Upwards movement to about 14.887 was expected last week. This is not what happened.
Price moved sideways and then lower.
Summary: The correction is still most likely incomplete. Upwards movement to a target at 14.827 – 14.887 is expected for the next week.
New updates to this analysis are in bold.
MAIN WAVE COUNT
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Primary wave 4 may be complete and primary wave 5 may be underway.
Primary waves 2 and 4 exhibit perfect alternation and good proportion: primary wave 2 was a deep zigzag lasting 15 weeks and primary wave 4 was a shallow combination lasting 24 weeks, 1.618 the duration of primary wave 2.
At 11.1 primary wave 5 would reach 0.382 the length of primary wave 1.
This wave count is preferred primarily for the reason that there has been no technical confirmation of a trend change from bear to bull for Silver.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 17.779. A breach of this invalidation point would now also require a strong breach of the bear market channel, so this invalidation point should not be moved any higher. When that channel is breached that should indicate a trend change for Silver from bear to bull. At that stage, only bullish wave counts should be seriously considered.
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All wave counts at the daily chart level this week will show movement since the high at 16.362.
While it is just technically possible that minor wave 2 may possibly be over at the high labelled minute wave a, that would be a remarkably brief and shallow second wave correction at minor degree and would have lasted only two days. What is much more likely is minor wave 2 is continuing further as an expanded flat or combination. An expanded flat is more likely.
At 14.827 minute wave c would reach 2.618 the length of minute wave a. This is reasonably close to the 0.382 Fibonacci ratio of minor wave 1 at 14.887.
Minor wave 2 may not move beyond the start of minor wave 1 above 16.362.
Minor wave 1 lasted 15 days, so no Fibonacci duration. Minor wave 2 so far has lasted 11 days and looks like it may not be able to end in just two more days to total a Fibonacci thirteen, so it may also not exhibit a Fibonacci duration. It may end in a few days.
FIRST ALTERNATE WAVE COUNT
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This wave count sees a 5-3-5 complete downwards for primary waves 1, 2 and 3.
The channel (maroon) drawn about this downwards movement is drawn using Elliott’s first technique. Draw the first trend line from the lows labelled primary waves 1 to 3, then place a parallel copy on the high of primary wave 2. Primary wave 4 may find resistance at the upper edge of the channel.
Primary wave 2 was a deep single zigzag. Given the guideline of alternation expect primary wave 4 to be shallow and a flat, combination or triangle.
There are multiple structural possibilities for primary wave 4. It is impossible to tell which structure will unfold, only that it is most unlikely to be a zigzag or zigzag multiple. If it is an expanded flat, running triangle or combination, it may include a new price extreme beyond its start, so it may include a new low below 13.983.
At this stage, the idea of a combination may be eliminated at the daily chart level. The reasoning for this is explained underneath the daily chart.
Intermediate wave (1) lasted a Fibonacci 5 weeks; intermediate wave (2) was 22 weeks, just one more than a Fibonacci 21; intermediate wave (3) was exactly a Fibonacci 144 weeks; and, intermediate wave (5) was 31 weeks, three short of Fibonacci 34.
Primary wave 2 lasted 15 weeks. Primary wave 4 is expected to be longer lasting because zigzags are quicker than combinations, triangles and even flats. Primary wave 4 may total a Fibonacci 21 or 34 weeks, give or take up to three weeks either side of these expectations.
Primary wave 4 may not move into primary wave 1 price territory above 32.343.
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Upwards movement for intermediate wave (A) is a completed double zigzag. This is termed a “three”, a corrective structure.
If primary wave 4 is a triangle, then one of the five sub waves may be a double zigzag. This may have been intermediate wave (A) of a triangle.
If primary wave 4 is a flat correction, then intermediate wave (A) must be a corrective structure and may have been a double zigzag.
Primary wave 4 may not be a combination, if the first structure is a double zigzag. Within multiples each corrective structure of W and Y (and Z if there is one) may only themselves subdivide as simple corrective structures (labelled A-B-C, or A-B-C-D-E in the case of a triangle). The maximum number of corrective structures within a multiple (excluding the joining X waves) is three. And so to label multiples within multiples extends the maximum beyond three violating an Elliott wave rule.
