For several weeks we've been waiting for a clearer indication as to the next larger move in the metals, and I think the market may have tipped its hand this past week.
In the most bearish setup I can see via Elliott Wave analysis, we are about to embark upon a wave (3) of iii of 3 – the heart of a third wave – down. In this setup, and using the SPDR Gold Shares
(NYSEARCA:GLD) as our continued proxy, as long as it remains below 128.30, and preferably below 126.30, we should be set up to break below 119 support quite hard. As you may remember, that is our signal that the 112 region will be our next likely target, on our way down to the 98 region.
However, if we are unable to break 119, or if we are able to move over the 128.30 region, it means that something else within this larger corrective wave action is playing out. Although the rally setup towards the 140s is much less likely at this point in time, it has not been invalidated in GLD, whereas silver has taken the immediate potential pattern for this move off the table. So, again, I am not seeing the potential setup right now for the 140s as the most likely outcome, especially as long as we remain below 128.30.
In summary, we are still left watching the 126.30, 128.30, and 131.50 resistance regions, along with the 119 support region to trigger our next big move in the metals. And, until 131.50 or 119 is broken, we may still get that b-wave triangle play out through the month of November.
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.
Positions in GLD, SLV LEAPS.