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Elliott Wave: Putting the Precious Metals Short on a Short Leash


We likely have a very simple pattern in front of us in the metals, and we can forget any expectations for a big drop to begin immediately.

When we use Elliott Wave analysis, it does not provide us with guaranteed setups, but it does provide us with very strong clues as to what the market's next move will be.

At this point in time, I think we have a very simple pattern in front of us, and as I noted toward the end of last week, I am now at the end of my rope with my expectations for a big drop to begin immediately.  There are only so many 1's and 2's I am willing to accept in a pattern before I need to see the market begin the heart of the 3rd wave down.  I am now just about at that point in the SPDR Gold Shares (NYSEARCA:GLD).

If you review both charts, you will likely see that my current count has us in wave ii of wave 3 of (iii) of III. And, as you review the 8 minute chart, you will see that we are in the c-wave of that wave ii, which should still provide us with a small move higher.  But, I am unable to accept any further move higher than that if this market is truly set up to kick off wave 3 of (iii) of III.

So, as you can see, either the market is going to take this opportunity to drop hard to the 119 region next for wave 3 of (iii) of III, or it is going to invalidate this setup by moving through 126 for a larger degree yellow wave ii, as seen on the 144-minute chart.

As for silver, I am going to maintain the same micro count at this time, except that I am going to try to maintain the ending diagonal potential for the bigger 5 wave move down.  That means we are now in a 1-2 set up in a c-wave of its wave III down.  This pattern maintains silver's potential to remain over the 16 region in the Mini Silver Futures Contract.

However, should we see it follow through in the same way as GLD, then it truly opens the door to the 11-14 region we have discussed in the past.  But, again, that makes this pullback a likely wave 2 of larger degree, and sets us up for a major wave 3, which is calculated to take silver well over 100.  So, although there would be more pain to those that have held their long positions, the upside potential becomes that much greater into the future.

See chart illustrating wave counts on gold and silver here.

Editor's note: Avi Gilburt is author of, 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.

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Position in SLV LEAPS and GLD
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