A small downwards wave to about 16.686 – 16.617 was expected, then a final last upwards thrust to a new high above 17.330. Price did move lower to reach 16.737, 0.051 short of the target zone, and there it turned to move higher.
Summary: The classic analysis supports bullish wave counts for Silver. The target is 20.395.
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, which must reduce the probability of this wave count for Silver. This wave count will still be considered however as Gold and Silver are not always positively correlated.
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.
SECOND WAVE COUNT
WEEKLY CHART
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This second wave count fits neatly with the new wave count for Gold.
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.
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 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.
DAILY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
This chart supports the second wave count and the alternate wave count. This chart is bullish.
There is room for the upwards trend to continue.
The last daily candlestick may be a hanging man, but the bullish implications of the long lower wick require a hanging man to have bearish confirmation in the following candlestick. If this happens, then the short term picture at least would switch to bearish.
Published @ 01:38 a.m. EST.
Lara, I think that in Silver you are looking at the wrong triangle. Below is the EW triangle according to my interpretation. As you pointed out, in Silver the triangle concept is still very much valid, but it does not align any more with your current only one weekly wave count in Gold. The strong positive correlation between Gold and Silver is undeniable. During my entire trading career there was only a handful of days when Gold and Silver diverged in direction, and even those temporary anomalies were corrected within days. I have to add that I have been watching PMs very closely…
Now, let’s assume that Silver’s main count is telling you the right direction. Should we not find a script for Gold that would be more in line with Silver?
Your triangle concept cannot be correct for fundamental reasons. While in a deflationary environment, and in PM bear market periods Silver tends to substantially underperform Gold, there is no way it dropping below $4 an ounce for fundamental reasons. At that point there would be no profitable silver mine on earth and closing a mine is very simple: you just lock it down and reopen when production becomes profitable again. That simple fact should keep in check the balance of supply and demand and with that the market price as well. This mere factor has the ability to limit the downside in any metal in general, including Silver in particular. The deepest I can imagine is $5 on the paper exchanges, with a substantial spread between the paper and the physical markets, but even that one is a stretch.
Nevertheless, the downside potential for Silver from here is huge and it further supports the flat idea for Gold. The less bearish scenario is Silver making a double bottom from here, while Gold dropping into the reversal zone between 1120 and 1070 in wave C of a regular flat. However, at this point I am in favor of the more bearish picture, implying an expanded flat for Gold.
The flat idea for Gold still needs a zigzag up to complete.
If there is a bearish wave count for Gold that is valid I will publish it, and I am certainly looking for it.
At this stage I have not found one.
Very cogent points Annapanna. I would only point out that with regard to your skepticism surrounding Lara’s target price, that in a deflationary depression, the price of EVERYTHING declines, including the cost of production… 🙂