If primary wave 4 is unfolding as a flat correction, then intermediate wave (B) has reached the minimum requirement of 90% the length of intermediate wave (A) at 14.2209. At this stage, it is still not possible to confirm intermediate wave (B) as complete although this week it looks like a clear three wave structure, so it is more likely to be complete or close to it. Intermediate wave (B) is now 1.06 times the length of intermediate wave (A), so the flat would be an expanded flat which is the most common type.
If primary wave 4 is unfolding as a triangle, then intermediate wave (B) within it has no minimum requirement, must be a corrective structure, and may also make a new low below the start of intermediate wave (A) as in a running triangle.
At this stage, intermediate wave (B) could be seen as complete. A new high above 16.362 would invalidate the main wave count and confirm this first alternate.
SECOND ALTERNATE WAVE COUNT
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This second alternate wave count is identical to the first main wave count up to the high labelled primary wave 4. It sees primary wave 5 as underway. There are only two possible structures for a fifth wave within an impulse: either an impulse (main wave count) or an ending diagonal (this second alternate wave count).
My sole reason for publishing this idea is to see what the equivalent wave count to Gold’s alternate would look like for Silver. Here the problems are the same and worse. This wave count violates two Elliott wave rules.
If primary wave 5 is unfolding as an ending diagonal, then the diagonal should be contracting because the fourth wave at 2.379 is shorter than the second wave at 2.482. But the third wave length at 3.796 is longer than the first wave at 3.190.
From “Elliott Wave Principle” by Frost and Prechter, 10th edition, page 88, rules for diagonals: “In the contracting variety, wave 3 is always shorter than wave 1, wave 4 is always shorter than wave 2, and wave 5 is always shorter than wave 3.”
Further, another rule states “Going forward in time, a line connecting the ends of waves 2 and 4 converges towards (in the contracting variety)… a line connecting the ends of waves 1 and 3”.
On the daily chart (below) I have drawn a parallel copy of the 1-3 trend line in cyan and placed it on the end of intermediate (2). This is done to illustrate that the diagonal trend lines slightly diverge; they do not converge.
This structure violates these two rules of a contracting diagonal. It also would violate the rule of wave lengths for an expanding diagonal: intermediate wave (4) is not longer than intermediate wave (2).
I am very uncomfortable with publishing a wave count which violates Elliott wave rules. Due to the multiple violations I have no confidence in this wave count; it is not Elliott wave. The sole reason for publishing it is to consider the equivalent to the alternate published for Gold.
Click chart to enlarge.
Because this wave count violates two Elliott wave rules I have nothing further to add. It should not be used.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Silver has been in a bear market since April 2011. I am adjusting the length of the weekly moving average, so that it shows where this bear market has been finding resistance. The 89 week (a Fibonacci number) Simple Moving Average works well for this bear market. If that is breached by a weekly candlestick, it would be strong indication that Silver has changed from bear to bull.
Of recent weeks, strongest volume is for a downwards week. This is bearish. The last three weeks of falling price came on declining volume as lows were made. The fall in price was not supported by volume at the end of the last wave down and so is suspicious. This supports the idea that some upwards movement should be seen about here.
On Balance Volume remains below a long held trend line. This trend line is somewhat shallow, repeatedly tested, and reasonably technically significant. While OBV remains below that trend line it will remain bearish.
RSI shows strong double divergence with price over a long time period (pink and green lines on price and RSI). While price made new lows RSI failed to make new lows. This indicates weakness in downwards movement and is bullish. Because this divergence is double and over such a long time period it is highly technically significant. This indicator is often leading (anticipates a trend change).
The regular technical analysis picture is unclear at the weekly chart level. A trend change will come and RSI is indicating it may come sooner or have arrived already. It needs to be confirmed by price, and a break above the blue bear market trend line would be full and final confirmation of a trend change.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The last three days which have seen a new low come on light volume. The fall in price is not supported by volume and so is suspicious. This supports the main Elliott wave count.
ADX indicates the market may currently be in a consolidation; the black ADX line is flat to declining. This also supports the main Elliott wave count.
On Balance Volume remains very bearish. I have added a new short blue trend line. If OBV turns up, it may find resistance again there. If it breaks above that line, then expect more upwards movement from price.
RSI shows divergence with price; as price made a new low RSI failed to make a corresponding new low. This divergence is bullish and indicates weakness in price. This also supports the main Elliott wave count.
This analysis is published about 01:46 a.m. EST.