This is simply how the market works. Before you are able to see any major rally, most in the market have to either be out of the market or positioned the wrong way. Just consider where all the money has to come from that chases a 3rd wave into a parabolic rally. And, based upon what I am reading out in the blog-o-sphere, along with the BPGDM being down in the 25 region, it certainly seems the market is doing its job of pushing investors out.
Overall, I cannot say that much has changed since last week, other than in silver. Silver did get a higher high to complete what I ideally view as a 3rd wave off the recent bottom, followed by what I would also like to view as a 4th wave pullback. And, as many of you know, I like it when charts provide us textbook structures. Thus far, silver still needs one more rally to provide us with a more solid 5 waves up off the recent lows. And, as long as we hold the 16.10-16.20 support region, I can still see the potential for a higher high in silver for 5 up.
Yet, as we noted last weekend, it is possible that the market has set up in a series of 1s and 2s off the recent lows, which is much more imm ediately bullish. That means that the next rally will not respect the resistance levels I have been providing you in my updates. During the week, I have moved that resistance up slightly on silver to account for a potential 5th wave higher. That upper resistance is now sitting in the 17.80 region, whereas GDX is still in the 24 region. GLD, after completing a nice 5 wave structure off the recent lows, can still push higher in an expanded b-wave towards the 122 region, but I would like to see that resistance maintain any b-wave rally for GLD. However, if we see the market break out over all these resistances, then it becomes clear that the heart of a 3rd wave is taking hold, and it would not be wise to get in its way.
In the ideal structure I am watching, I would still like to see another rally starting early in the coming week. That should provide us with a better 5 waves up in silver and GDX, whereas GLD would see it as a b-wave high in wave (2). That would suggest that any ensuing pullback from that high will likely be a very sharp downside move, pushing even more investors out of the complex, which will likely set up the REAL break out for which we have been eagerly awaiting. And, as long as the July lows, maintain as support, we are on a break-out alert. But, the preferable structure would still take another week or two to perfect the set up.
So, as I noted last week, my preference is for the market to continue these machinations over the next few weeks to provide us another break out set up. Un der this scenario, the break out may not occur until the end of August. But, there is potential for the market to break out even before that time, and within this writeup I have provided you the guideposts for which you should be mindful for such an eventuality.
See charts illustrating the wave counts on the GDX, GLD, and Silver Futures (YI).