GOLD & SILVER
Well, it seems as gold and silver have carved out another bullish possibility of late. However, over the last 4 months, we have seen many bullish possibilities, all of which ended with invalidation of the bullish pattern. Will this one be the same?
Starting with Gold, the GLD has never broken down below its December 2011 low as silver has. Furthermore, it has been coiling in this potential bullish pattern for over a month now. So, it seems it is a do-or-die time for this metal. The first thing we will need to see if a break out over the 157 level, which would take it through the declining trend line, with confirmation coming on a move through the 159 region on large buying volume. If we do see such a move, then my target would become the 164.50-166 region for wave iii of (3).
I want to also note that the internal Fibonacci extensions at multiple wave degrees provide very nice overlapping confluence with the higher noted targets on the GLD chart. Although not conclusive, this does lend more support to this bullish set up. Also, note that green wave 3 is just on the chart for illustrative purposes, as its target are actually much higher, with the 1.618 extension around the 190 region.
Again, a break down below 150, which is then confirmed by a drop through 158 will place the 143 region back on my radar screen as the next primary target.
In silver, the 13 minute chart I have been presenting does give us a clearer impulsive count to the upside as compared to the count we have seen to the downside since the top was hit last week, which I mentioned I was shorting in our Trading Room.
Although there are several ways to count this decline since that last top, it does seem to be more corrective than impulsive. The manner in which I have it labeled has an a=c calculation into the low, which is just below the .618 retracement of the prior rally. Although we like to see a retracement to this level for a wave 2, when silver is truly in a bullish posture, it rarely pulls back below the .382 retracement, so this deep pullback should have us looking at this pattern with some question.
Nevertheless, if silver can now begin a very strong rally supported by large buying volume, then we may have confirmation of the bullish count following through. Ideally, we would like to see a rally take us up to the 32/33 region, at which point, we can look for a larger position to buy into the market on the ensuing consolidation/pullback.
In my mind, the key levels of resistance that will have to be broken through will initially be the 28.40 region, which is the last high and the 50DMA on the daily futures chart, and then the 29.25 levels. Once those two levels are broken through, then we may actually have a bullish pattern on our hands.
Hope remains eternal within the metals market!!