USLV update - critical juncture alert

In this post I provided a very short term model for USLV which indicated that I was expecting a nice gap up in the C wave.  Happily, today's action matched the model perfectly and I was able to exit the trade on the gap down from 47.40 to 47.20 by using a stop market order placed just below the kiss of that resistance line.  The important thing wasn't so much the ability to capture ~5 percentage points on this trade as it was to test my understanding of the state of the chart.  5 points is chump change relative to what this is going to pay once the bottom is in.  But the big gains will mostly be had by those who are sitting there waiting for the setup and who are secure enough in their chart reading skills that large, leveraged bets can be made when the time comes.

A big part of this is knowing what constitutes major support and major resistance which is why I made this post on that subject.  The chart in that post was SLV.  Below, left are the major support and resistance lines for USLV.  Note that these lines are "hyperaccurate".  I didn't just rough them in.  I zoomed into the 5 minute scale to make the line sit exactly on top of the two peaks circled in red.  I know it does not look like it in the picture but that's because the line location is not redrawn perfectly by the software at different scales.  But the coordinates stay true so that the line will be accurate if you zoom in on some later portion of the chart.

Above, right and also below (with higher zoom) you can see why this matters.  The upper turning point downward back in mid March was close to that 14 month old trend line but it was not perfect (it looks perfect upper right but the higher zoom below shows that it was off by a little bit). 

But after the A-B-C  of the past 4 days, look how perfectly that resistance line has been respected by the chart!  I find this absolutely amazing no matter how many times I see it.  In fact, the chart either had to break out of this down sloping trend line or it would slide down it just as it did.  Since I suspected that this was a C wave (actually wave 4 of a larger downtrend) I did not think it would have the power to break out of such a long standing resistance line (usually it takes a 3rd wave) and this is what gave me conviction to sell into the strength, catching nearly the exact peak.

And so now, as in tomorrow, silver has to make a very big decision:   Was this really just A-B-C or is it actually something much bigger.  If this is an A-B-C, that resistance line will hold.  That would likely mean that the wave which ran from $61 down to $44.50 was a 3rd wave and that what just finished today is a 4th wave.  That means one more USLV wave down to about $35.  If that model is the correct one then it should result in a throw under of the large ending diagonal shown within the large blue circle above.

HOWEVER, there is some evidence that a metals bottom could be confirmed as soon as tomorrow.  So it should not be ruled out and the breakout should be actively looked for.  What evidence?  Well, it comes in several forms but one important form is the PAAS chart.   PASS is currently in the retracement range that I expected for its wave 2 down.  If this count is correct, a powerful wave 3 should occur very soon.  If instead this breaks down to a lower low then everything has to be rethought.

PAAS bounced off the 50 and tested the 38.2 from below.  That is typical of a stock that has more downside.  Usually if the bottom is in, the reversal is quick in order to sneak back up without people noticing it.  Btu here we have a clear a-b-c back up into the 38.2 and that should be regarded with great suspicion.

Bottom line: if USLV or PAAS break out of the resistances shown above then it is a major, major event and likely signals the next wave up is in hand.  That would be a 3rd wave up.  That means big bucks made in a small amount of time. So, while this can happen and one has to be aware of what the gap up really means in this case (the break out of a 14 month old trend line/important), the current chart model is that there is another wave down for metals and miners.  In that case, PAAS probably ends up at the 61.8 fib