Wave count change: Serious chance of one more silver smash before the real bottom hits.

Bottom line: I think my silver bottoming call in June will turn out to have been premature.  In other words, I think the patient dollar cost averaging folks are going to get another chance to buy at un-sustainably low prices.

The reason for this new direction is that I'm looking at the chart action in SLV and USLV and it really seems like we are working on a 4th wave triangle here.  If that turns out to be the case then it will be the penultimate wave and if that happens then expect a lower low.  Besides, after such a long metals smack down over the past couple years I would expect some kind of a capitulation, high fear, high volume bottom and we just haven't seen that yet.

The following chart shows my new EW count.  In short, waves 1,2,3 and 4 of the big run up in 2011 were the normal sized wave and then the extended 5th wave was a big, massive panic into silver.  After those 5 waves up we should a-b-c back to the prior 4th wave.  According to this model, that wave is around $15.  If this model plays out then we will be left with a massive inclining double bottom that will fuel the next big run up to all time highs.

At the very least this chart should show just how small the silver market actually is.  If the herd panics into metals again (I mean when the herd does this since the fiat currency is certainly dying right now), the next move up is going to be a huge percentage mover.

Note that there is support at around $17 as shown by the declining red line.  If that breaks down it could panic the few remaining metals bulls.  I can afford to be a metals bull forever because I hold the physical metal, not paper promises and also because I'm not leveraged in my holdings.  So when you see the panic happen, buy while there is blood in the streets.  It does not really matter if you end up buying at $20 or $15 or even $10 because the dip to those levels will be short lived given the rising global interest in holding metals instead of paper assets. The cure for high prices, as they say, is high prices.  Likewise, low priced stuff only gets more attractive at lower prices.

Also, keep in mind that these are only models.  It's not a crystal ball.  It's a way to get better odds in the great casino of life.  Catching the exact bottom is mainly for ego.



Here's a zoom in on just the C wave that is almost finished forming:

Finally, here is a close up of what I now think is the 5th of C.  My count update is driven by the shape of the wave that is now unfolding.  This is not a normal motive wave.  This looks a lot more like a corrective one and if that is true then I have to look for a count that supports having a corrective wave here.  This new count fits that bill.  This new count will be invalidated by any significant break out of the down sloping green line.  No matter what happens, just keep in mind that the goal of the herd is to fool as many predators as possible.  This is why trying to catch the absolute bottom is more entertainment than investing strategy.  With stocks and bonds you always have to worry that they will BK on you.  Metals can't do that.  Dollar cost averaging into the physical bullion will always be a good strategy.


The best way this could end for silver is to rip the band-aid off quickly in a really rapid extended 5th wave collapse that just wipes out anyone who has been playing on margin with monster leverage (hedge funds...).  There is nothing like a rapid, capitulation type collapse of a hard asset like silver to call in the new set of buyers for the next run up.  Everyone who bought at $50 should just be disgusted by the collapse and swear never to buy metals again (even though they should be swearing never to buy the peak of a panic again).  Still, I think anyone who bought at $50 will, within 4-5 years, be whole again. I expect the next run up in silver and gold will be driven by some demonstrated duress in the global financial system and perhaps in the US government (instead of just fear of same as was the case during the first big run to $50).