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The Metals Are Building Another Launching Pad

Commentaries & Views

For those that follow me regularly, you will know that I have been tracking a set up for the VanEck Vectors Gold Miners ETF (GDX), which I analyze as a proxy for the metals market. I believe that the GDX can outperform the general equity market once we confirm a long term break out has begun, and I think we can see it in occur in early 2018.

Since I have been on vacation for the last two weeks, and will be traveling again this week to LA and NYC, I am going to keep this update a bit shorter than normal.

In early December, we identified a specific 20.89-21.26 support region for the GDX, which, if held, could begin that major 3rd wave break out and rally we have been awaiting. But, since it would mean that this 2nd wave would have completed in an unorthodox manner, I noted that I would need to see confirmation that the market has truly bottomed.

On December 12th, (in an article published on December 13th entitled “Strap Yourself In - We Are About To See Some Big Moves In Metals”), I warned you to be prepared for large moves in the market. As we now know with the benefit of hindsight, the GDX bottomed at 21.27 (within a penny of our support) on the 12th, and began a strong rally through our first two resistance points.

Last Saturday January 14th, I noted the following to members:

This means we have now almost completed 5 waves up off the support we had been tracking into the December lows, wherein both silver and GDX bottomed within pennies of the support upon which we had been hyper-focused at the time, whereas GLD came up a bit short of its targeted support. So, wave (1) off those lows will likely complete in the coming week.

On Wednesday, just after 2PM, I published a mid-week update to my members entitled “Prepare For A Retracement.” Within minutes of my publishing that update, the market began the pullback we experienced during the remaining part of the week.

At this point in time, the market seems to be setting up in a break out fashion within the next few weeks. In fact, that rally can provide us with a stronger move than that seen in early 2016. However, it may take more consolidation/pullback before the market is ready for such a break out. But, as long as we hold support between 22.50-23.25 over the coming weeks, it would suggest we are going to begin a rally which could eclipse the strength of the one seen in early 2016. 

It would take a move through the 25.50 level to suggest that a parabolic rally has likely begun sooner rather than later, with a break down below the December 2017 low completely invalidating this set up. And, to give you an idea of the potential of such a rally, the GLD can even reach its prior all-time highs within 2018, if we see the full potential being projected by this set up.

Lastly, I want to remind you that my job is not to tell you what the market MUST do. That is an impossibility. Rather, my job is to provide you the guideposts for how the market can react as long as it respects those guideposts. For this reason, I will never be right 100% of the time in my primary expectations, but you will know up front where those primary expectations become invalidated.

Moreover, these expectations are based upon market standards which apply approximately 70% of the time. That means there will be a minority of the time that the market will move outside the norms and standards we follow. So, before you decide to work with the analysis methodology I utilize, you must not only understand the tremendous value it can bring to investors in identifying relatively accurate points at which the market can turn point, but, also its limitations.

See charts illustrating the wave counts on the GDX, GLD & YI.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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