With metals and mining stocks frustrating so many for the last 3 years, it seems they will be frustrating folks for just a little while longer. As I have been saying for quite some time, I do not believe the bottom is in just yet. However, the market seems to be setting up long-side participants for one final shellacking and it may be loading up the “long-train” just in time for the final plunge.
If you remember back to February, I warned those that read my analysis that the market could be setting us up for something quite evil, which would hurt investors on both side of this market. The whipsaw I was expecting has been playing out quite well so far, and it is not likely over. We still will likely see higher levels before the final decline takes hold. The market needs to become much more overall bullish to support the type of drop I want to see to end this almost 4-year correction.
What I find quite interesting is that many “fundamentalists” have been suggesting over the weekend that the metals market will rally due to the poor jobs report. For those that know me well, you know that I chuckled quite loudly reading that. The first thing that came to mind is how many times have we seen the metals rally on good jobs reports, as well as decline on good jobs reports? For those that watch the market from an intellectually honest perspective, the answer is many. Yet, so many need something to which to point, which they feel “logically” supports a rally.
But, the problem is that even though this type of analysis sounds good in a sound-bite, it is not supported by the facts, since both types of reports (negative and positive) have seemingly “caused” rallies. Rather, we have been looking for a rally to set up well before this jobs report, and the reason we have been looking for this rally is due to a sentiment pattern we have been tracking. To me, this is a much more consistent manner in which to view this market, which has also allowed us to be one of the few who have maintained on the correct side of this market through the greater part of all the twists and turns over the last 3+ years.
Last weekend, I explained that as long as the support regions we cited held on the expected pullback, metals and miners should be heading higher over the next month or two:
But, that brings me to a major test the market must now pass, and that is one of support. The current pullback – which was called for in our Trading Room at Elliottwavetrader.net last week in the alerts sent out to subscribers – does not yet look complete. But, as long as the (ARCA:GDX) remains over 17.90, the (ARCA:GLD) over 111.40, and silver over 15.80, I will continue to be looking higher towards the 2015 highs, with the potential for silver and GDX to exceed those highs, and even attain levels of 20-22 in silver and 23-25 in GDX.
During the week, as all markets bounced off the support levels I noted, I sent out a Wave Alert suggesting to subscribers at Elliottwavetrader.net to place stops on their long positions right under the levels at which we bottomed this past week. As long as that support holds, I am going to be expecting a break out in either a c-wave higher, or a 3rd wave. And, as I noted last week, I will be significantly reducing long side risk as we complete that c/3 higher.
As the pattern further develops, I will send out a Market Update should something change. But, for now, as long as support holds, I will continue to look higher in the short term to set up our final decline to lower lows later this year, which should end this almost 4-year correction.
First published Sun Apr 5 for members of ElliottWaveTrader.net.