearly opened the door to this decline, which was something I expected. This is why I was stating that I was buying shorts at the prior highs, and if we did get a further high, I would have simply added to those shorts. But, due to the nature of corrective action in the metals, I really do not like to take chances.
As it stands now, many are looking at this chart
in the way that I have labeled the alternative count. Note the slight modification I have made to the support region for silver in this count, as I am now using the region between the .764-.618 retracements as the primary region of support, which is a little lower than it was earlier this past week.
But more importantly, please watch the MACD on the 144-minute charts in the upcoming week. Currently, it is attempting to set up a positive divergence for the next drop, which I expect early this upcoming week. While that can be a wave v, as labeled in the alternative count, I think there is an equally compelling possibility that we may only have a 1-2, i-ii set-up in a larger c-wave down for a 5th wave in the metals, which can take us much, much lower, and potentially even lower than our next target region (the 17.76 region). And, in GLD, once we break down below the cited support box on the chart, my minimum target is still the 112 region, with the potential that we may even see levels 10 points lower than that.
Therefore, if you are trading metals over the next week, I would be watching all these charts very carefully for any and all indications as to whether the blue boxes will be holding, which can launch the metals into a larger c-wave higher. But my primary inclination is that any bounce from the boxes will likely only be a corrective bounce as labeled in the GLD chart in the yellow, which will simply set up lower levels that I think can be hit quite soon. But, as you know, I will maintain an open mind, especially in the metals, as it can be quite painful to be on the wrong side of this trade.
See charts illustrating wave counts on silver and gold here
Editor's note: Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD, and VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.
Yellow Wave (3) or Green Wave IV?
Nearing Topping Target
Author is long SLV LEAPS with an intermediate-term hedge.