The metals market is an extremely emotional one. The highs and lows you see with metals traders are evident at each of the extremes. I think we are now approaching another extreme.

Several months ago, back in early June, I notified those willing to listen that gold was preparing to “take off like a rocket-ship.” To my members of ElliottWaveTrader.net, I outlined my expectations for a strong rally to the 137 region, followed by a continued move to the 143/45 region before we see a larger consolidation. Thus far, the market has been reacting as generally expected.

In my last public metals article, I noted that the market was not providing us any signs that a bottom has been struck just yet. Rather, the rally we experienced in October was quite overlapping and did not satisfy my need to see a 5-wave rally to confirm that a bottom has already been struck.

So, in the last week of October, GLD provided us with a small degree 5-wave decline. That provided us advance warning that the next bout of weakness in the metals complex was setting up. To that end, on October 30th, I let our members know that I was preparing for a decline in GLD with an ideal target in the 133-135 region, and was buying puts on GLD for that potential move. This was when GLD was hovering just below the 143 resistance I had cited multiple times in our trading room.

At this point in time, we are approaching my ideal target region.

But, what really amazes me is how bearish many have now become of the metals. I am reading many posts, blogs and articles which are starting to view this as a “fake rally.” Yet, I don’t think the structure of the metals market is supportive of that perspective.

The rally we have experienced over the last year has been quite impulsive looking, whereas the pullbacks have been quite corrective looking. This is exactly how a bull market should behave.

Therefore, as long as GLD remains over the 130/131 support region (and ideally over 133), my next target region is the 157-161 region.

But, before I am willing to trade that next rally aggressively, I am going to wait for the market to provide us with a clear 5-wave structure off a low I expect to be struck over the coming week or two. Once that 5-wave structure completes, I will be preparing an aggressive trade posture for the next larger degree rally phase I expect.

In the meantime, I am looking for a local bottom to be struck in our gold price forecast over the coming week or two, and followed by a 5-wave rally off that low. That will then put us on warning to prepare for the next major rally phase over the coming months.

Lastly, the next time we see a 5-wave structure rally breaking us up through the 139.50/140 resistance region will be the first indication that the next rally phase has likely begun.

For those that would like to understand this methodology a bit better, please feel free to read through the six-part series I penned on ElliottWaveTrader, which explains my methodology from the theoretical and technical perspectives.

See chart illustrating Avi's wave counts on the GLD.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.

© 2019 Copyright Avi Gilburt - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.