Metals Market Signaling Lower

While we were watching intently to see if the market was going to take advantage of a further bullish set up this past week, when it broke support, it made it clear that we have likely topped in wave i off the recent lows. However, I have to note that silver has a very uncertain 5 wave structure off the lows, which is why I posted that I was shorting it on Tuesday, with a stop at 16.05. 

In fact, by the end of the week, we can even see a 5 wave structure off the recent highs in silver, which is suggestive of the potential that silver can very well see a lower low. This means that silver may finally strike our long term ideal target at 12.75.

However, the GLD and the GDX do not have similar set ups which are quite as clear as we see in silver. So, while I have noted that I see the probability that GLD and GDX have bottomed at approximately 65%, I cannot say that silver is greater than 50% at this time.

And, while I still expect to see lower levels in the metals and miners in the coming weeks, I think we are approaching a bounce, which “should” only be a corrective bounce, setting us up for further declines.

I want to take a moment to make something very clear. Approximately two weeks ago, I noted in our Trading Room at Elliottwavetrader.net that I was starting to hedge my long term positions in mining stocks, as it seemed as though we were topping in wave i off the lows. And, last week, I noted that I would exit those hedges if the market was going to prove its more immediate bullish intent with a move through 22.25. But, I also noted many times that I am unwilling to aggressively short the market.  So, I faced a very reasonable question as to why I shorted silver this past week.

The answer is quite simple. After we have made a lot of money shorting the metals and miners for the last 4 years, our primary perspective maintains that most of the charts in this complex have seen a long term bottom in place, with a lower probability potential that one more lower low may be seen.  This means that we have moved from focusing on the downside in the market to the upside in the market.