Bulls are running wild when it comes to the metals. Everyone seems so convinced that the multiyear lows are in place. I have never heard so many people discussing an inverted head-and-shoulders pattern as much as I have been hearing it when it comes to gold. But, as we know, when most of the market sees and believes in one thing, that is rarely what transpires.
So, does that mean I am immediately bearish on the metals? No, I truly cannot say that. As I have been saying for weeks now, if the 119/120 region in the SPDR Gold Shares
(NYSEARCA:GLD) maintains support, it can launch us as high as the 145 region. However, I am not convinced yet that we are headed that high.
There are two main reasons why I am not yet convinced. First, we still have a very bearish pattern in the Mini Silver Futures Contract, which counts as a 1-2 to the downside. It would mean this rally is a c-wave of the wave 2. Second, and what also supports the first reason, is that the buying volume on this rally was relatively low. It is also for this reason that I do not believe that the low
in the metals has yet been seen, especially since we do not have a completed pattern to the downside.
However, if the metals were able to pull back correctively over the next week, and then see silver take out the 23.55 level and GLD take out the 133 level, then I would be on board for a rally that can potentially take the metals over the highs seen in September. In fact, the ideal target region for GLD would be the 145 region, whereas silver would likely head towards the low 27 region. But, again, I will need the metals to prove this to me over the next week or so before I can be more confident of this potential. So, I am still suggesting caution to all those trading the metals in this region.
And, lastly, I am going to continually remind those that are in this sector for the long haul, pullbacks down into regions below $20 in silver are to be considered buying opportunities for the long term.
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.
Position in SLV LEAPS and GLD.