Price Action Over Prior Week
After the GDX struck a higher high, and GLD and silver struck lower highs, they all pulled back over the prior week. While many viewed the labor report as the "cause" of the pullback, we expected this pullback to occur no matter what the labor report said.
Anecdotal and Other Sentiment Indications
In following up on my discussion last week, I would like to add several further points to ponder for those that believe the market was manipulated to drop 45% in gold and 70% in silver.
The first question I always ask is if these analysts believed so strongly that the markets were being manipulated to drop so significantly, why did they continually suggest you buy into a manipulated market week after week while it continued to drop for years? Would not the prudent course of action be to suggest that investors take their money out of a manipulated market? I know I always suggest to those that read my analysis to head to the sidelines when we approach a period of high risk. One must wonder why they did not do the same? After asking many manipulation theorists this question, not one has provided a reasonable answer to this question. I wonder why!?
Instead, they continued to call bottom after bottom, week after week, suggesting that you buy every week, and claiming that the only reason they were wrong was because of the "manipulation" continually driving the market lower and lower for years. If they truly believed the market was manipulated, should they not have waited for evidence that the market was no longer manipulated before calling a bottom and suggesting for you to re-enter the market? Yet, that is clearly not what we experienced during the 4-year correction and to believe otherwise is simply as dishonest as their claims that they have been wrong because of manipulation.
The second point to ponder is, if the market is manipulated, then there should be no one who has been able to accurately predict manipulated market movements. The general manipulation theory posits that there is an "entity" which moves the market at its whim. This means that there is no way one can "know" which way the market will move since that can only be known by the directors within that "entity." Therefore, there cannot be any standardized analysis methodology that could ever successfully and consistently divine the direction of the metals, at least not based upon this theory.
If so, then how were we - at Elliottwavetrader.net - able to publicly call for the gold market to top within $6 of where it did in 2011? Moreover, how did we know to begin buying back into the market at the end of 2015 and early 2016, for which I had a very large "BUY BUY BUY" box on my charts? How would it even be possible for anyone to accurately identify where a truly manipulated market would turn at both the highs and lows, as the only one privy to such information is the manipulator?
Ultimately, I can assure you that there is no account traded over the last 5 years which has been profitable by following theories of manipulation. So, don't you think it is about time to focus on what does provide consistent profitability rather than consistent excuses? Sure, a broken clock is right twice a day, but do you really think that is going to provide you with the consistent profitability you seek within these non-linear markets?
Again, most of you will not want to hear any of this, and will surely dismiss this as the rantings of a madman. But, I can assure you that I have not come across anyone with a record that has exceeded ours in accuracy for directional moves in the metals over the last 5 years. And, while many of you will likely dismiss our perspective because it does not comport with your bias, I can assure you that our ability to be highly accurate in the metals market has completely ignored all manipulation theories and fundamentals. Again, ask yourself, from a logical perspective, how can any method be highly reliable and accurate in identifying the twists and turns in a market that is supposedly "manipulated?"
When you begin to understand how to track market sentiment, while ignoring all the noise, then you will begin to understand the "true power of the dark side" of the market. And, that has nothing to do with the evil banksters.
Price Pattern Sentiment Indications and Upcoming Expectations
The current price pattern is most clearly seen in the GDX structure. As long as the GDX maintains over the 29 level, we are setting up to run strongly to the 39-41 region, which can even be struck within the next month should this bullish set up trigger over the coming week or so. This would also suggest that GLD is heading to the next target region between 142-145 and silver can reach the 22.14-23.33 region.
However, should the GDX break below the 29 level, it is an early warning that this consolidation may not yet have completed, and the market may head down towards the 27 region again before the next bullish set up appears. So, watch that 29 region carefully, as the market will make its intentions known between the 29 and 31.65 goalposts.
