Silver is consolidating. Volume may suggest the breakout direction.
Summary: Silver is in a small consolidation. Volume suggests an upwards breakout. The Elliott wave target is at 20.395.
A new low below 15.525 would indicate Silver remains in a bear market. The target would be 3.858.
Last monthly charts can be viewed here.
New updates to this analysis are in bold.
ELLIOTT WAVE COUNTS
MAIN WAVE COUNT
WEEKLY CHART
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The main wave count expects that the bear market, which began from the April 2011 high, is incomplete.
Cycle wave a is seen as a five wave impulse for this main wave count. There are multiple corrective structures possible still for cycle wave b.
This first weekly chart (there are two weekly charts for the main wave count), sees cycle wave b as a now possibly complete regular contracting triangle. The equivalent wave count for Gold is now invalidated (but there is still a bearish wave count for Gold), but Gold and Silver do not have to complete the same structures, and they are quite often different.
Primary wave E of the triangle may have ended with an overshoot of the A-C trend line. If this wave count is correct, then price should have reversed already. Within the new downwards trend, no second wave correction may move beyond the start of the first wave above 17.680.
DAILY CHART
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At this stage, the A-C trend line is overshot but not breached. This wave count for Silver still has a good fit and the right look, even though it no longer works for Gold.
A new high by any amount at any time frame above 17.680 would invalidate this wave count for Silver.
SECOND WAVE COUNT
WEEKLY CHART
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Cycle wave b may be completing as a double combination: zigzag – X – flat. The second structure, a flat correction for primary wave Y, may be underway.
Within a flat correction, intermediate wave (B) must retrace a minimum 0.9 length of intermediate wave (A) at 15.938. Intermediate wave (B) has met this minimum requirement; the rule for a flat correction is met. Intermediate wave (B) is longer than 1.05 times the length of intermediate wave (A) indicating this may be an expanded flat. Expanded flat corrections are the most common type. Normally their C waves are 1.618 or 2.618 the length of their A waves.
The target calculated would see primary wave Y to end close to same level as primary wave W about 21.062. The purpose of combinations is to take up time and move price sideways. To achieve this purpose the second structure in the double normally ends about the same level as the first.
While the combination wave count at the weekly chart level does not currently work for Gold, it does still work for Silver. They do not have to complete the same structures for cycle wave b, and fairly often their structures are different.
At this stage, the duration of minor wave 2 now looks wrong. This wave count is now less likely.
DAILY CHART
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Minor wave 3 may only subdivide as an impulse and must move above the end of minor wave 1 at 18.207.
Minute wave i may be complete within the impulse of minor wave 3.
Minute wave ii may now be a completed expanded flat correction. However, it has corrected only 0.328 of minute wave i and so is shallow. It may continue further to take up more time and deepen the correction. If the degree of labelling within minute wave ii here is moved down one degree, it may be that only minuette wave (a) of a longer lasting flat correction may be complete and the last high may be minuette wave (b). For this reason, the invalidation point is left the same.
Minor wave 3 must move beyond the end of minor wave 1 above 18.207. A new high above this point would meet the Elliott wave rule and add confidence to the wave count.
Minute wave ii may not move beyond the start of minute wave i below 15.525.
The target for minor wave 3 expects the most common Fibonacci ratio to minor wave 1.
ALTERNATE WAVE COUNT
WEEKLY CHART
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This alternate wave count looks at the possibility that the bear market may be over for Silver and a new bull market may have begun.
A series of two overlapping first and second waves may now be complete for cycle waves I and II, and primary waves 1 and 2.
A third wave now at two large degrees may be beginning.
Targets calculated for third waves assume the most common Fibonacci ratios to their respective first waves. As price approaches each target, if the structure is incomplete or price keeps rising through the target, then the next Fibonacci ratio in the sequence would be used to calculate a new target.
Within primary wave 3, no second wave correction may move beyond the start of its first wave below 15.525.
The large base channel about cycle waves I and II nicely shows where primary wave 2 found support. A lower degree second wave correction should find support (in a bull market) about a base channel drawn about a first and second wave one or more degrees higher.
DAILY CHART
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The expanded flat correction for intermediate wave (2) may now be complete. If this is correct, then a third wave up at three large degrees may be in the very early days for Silver.
However, if intermediate wave (2) is complete, it is only 0.382 the depth of intermediate wave (1). Because this would be a rather shallow second wave correction the possibility that it may continue to move lower must still be accepted. Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 15.525.
TECHNICAL ANALYSIS
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
At this weekly time frame Silver is still range bound. The bearish signal from On Balance Volume and Stochastics reaching overbought indicates Silver may have turned downwards still prior to reaching resistance.
During the large consolidation outlined by blue resistance and support, it is a downwards week that has strongest volume suggesting a downwards breakout is more likely than upwards.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
Strongest volume during the smaller shorter term consolidation is for upwards days suggesting an upwards breakout is more likely than downwards. Next resistance is about 18.30 and above that about 18.50 on the weekly chart.
Watch On Balance Volume closely. A breakout here may precede a breakout from price.
Published @ 04:37 a.m. EST.