Try Silver, Baby!

Long time readers know I am bullish on metals and that I think metals likely bottomed in June of 2013.  Since then they bounced nicely and then were walked all the way back down to almost (but not quite) that level.  I did not expect such a dramatic walk back to be sure but unless and until the metals could be taken down below the June low, I had to stick with my EW model that June was the E wave of an ending diagonal:

I initially started buying physical silver on the week of June 15th.  The price actually bottomed on the 27th of June so I was a bit early but not too early if you consider that I didn't buy any of it for any of the bear silver market that had occurred from the $50 peak.  I knew that was a short term bubble and told friends and family that I would not make any panic buys thinking the train was going to leave the station.

Since the peak of 1 I have been waiting for 2 to bottom and it has been a long wait.  The head fake breakout that occurred a few weeks ago was meant to break the will of even the strong.  Part and parcel of that was the growing chance that my wave count was going to have to be changed.  One penny below the E wave would mean that I was wrong on that count, something which I stated in these pages.  I also pointed to the growing criticality of the shares meeting the vertex of the triangle.  They generally do something, either break out or break down, before that happens.

Well, we may well have our answer.  Today we had a nice gap up in silver that took it above the
hidden resistance line that runs parallel from the last head fake breakout.  The model below shows this concept in more detail.

In short, we may well have seen a significant (or even "the") turning point for silver, gold, and mining shares.  The odds that this gap up today was another head fake are very low given the wave count of these final 5 waves.  While this indication is certainly "green shoots" in the metals department, it is not high confirmation yet.  That is why I entitled this post "Try silver, baby!" instead of "Buy silver, baby" which itself would be a reference to my recent correct call on Alcoa.

If my analysis is correct, we should expect an upward 3rd wave movement in USLV really soon.  As reported earlier, I have a small money bet on this horse as a way of putting on leverage on top of my much larger physical silver holdings.  I had stops in at $50 (buy price was $62) but decided to pull them off as the chart was likely to make a decision at the vertex and I still thought/think the odds favor a bottoming of some sort here.

By the way, I am also on S+P 500 topping alert for some time now and it would not surprise me to see gold and gold miners go up while the S+P goes down.