By Cory Are You Being Led By Sentiment In The Metals, Or Rising Above It?
This posting is quite technical in nature from Avi but there is a level that he points out for GDX that we can all watch today. We are continuing to see metals stocks sell off even with the gold an silver prices drifting higher. This is never a good sign but to focus on Avi’s number for GDX we will be watching 22.30. While Avi is still bullish overall on the metals he has a similar time frame as us, late this year when the metals could really get going. Here is his full post…
I was told a story today about another analyst who bought into a 3X leveraged ETF on Monday as the GDX was hitting its highs and the market was quite bullish, and then sold for a 10%+ loss yesterday as it was hitting its lows when the market turned very bearish. Sadly, he and those following him were watching as this rally took hold today.
So, I think this is a good time to remind you of what one of our more astute members – Roy Prasad – has said about markets:
The goal of EW analysis is to analyze sentiment, not participate in it!
I am also going to take this opportunity to remind you WHILE THE MARKET IS UP that most should not be using leveraged ETF’s or options until the heart of a major 3rd wave is taking hold. And, as I have also noted many times before, I don’t expect that to happen until later this year, assuming we are able to complete wave 1 within the next month or two back towards the August highs. For those that had a hard time stomaching this recent pullback, please consider whether you are too heavily leveraged into this complex.
As you may remember from the weekend update I sent out to members at Elliottwavetrader.net, as long as we held over 21.60GDX on Monday, and completed 5 waves up, we could have a nice set up for a break out into the Fed announcement.
However, even after we completed 5 waves up on Monday, yesterday, those that were overleveraged in the complex were certainly participating in the sentiment as we were hitting the lows toward the end of the day. But, if you were able to maintain a reasonable perspective, you would have recognized that we had another 1-2 set up in place, which could lead to a 3rd wave break out. I wrote about it all day yesterday, and reiterated it this morning yet again. Clearly, it was not an easy trade to take due to the depth of the wave 2 yesterday, but the pattern was a rather nice set up.
So, with today’s rally, the market has broken out of initial resistance. However, we still need a larger degree 5 wave structure to complete before we can be much more confident of the fact that this rally is pointing us back towards the August highs …read more
Source:: The Korelin Economics Report
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