SLV, GLD - November 1, 2009

While PM miners had a rough enough correction to force us re-think, and re-arrange bullish alternate counts. The correction of Gold and Silver so far looks routine and their bullish alternate counts seem on track.

This is weekly chart of SLV


A very rough week for the white metal. The positive posture of the metal ETF is still intact. There is an uptrend line from 2008 which should be good enough for at least a bounce. If the bullish count is correct, the decline is Intermediate wave 4 and should not get much lower or it will run the chance of overlapping Intermediate wave 1.

This is a daily


Not a good week, eh? Exit doors of crowded trades are narrow and few.

But notice the spot that held the decline last week. Tightly above top of Intermediate wave 1 and right on the center line of the channel that I have drawn from December 2008, which coincides with a secondary uptrend line from July.

It doesn’t matter much because it either overlaps Intermediate wave 1 or not. As long as it does not, there is no cause for concern.

If it overlaps, then we’ll have three probable outcomes.

1. The bullish view of silver is wrong and the entire run from 2008 has been a counter trend rally

2. The labeling is wrong and the entire move from July is a wave 1 of a lower degree like Minor wave 1, and this correction is Minor wave 2, which may correct all the way down to 12 without violating anything (other than your portfolio, of course)

3. The labeling is correct, and we are having a sideways correction to end above the top of Intermediate wave 1.

Take your pick if overlap happens. My choice would be to observe from the sidelines. That having been said, I thought I would give silver the benefit of my speculative doubt and bought a small position. I won’t hesitate to sell and move to the side lines if I sense trouble

This is a 60-min chart


See how weak the Minute wave 5 of Minor wave 5 of Intermediate wave 3 was! That ending wave fooled me a bit. But other technical tools and stops did their job. That is why I say Elliott Wave is just a tool. I think it is a superior tool, but only a tool and not the only tool.

There are some positive divergences, and that’s another reason I started a small long position. If we get a good bounce, I may either take some profit to bring down cost, or hedge, or both, and let the market tell me if adding to existing position is warranted. If it tanks, I will exit.

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This is a weekly chart of gold



It just looks like it is pulling back to, and maybe retesting the breakout point.

This is a daily of GLD


Same comments and wave scenarios as for SLV. GLD, however, has a longer way to drop before it overlaps top of its Intermediate wave 1.

This is 60-min chart


There are two obvious areas of support: 99-100, and 96-97.

For SLV, I have target of 18.50

For GLD, I have targets of 106 and 110

To me, targets are theoretical and nice to have. Stops and support, on the other hand, are more concrete, better defined, and a must have.

One final note, if my count for GLD is correct, Intermediate wave 2 was a zig-zag, the correction so far is a 5-3-5, observing EW’s alternation rule, ongoing correction cannot be over – something to keep in mind