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Silver and Gold Top Not Confirmed Yet


It seems that being a metals bull has come into vogue again, but it may be premature to declare that a new bull market is upon us.

It seems that being a metals bull has come into vogue again. Everywhere I look, all the former bullish analysts have gotten all "bulled up" once again, and I have even seen some new analysts move into this arena declaring the end to the bear market in the metals.

One analyst, who seems to be a relative newcomer to the metals world on Seeking Alpha, is even calling for up to a 20% rise in the upcoming week in gold, which tells me sentiment is clearly getting way ahead of itself. Even on Stocktwits, bullish sentiment has risen over 80%. But, I think they may all be a bit premature in declaring the new bull is upon us.

Before the equity markets began heading down this week -- which is what our pattern work called for -- I noted to expect the old perspective about metals to be dusted off and marched out to market participants.  Yes, the old "metals are a safe haven" perspective is back and better than ever. This is simply because the metals have gone up while the market has gone down. But, wasn't this expected to happen based upon their separate sentiment patterns and not due to some correlation?

This past week, the SPDR Gold Shares (NYSEARCA:GLD) hit my target region quite perfectly.  In fact, the 133.50 level is the 1.618 extension off the last lows in GLD.  While this is normally the extension target for a third wave, based on my firm's Elliott Wave analysis, we really do have enough waves in place to consider this pattern complete. And, that alone is something that should tell anyone who is bullish on metals that something is askew. Since when do metals hit standard extensions, much less the 1.618 extension for all of a 5 wave move?  It truly signals to me that GLD is much weaker than it should be as when metals are truly bullish, they always extend beyond the standard extensions.  Think about the last time you remember when metals hit standard extension either up or down. It hasn't occurred often.

As for silver, it has been a lackluster week for sure.  On Thursday (March 13), I noted a lotto trade for Friday in my firm's trading room, which gave us a very nice pop, as expected, into Friday morning.  However, the main reason I suggested to sell that at the open was because not only did GLD hit its target near the open, the pattern in silver was not suggestive of immediate upside follow-through on Friday.

At this time, it is clear to me that silver and GLD have two different patterns. If both are still bullish, then GLD will pull back no lower than 128 in a wave 4 (the 1.00 extension) -- based upon Fib Pinball -- and the Mini Silver Futures Contract should not pull back lower than 20.75, for a wave ii in a 5th wave, with the high on Friday being wave i of a leading diagonal for the 5th wave.  If GLD holds support, then we will next target the 134.75 level (1.764 extension) to the 136.75 level (2.00 extension) in a 5th wave, and complete the c-wave of its larger degree 4th wave.  If silver holds support, I am still looking for the 22.50-23 region.

However, as I have said many times before, I still believe lower lows will be seen, which means that the expected decline towards those lower lows can begin at any time.  In fact, as you can see on the silver chart, the pattern is already potentially completed, along with a possible i-ii setup in the other direction.  So, again, anyone who is attempting to trade for higher levels in the metals over the next two weeks must know they are taking on a significant risk based on my larger views of the metals pattern.  As for a downside trigger, a break down below GLD 128 will be my first indication we are heading down to lower lows.

As for my larger-degree expectations, I still foresee the 90-100 region to be targeted for GLD's final lows, while silver will likely still see a 16-17 handle.  If we do break the 16 region in silver and head down into the 11-14 region, then this would make me look at this three-year pullback in silver as a larger degree wave 2, which means wave 3 should be upon in the not too distant future, with targets in excess of 100.  However, if this is going to be a 5th wave in silver rather than a 3rd wave, we may not exceed 100.  In GLD, my minimum target on the upside will be the 245 region, which corresponds to the next resistance region in the 200-year Elliott Wave and Fibonacci Pinball study I did three years ago.

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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