Sept 2018 – Gold & Silver – Potential Bottoming Signal 10th September 2018
Back in July, the metal markets broke through support levels, and we began plotting a new pattern in the markets that pointed to lower prices before we can complete the larger degree wave 2 we have been stuck in since the 2016 highs for the past two years. And as enter this week, most of the metals we track continue lower. In following through on those downward patterns, Gold and Silver have nearly all but completed the minimal wave structure we would need to see to suggest a potential bottom is being stuck.
Yes, this means we can start looking for clues that the markets are bottoming, but that does not mean that we have ‘bottomed’ yet. It means market can finally prove it has bottomed with its next rally being impulsive, as we have enough waves in place to consider this multi-year wave 2 is either complete or near completion. Confirmation is now what matters, as individually, markets are not very clear as to whether a bottom is in or another nominal low needed.
In starting with Gold [below], last week I highlighted the downside move to $1,160 was a wave 3, with a 4th wave up to $1,220 before a 5th wave towards $1120 to complete the pattern. Now, I must note that the move off the wave 3 low, has given a ‘technical’ impulsive pattern with a pullback that has so far held above $1190 and is corrective. Now this does not mean Gold has completed its downside pattern for all its 2 year long correction. I will change my view if we see a strong impulse here clear above $1,220 and move higher, but so far we have not seen much follow through to ignite an impulsive rally. For now though, whilst we remain below $1,220 I still view this as wave 4 which means we likely still have one more low ahead.
Now silver admittedly is one ugly chart when it comes to its larger pattern. Whilst not normal for wave 2, they nonetheless can retrace nearly 100% of wave 1 before rallying in wave 3. But as I said it isn’t the usual expectation, but it is nonetheless the pattern that the market is presenting to us, whether we accept it or not.
But, as you can see on the chart [below], the drop we saw last week gave us a 5 wave structure down to have potentially complete wave 2, with micro patterns providing support to this structure. This would mean silver could provide us with a confirmed bottom last week if we can see an impulsive structure take us through resistance near $15.40 – $15.60. But, unlike gold, we have no potential 5 waves up having begun, yet. If the market fails to provide an impulsive more higher that breaks resistance, then we could see a lower low towards the $13.80 level.
The bottom line is while we may still see one more push in both markets to the downside in the coming week, I think we are setting up for a rally to begin by the week after. Please review the charts and discuss with your trader any strategies yet to be formed. Whilst I cannot confirm a bottom is in, no one can unless in hindsight, I can confirm we have a potential bottoming signal. Whether you want the market to rally, or indeed drop to give you that opportunity, we will see what the market signals to us over the coming weeks, but either way speak to your trader as soon as possible if you have not already done so as either way, the next confirmed bottom in these markets may never be seen again.