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Don't Get Too Bullish on Silver and Gold Just Yet

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My primary expectation at this time is that another low will likely be seen into the fall.

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With the breakout over resistance cited last week, the metals gave us a negligible wave ii retracement in this c-wave, which was more evident in the SPDR Gold Shares (NYSEARCA:GLD) than it was in the Mini Silver Futures Contract. As I have warned over and over, when silver gets into a bullish pattern, it often does not provide a pullback for an appropriate entry. And this is exactly what we have seen over this past week.

In fact, when you look at the silver chart, it is simply a straight line up, and has almost no discernible pullbacks upon which to base a count. However, while my statement last weekend (that, according to Elliott Wave Theory, silver was completing its wave i in the c-wave) is still applicable, the wave ii was almost unnoticeable as silver simply pushed higher, and is likely in the heart of its third wave of this c-wave higher at this time.

As for GLD, it seems we have a bit better structure. But, as I always say, until we have a clearly defined wave 1 and 2 in the metals, it is sometimes a bit more difficult to pin the count down during an impulsive move. The count I have been working with is that the last larger pullback to the 123 region was a b-wave of a larger degree wave 4, and we are now within the third wave of a c-wave. As long as GLD maintains over 127, then I am expecting we move towards the 134.50-136.25 region to complete the wave 3 of wave iii of c, and as long as we maintain support on the pullback over the 131 region, my expectation would be that we will approach the 142 region. There is significant confluence in that region, as that is where c=1.236*a, it is the 1.00 extension down in this larger impulsive wave down, as well as the 2.00 extension for the c-wave.

As for silver, as long as it can move through the 24 region, and not break down below the 21.70 region (and preferably maintain support over 22.50), then I believe we can target the 25-27 region we have been so long awaiting for a wave 4 corrective rally.

Now, I would like to take you all back to a point in time last year, when silver rallied almost $10 between June and September in what seemed like a parabolic move. Everyone and their mother thought I was crazy for maintaining a count that called that a corrective rally. And, the reason I called it a corrective rally was that the start of that rally lacked an impulsive beginning. Well, here we are a year later, and I find myself in the exact same scenario. We have the possibility that silver will again rally almost $10 off its low, and many have become bullish on the metals once again. And I may again be the lone voice looking for as high as the 27 region, only to be followed by a decline to a minimum target of the 17.75 region, since the start of the rally was not a clear 5 wave structure.

However, I will remain open to the possibility that the move off the last lows was a leading diagonal, but it would mean that we need to see a third wave up into our target region, followed by a fourth wave consolidation and fifth wave to new highs. But, my primary expectation at this time is that another low will likely be seen into the fall.

See charts illustrating wave counts on silver and gold at 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.

Read more:

Bears Finally Have Their Day

Stuck in the Middle

Déjà Vu?
Positions in GLD, SLV.
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