Last week’s Silver analysis expected some upwards movement.
Again, this is exactly what has happened.
Summary: Price should move lower from here. The main wave count expects to see a new low below 13.569, so the alternate would be invalidated below this point.
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 11.02 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.
Within intermediate wave (3), no second wave correction may move beyond the start of its first wave above 16.349. At this stage, a breach of this invalidation point would also require a breach of the upper edge of the maroon channel and would indicate a trend change from bear to bull.
When cycle wave a is a complete five wave impulse, then the following upwards movement for cycle wave b should last one to several years, may be any one of 23 possible corrective structures, and may not move beyond the start of cycle wave a at 49.752.
Click chart to enlarge.
All wave counts at the daily chart level this week will show movement since the high at 16.349 on 28th October.
A second wave correction for minor wave 2 may now be complete or almost complete. The target for it to end was 14.612, which has been slightly exceeded.
The green trend line is offering support for upwards movement. When that green line is clearly breached on the daily chart, that shall provide some confirmation that upwards movement for minor wave 2 is over. At that stage, some confidence may be had that minor wave 3 should be underway. At that stage, I would be prepared to calculate a target for minor wave 3. I am not prepared to do that while there is no confirmation it has begun.
It must be accepted that minor wave 2 could move higher while there is no confirmation that it is over. It may not move above the start of minor wave 1 above 16.349.
ALTERNATE WAVE COUNT
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If super cycle wave (a) is a double zigzag, then within the second zigzag of the double labelled cycle wave y the structure may be complete.
Primary wave C is an ending contracting diagonal within the zigzag of cycle wave y. All subwaves subdivide as zigzags. The third wave is shorter than the first, the fifth wave is shorter than the third, and the fourth wave is shorter than the second. The trend lines converge.
There is a small overshoot of the (1)-(3) trend line at the end. This indicates the contracting diagonal structure is very likely to be complete.
If this wave count is correct, then super cycle wave (a) has subdivided as a three wave structure. That indicates Grand Super Cycle wave II may be a flat correction.
If this correction at Grand Super Cycle is a second wave (as opposed to a fourth wave), then a triangle may be eliminated.
A combination may also be eliminated because the first wave is a multiple. Combinations may only consist of a maximum of three corrective structures, so within each of W, Y and Z they may only subdivide into simple A-B-C structures (or A-B-C-D-E in the case of triangles). To label multiples within multiples increases the maximum beyond three, violating the rule.
Super Cycle wave (b) must retrace a minimum 90% of super cycle wave (a) at 23.945. Super cycle wave (b) may make a new price extreme beyond that seen for super cycle wave (a) above 49.752 as in an expanded flat.
Super cycle wave (b) may be any one of 23 possible corrective structures. It is impossible to predict at this early stage which one it will be, only to say it is unlikely to be a rare structure such as a running flat, expanding triangle or triple combination. That still leaves multiple structural possibilities.
The first movement up for a wave of this large degree must subdivide as a clear five at the daily chart level, and probably at the weekly chart level also.
Click chart to enlarge.
If there has been a trend change at super cycle degree, then a clear five wave structure upwards must develop.
Upwards movement for minor wave 1 may now be seen as a leading expanding diagonal. This is a fairly clear five up, although this movement may also be seen differently (as in the main wave count).
Leading diagonals in first wave positions are normally followed by very deep second wave corrections. So far minor wave 2 may be unfolding as an expanded flat correction. It may not move below the start of minor wave 1 at 13.569.
Both wave counts expect downwards movement this week.
TECHNICAL ANALYSIS
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
During this sideways consolidation that Silver began back in November 2015, it is an upwards day for 7th January, 2016, which shows strongest volume. This suggests that price may break out of this consolidation upwards. This trick does not always work, but it works more often than it does not work. Price looks like it is breaking out upwards this week on a day with increased volume to close above resistance which was about 14.65. This does not support the Elliott wave counts.
ADX indicates there is a trend as the ADX line is above 15 and rising. The +DX line is above the -DX line indicating the trend should be up. This does not support the Elliott wave counts.
On Balance Volume has not shown the way. A break above the blue line or below the brown line would indicate the direction that price should move to.
RSI is not extreme and does not exhibit divergence.
Stochastics does exhibit divergence: the high in price for 3rd February does not have a corresponding high for Stochastics. This indicates weakness in this upwards movement today, despite the higher volume.
It may be that this volume spike indicates the end of a short term upwards swing, which would make sense of divergence from Stochastics.
It may also be that both Elliott wave counts are wrong and that there is a new upwards trend developing for Silver.
This analysis is published @ 12:57 a.m. EST on 4th February, 2016.