I want to conclude this week's article with my general perspective of the metals complex, which I just posted at Elliottwavetrader.net:
I want to address one final issue which has been asked of me so many times throughout 2016 in so many different ways. Being a somewhat creative Elliottician, I am certainly able to come up with counts which suggest that the market can see a bigger retracement into the fall, and even the possibility of lower lows in the complex. This is what many seem to be doing because of their bias that the market has moved "too far, too fast," or that the market "must" have a correction. But, I will not force a count just because people have biases or feel that the market "must" correct, especially when I have no high probability pattern set up in place to support such biases or feelings. So, allow me to present the perspective through which I analyze the metals market, which is most often based upon the Occam's razor principle.
We have recently experienced a 4 year correction which took silver down over 70% and the mining stocks lower than most people even considered was possible. In fact, I remember the snickering and mocking posts when I suggested years ago that silver can see 14 and that the HUI can see 100. Now, after such decimation, the market has presented us with many impulsive structures off those lows on many wave degrees. This leads me to believe that the market has transitioned from a bearish trend to a bullish trend.
Now, normally, we see .500-.618 retracements for 2nd waves, whereas 4th waves usually retrace .236-.382 of the prior move. And, the deeper 2nd waves provide us with clear guideposts for the larger count. But, when we have had the decimation we experienced from 2011-2015 in the complex, it is not unusual to expect that even 2nd waves may only provide us with .236-.382 retracements, which I warned could be a strong possibility even before we began this rally in 2016. And, this seems to have been the nature of the market since we rolled into 2016. But it does lead to a bit more uncertainty due to having to accept higher 2nd wave retracements, which make it hard to discern between 2nd and 4th waves.
So, while we certainly can see a bigger retrace take hold at any time, I am unable to forecast larger retracements unless the market breaks some minimal level of support to suggest this may occur. Personally, I would have loved to have seen a larger retracement, as it would place even more confidence in the larger degree count. But, we have to work with what the market provides, rather than hope and wish for what we want.
So, until such time that some minimal support is broken, I am going to maintain my uber-bullish perspective on the complex, which has not really provided much in the way of a "gentleman's" entry for those that missed the bottom. And, for those that have experience in this complex, you know this is not unusual and the resulting "chasing" often fuels the next rally phase. It was due to this potential that I was noting so strongly at the end of 2015 and early 2016 that I was moving heavily into the complex, and it is why I will not sell a single ounce of metal or a single mining stock for quite some time. And, it was for this reason we opened our EWT Miners Portfolio in September 2015, and immediately began buying mining stocks such as Barrick (NYSE:ABX), Silver Wheaton (NYSE:SLW), Freeport-McMoRan (NYSE:FCX), and Goldcorp (NYSE:GG), just to name a few.
During these types of bull-market moves, surprises are usually to the upside. So, when I expect some downside set up to take hold, I will hedge my personal positions, but will not sell them. In this way, not only have I and those that followed me garnered every penny of significant upside this market has offered in 2016 (and have not been left in the "dust" as so many have who claimed the market "must correct"), but we have even made some money on the downside during the small pullback/consolidations we experienced. And, in our EWT Miners Portfolio, we have been re-allocating money from those stocks that have led the market (once they have struck our upside targets) to those that have lagged, but have set ups to "catch-up."
I hope this explains the prism through which I view the metals market. Some of you may certainly disagree with my perspective, and that is fine. Even though we caught the high in 2011 and the bottom in 2015/2016 in this complex, we will clearly not always be right about every move the metals complex will make. But, until the market shows me some indication of invalidating the more uber-bullish perspective it has been providing us for 2016, I will continue to stay the course.
So, now seems to be apropos to remind you of the Jesse Livermore quote I posted when we were lower in price in the complex:
"After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It was never my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!"
Until the market gives me a clear contrary indication (of which I will alert you in a mid-week update at Elliottwavetrader.net), I will continue to "sit tight."
Disclosure: I am/we are long SLV AND GDX OPTIONS AND VARIOUS MINING STOCKS.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.