We have been moving higher in gold and silver, as expected since
we broke resistance, and I still think we will see even higher
levels yet. However, I am now seeing a difference between the
various metals charts I am viewing.
When I look at the daily silver chart -- the Mini Silver Futures
Contract -- and even compare it to the June-September rally last
year, I can see silver heading much higher, and potentially still
as high as the 26-27 region. However, when I look at the smaller
time frame of the 144-minute chart, and especially in the
SPDR Gold Shares
(NYSEARCA:GLD), I am seeing a top that can potentially occur
earlier than expected, which does get me a bit more cautious. But,
again, the daily silver chart is looking extremely bullish to me at
this time, and if I were just reading that chart, I would think we
could still see maybe another two or even three weeks of rally in
silver, with maybe a week or so of that time being a larger degree
4th wave in this c-wave, according to Elliott Wave Theory.
But, because of the GLD charts signaling some caution, I am going
to suggest that those who are trading this rally with shorter-term
options consider taking their profits on the lower targets I
present in the analysis below. There is no reason to let those
profits go to waste. So, yes, I am suggesting to many of you to
consider playing this move up a bit safer at this time, and allow a
4th wave corrective pullback to develop before re-entering for a
potential 5th wave.
When I look at the GLD chart, the pattern seems to indicate that we
are in the 5th wave of the wave iii of the c-wave. This means that
this c-wave may not extend as high as we had initially expected,
and we may actually top in GLD 138.50 region, which is where a=c.
In fact, the 3rd wave of wave iii did not even reach the 1.00
extension of the c-wave Fibonacci Pinball level, which tells me
that gold is not quite as strong as many believe. And, as for
support, any break down now below 130 (the top of wave i of the
c-wave) opens the door to a much larger decline which can still
target at least the 112 region.
As for silver, this current pattern seems to be targeting the
24.55-24.76 region. The question is whether this will represent the
top of wave iii, or all of this corrective rally. When I look at
the daily technicals, there are no signs of a market top at this
time. The RSI and the Slow Stochastics are embedded, and the MACD
is still pointing up, which are all signals of us still being in
the 3rd wave of this c-wave.
In fact, if we compare the pattern in the RSI to that of the
June-September rally last year, we almost doubled the amount of
rally that has been seen thus far in that time frame. This would
still keep us on target to hit the 26-27 region within the next few
weeks. However, due the smaller time frame pattern, I am going to
suggest exiting your shorter term long positions as we move into
the 24.55-24.76 region, and allow the market to prove to us that it
is wants to consolidate in a multiple-day (maybe even week long)
wave iv before re-entering for a wave v rally. A breakdown below
the 22.20 level would indicate to me that the trap door may be
opening and having us target the 17.75 level next.
What is most interesting is that GLD does not present nearly as
strong as silver. The negative divergences we are seeing in GLD
relative to the a-wave (which are not seen in silver) are actually
quite surprising, and explains why gold is not performing as well
as silver on a relative basis. In fact, silver can continue to
outperform GLD, which may be why I can see GLD topping well below a
potential top in silver, from a relative perspective.
And, as you may recall, many of you were shocked when I announced
at the end of June that I was no longer hedged in silver on my
LEAPS. At this time, I will sell my shorter term calls and begin to
layer in hedges as we move into the 24.55-24.76 region (assuming we
do not see any clear extensions). But, at the same time, if we see
an adequate wave iv, I will then re-enter shorter time frame longs
for a wave v - which can still take us to the 26-27 region, and
begin to add further hedges after the 3rd wave of that wave v
begins to complete.
See charts illustrating wave counts on silver and gold
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
Is This Wave IV?
Trying to Complete 5 Waves Down