An interesting long term gold miner's chart.

I've been working from the ETF charts for miners for some time now:  The main one available through TDAmeritrade StrategyDesk is GDX, the gold digger's index then of course GDXJ for the juniors.  The problem with these charts is that they don't go back very far.  ^HUI on yahoo is the best one, but even it only goes back to 1996.  In order to have the context to understand current waves, you must have a large data set.  What happened before has a direct impact on what will happen in the waves going forward.  This is true for all cyclic functions.

I did some searching this weekend and was happy to find a chart of the Barron's Gold Mining Index that goes back to 1940 (not perfect but better than what I have now).  The best count that fits this time fragment is as shown below.  I hate to say it, but the shape of that ending diagonal is fairly unique and hard to mistake for anything else.  I sometimes refer to this as a fish tail as well.   Look at the alternation between wave 2/5 and 3/5.  In 2/5, we got a perfect horizontal triangle for the b wave.  In 3/5 we got an unequivocal vee correction for the b wave.   Also note that the a wave of of 3/5 just missed the top rail while the c wave went just a tad further in order to tell us it was in fact the end of the a-b-c sequence.

In addition, we have presence of my "proprietary" (not that it's that special, just want people to know that it is personal observation and not part of the EW rules) start of wave triangle right at 4/5 and which is circled in red above. This indicator should tell us whether or not the above model is valid.

The normal meaning of a triangle when it is the wave itself is that that wave is the penultimate wave.  So, either b or 4.  For example, in the historical data above, the b of 2/5 wave was a perfect text book horizontal triangle.  However, I have found many times that a small triangle at the start of a wave means that the wave about to be drawn is the last one of the impulse or contraction. 

Most people are looking at that small, circled triangle and thinking that it is the 4th wave and that one more wave is coming down. It could work out like that and if it did we would know that this ending diagonal model is wrong.  In fact, that is what will likely happen if the EWI guys are correct about the current wave in GLD being E of 4. I like my model above but of course time will tell.  Still, it gives us something very clear to look for:  The 2/5-4/5 line will either hold or it won't.  If it does then we get the model shown above.  If not then a path not drawn in above will likely play out: 5 of A down will play out, probably a-b-c to kiss the new resistance line from below, and then 5 more waves down into C.

So to recap:
If this breaks down right now for one more wave down then it will be a 5th wave followed by a rally to kiss the lower rail from below and then to much lower lows.

However if this holds and then travels 3 waves up then some time before 2020 one of the worst bear market for miners in history could occur. Remember one thing about gold: when people are living hand to mouth, what good is it?  Gold is only of value for those with excess production relative to their consumption that they need to store in a temporary token of value.  Or maybe the economy won't be bad but bitcoins will be used by government.  At first they could see like they work (thus again distracting people away from honest money like gold) but they will be gamed like everything else (and probably much, much quicker than dollars were).  If people think they don't need gold for a period of time because they have computers and bitcoins then miners might suffer.

Careful: this is a LOG scale chart.  It's perfectly valid for wave counting but the scale will throw you unless you look at it carefully.