The GLD has simply refused to invalidate the bearish potential on the chart, and silver looks simply terrible.
Now, as you are probably sick of hearing from me by now, my ideal pattern still had me looking higher to the 130+ region. In fact, I told you last weekend that I was expecting a test of the 124 region. And tested it we did. The low struck this past week was 124.39, before the market moved higher off that level.
As I also said last week, the pattern with which we dropped into that region “should” give us the clues as to whether we will break down further, or if it is a corrective pullback setting up a move higher to the 130+ region. But, unfortunately, I am unable to provide clarity on this perspective, as the market has not provided it to me. The initial drop off the highs has made it a bit unclear to me at this time, so we will have to leave it up to support and resistance over the next week to light the way.
The bare minimum level which MUST be taken out is the 126.07 level. Below that level, and we have a 1-2, i-ii, (1)-(2) (i)-(ii) set up, which means the market can simply fall away quite strongly at the open on Sunday night. However, if the market is able to move through that level, then the main reason of resistance resides at the 127.10 region. If the market is able to move through that region impulsively, then we can view the market as a 1-2 set up off the b-wave low, and in the heart of a 3rd wave in the c-wave targeting at least the 130.50 level, with the potential to extend to the 133.50 level.
So, while the micro structure is not entirely clear, we have solid guidelines as to what we need to watch over the next week. And, should the market chose the bearish perspective follow through, a drop below the 123.21 level opens the door to at least the 119 level, but more likely taking us to a test of the 114/115 region. Assuming we do see those lower levels, we will be watching the structure as well as the technicals to then determine if this is a larger d-wave, or if we are indeed heading to the lower lows sooner rather than later.
I think early this coming week will be the tell. If the GLD is not down by 4-5 points early in the week, it makes the potential to reach the 130+ region quite high.
And, as we have been saying for several weeks now, silver still looks quite bearish. Until it is able to at least move over the 19.90 region, and take out the down trend channel it now finds itself within, and then follow through over the 20.20 region, there is nothing to even speak of on the upside in silver. Until those levels are taken out, we can even see silver begin the heart of a 3rd wave down, which is signal by a strong break down below 19.25 early next week.
For those of you that have reviewed the Commitment of Trader’s report this past week, you will also know that the commercial traders have become even more bearish over the last week, whereas the larger speculators (usually referring to the hedge funds) have become even more bullish. More often than not, it is the commercial traders that are on the correct side of the next market move, so this is usually looked upon as a very bearish indication. While it is not necessarily an immediately bearish indication and a rally to the 130+ region in GLD can still occur even with a report this bearish, it does mean that attempting to trade for it has become even more risky, at least as long as we are below 127.10.
In conclusion, I have been “hoping” for a run up to the 130+ region in GLD to complete this e-wave of the 4th wave, but the chances of it happening are becoming much slimmer. In fact, early next week should provide us with solid evidence of whether it will happen or not. So, whether you have a bearish or bullish bias – and I know we have some on the elliottwavetrader.net with strong feelings on both sides of this trade – you must recognize the levels of support and resistance I have noted herein. And, please do not maintain your bias if the market provides a clear directional move over the next week, as I suspect it finally will.
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