As we know, consensus for the majority of 2016 was that the PM sector had finally bottomed after brutal 5 year bear. This may yet prove to be the case. We had a stunning 332 dollar rally in Gold. A massive move up in Silver and also miners went crazy.

Recently, however we have seen less than positive price action. I recently had a thought that the complex (mainly Gold and also Silver to another degree) was in a long term Diamond. This may yet prove to be the case.

From an EW point of view, the view of some is that we completed 5 waves up till the summer of 2016. This is normally seen as the completion of Wave 1. We are now heading down once more. Wave 2 consists of an A-B-C which is evident from the price action (in Gold as my proxy for the purpose of this). First leg down to 1250. Then up till 1339 on election night and back to the ‘YCL’ in December. All pretty much consensus.

 

What if. What if the huge move down wasn’t an A-B-C. What if it was just an A. Let me explain. Let us assume it was just an A. Well we have a move from 1377 till 1124. A huge drop of $253. Massive. Voices are saying that we are for sure heading lower. I’m not so convinced just yet, I may be wrong. Surf city seems to believe we are in the timing band for a low. For more in depth fantastic analysis you should head over to his site! Honestly some excellent work and he has been pretty much bang on the money for this IMC. Graddhy has posted some fantastic charts which also seem to concur that a move higher is indeed due. I am more inclined to be in this camp temporarily due to the waterfall action we have had over the last week or so. It is also here where my multi-year Diamond structure comes into play. I still think we need to hit that top rail although it is by no means necessary. I think we will. Currently it comes in at around $1300.

At this point I would exit any longs I would have open and then sit back and wait. I think the ‘B’ would be finished right here. The Matterhorn once again not breached. Back down we go to start the ‘C’. Now an A and a C wave are usually very similar in length from what I have read. Please someone correct me if I am mistaken. If so and we did indeed reach around $1300 in Gold futures, another $253 drop would take us to low and behold $1047. Just two dollars shy of the ‘Bear market bottom.’

 

Of course I have not taken into account that Gold didn’t actually bottom at 1045 but with a few cents here and there tacked on. Also didn’t top at $1377 and again bottom at $1124. Again add a few cents here and there and the picture looks like we may indeed be setting up for a multi year double bottom. A long term bottom would then be in place.

 

As ever, views are appreciated but this just came to me in a brainwave. A similar thought came to me in the fall but I forgot to post it. I did notice that from 1377 to 1250 was exactly half way to the final bottom and I would not have been surprised to see it reach 1123. I just forgot to post it. I would not be surprised at all if this played out.