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Technical Analysis: Silver and Gold Positioned Quite Bearishly

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Many people want to believe metals are about to skyrocket, but the charts are telling a different story.

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I know so many people want to believe -- and some even have a strong "feeling" -- that the metals are about to skyrocket. But, I must tell you, the chart is telling a very different story at this time. Of course, gold and silver may take out resistance, but it is looking less and less likely as each day goes by, especially since the rally up has been based upon an initial 3 wave beginning, per Elliott Wave Theory. Such a move is corrective in nature, and usually does not set us up for a breakout but rather a breakdown.

So, right now, I can keep this rather simple. My primary count has us moving up in a wave 2 of a larger degree c-wave. Resistance for that wave 2 in the Mini Silver Futures Contract is between 22.25 and 22.60. Assuming we stay below that region, my next lower target is 19.90 region. A breakdown below 19.60 would likely invalidate the potential for a larger degree b-wave bottom, and have us targeting the 17.76 region next.

Resistance for wave 2 in the SPDR Gold Shares (NYSEARCA:GLD) is 130.50-131.75. Assuming we stay below that region, my next lower target is the 121-123 region. A break of that region opens a trap door, as my next lower target is down in the 112 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.

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