Price Action Over the Prior Week
The market has continued to whipsaw market participants over the past week. But, it has still remained below our relevant resistance levels, which leaves the potential for one final drop before this correction has completed.
Anecdotal and Other Sentiment Indications
As we approach the election in a few weeks, I am sure many of you have seen the debates, heard the candidates speak many times, and probably have made your decisions about for whom you will be voting. And, there is certainly very strong feelings on both sides of this campaign.
But, for those that are interested in the precious metals market, many questions have been raised about which candidate would be best for the metals complex. In fact, I have seen many articles and opinions written about which of the candidates would be more beneficial for your precious metals investments, and the feelings are just as strong as the feelings about the candidates themselves.
There are those that believe that a Clinton presidency would mean further Fed involvement in the financial markets, which they surmise would suppress the metals market. And there are those that believe that a Trump presidency would curtail Fed involvement in the market, which they surmise would allow the metals to run higher.
But, when we take apart these theories, they really are not internally consistent. If under a Clinton presidency the Fed would be allowed to suppress interest rates, would that not be positive for the metals since there would be a greater chance that we could see negative interest rates, which would increase the demand for precious metals? And, would the inverse be true with a Trump candidacy in that allowing interest rates to rise would be negative for precious metals since it would suppress demand?
This election seems to present a truly complex issue for precious metals investors.
And, if you are reading this article, you are probably interested in knowing my opinion as to whether you should have your finger on the "buy" or "sell" button the night of the election.
I will tell you a little secret that all those that have read me for a long time have probably come to understand about my perspective on this market: It makes no difference who is in office as relating to the price direction for gold. The analysis will be the same coming from me, and, as you know, I have not wavered in my analysis and the market has followed through on most of our expectations. Yet, those that were trying or continue to try to glean anything from the election news as related to the precious metals complex have found themselves caught in some serious whipsaw over and over. It seems some people never learn.
As I have said over and over, the substance of the news is not determinative of the direction of the metals. Exogenous events are not as important as many seem to believe, and that also applies to which candidate makes it into the White House. In fact, no matter who wins the election, I believe the next sitting President will see the resumption of a long term bull market in the precious metals complex.
Even if you contemplate the underlying fundamental reasons as to why the markets will move up or down based upon which candidate wins, you should come to the conclusion that neither position really is supportable by history.
As I have written in the past, metals have historically risen during a period of rising interest rates, so assuming that a Trump presidency is going to cause rates to rise and metals to correspondingly decline is simply wrong.
Does that mean that the metals will only rise no matter who is in office? Well, as I have said so many times, as long as the market holds the support I have noted in my past articles, I expect a very strong rally into 2017. That applies no matter who is in office. And even if we do not hold support and make a lower low in the larger complex, that lower low will be the final low seen for decades to come. So, I will repeat my expectation that no matter who wins this upcoming election, the next President will likely see the resumption of a long term bull market in precious metals.
Price Pattern Sentiment Indications and Upcoming Expectations
As I have been noting for several weeks, 26.25GDX, 122.75GLD and 18.60silver are the relevant resistance regions to key in on. As long as the market is not able to break all three levels, then a lower low is sitting out there. While there is still potential for one more push higher in the coming week before we see that drop, it is not necessary, as the market can simply drop from the current region within which we reside.
Alternatively, if the market is able to break out over the 3 resistance regions noted above, then it is the initial signal that the low for this correction is likely struck, and we begin the next major bull phase. But, at least at this point in time, that is not my expectation.
As far as all the questioning of positioning, the last lows were initial buying opportunities as I have mentioned in my prior writings. You can choose to hedge those positions as long as we remain below resistance, and then buy further long positions should we see the next drop that I would like to see. But, the bigger picture is that as long as we hold over 19.80 in GDX, this market is setting up in a very bullish fashion going into 2017.
This article was written by
Avi is an accountant and a lawyer by training. His education background includes his graduating college with dual accounting and economics majors, and he then passed all four parts of the CPA exam at once right after he graduated college. He then earned his Juris Doctorate in an advanced two and a half year program at the St. John’s School of Law in New York, where he graduated cumlaude, and in the top 5% of his class. He then went onto the NYU School of Law for his masters of law in taxation (LL.M.).Before retiring from his legal career, Avi was a partner and National Director at a major national firm. During his legal career, he spearheaded a number of acquisition transactions worth hundreds of millions to billions of dollars in value. So, clearly, Mr. Gilburt has a detailed understanding how businesses work and are valued.
Yet, when it came to learning how to accurately analyze the financial markets, Avi had to unlearn everything he learned in economics in order to maintain on the correct side of the market the great majority of the time. In fact, once he came to the realization that economics and geopolitics fail to assist in understanding how the market works, it allowed him to view financial markets from a more accurate perspective.For those interested in how Avi went from a successful lawyer and accountant to become the founder of Elliottwavetrader.net, his detailed story is linked here.
As an example of some of his most notable astounding market calls, in July of 2011, he called for the USD to begin a multi-year rally from the 74 region to an ideal target of 103.53. In January of 2017, the DXY struck 103.82 and began a pullback expected by Avi.As another example of one of his astounding calls, Avi called the top in the gold market during its parabolic phase in 2011, with an ideal target of $1,915. As we all know, gold hit a high of $1,921, and pulled back for over 4 years since that time. The night that gold hit its lows in December of 2015, Avi was telling his subscribers that he was on the phone with his broker buying a large order of physical gold, while he had been accumulating individual miner stocks that month, and had just opened the EWT Miners Portfolio to begin buying individual miners stocks due to his expectation of an impending low in the complex.
One of his most shocking calls in the stock market was his call in 2015 for the S&P500 to rally from the 1800SPX region to the 2600SPX region, whereas it would coincide with a “global melt-up” in many other assets. Moreover, he was banging on the table in November of 2016 that we were about to enter the most powerful phase of the rally to 2600SPX, and he strongly noted that it did not matter who won the 2016 election in the US, despite many believing that the market would “crash” if Trump would win the election. This was indeed a testament to the accuracy of the Fibonacci Pinball method that Avi developed.
Disclosure: I am/we are long PHYSICAL METALS 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.
Additional disclosure: I remain hedged until resistance is taken out or lower lows are seen