Interesting silver chart

Metals are at a critical inflection point.  On one hand, they are at historical levels of bearishness.  On the other hand, the conventional wave count suggests that only wave 1of 5 is completed yet.  So it is very difficult to know where they go next.  I'm still gathering all of the data but below is an interesting view of the SLV chart when shown in log scale.

On this chart we have a clearly downsloping channel.  SLV just broke down a major support line and appears to be back testing from below.  This is normally the time to sell because if the back test fails, the market will see that support has turned into resistance and players will abandon ship.  At the same time, 5 downward Elliott waves have technically transpired even though the 5th wave is not about the same size as wave 1 yet.  These size relationships are guidelines only even if strong ones.  The only real requirement after completing the 4th wave triangle is that 5 waves down takes you to the 5th and final wave of the sequence - that being the entire bear market in metals since 2011.

It is no coincidence that the market found support where it did.  That bottom was the exact centerline of the ever-so-slightly narrowing channel.  In other words, this could qualify as a falling wedge and wedges often terminate with a mid channel 5th wave.   The conventional wisdom model is the green one but I would not rule out the red one. 

Thus, this is a difficult time to trade the metals and miners.  If the red resistance line can be broken out of, especially with a gap or high volume move "with gusto", the red model gets the nod.  A subsequent break back up into the 4th wave triangle would be a strong second confirmation.

But if SLV prints a lower low than the recent low of $16.04, look out below because wave 3 of 5 will be playing out with a target price of $12.  If that happens then folks, I'm abandoning TVIX and playing JNUG.  I would always rather play something long than short but I also have to play the odds.  The odds are currently very high that the broader markets have put in a historical peak and so my current focus is TVIX.  But if we get a clear washout metals and miners (M+M) bottom then the run up for SLV will be from $12 to $20, minimum and the bottom should be easy to spot near the lower orange rail of the down sloping orange channel (count the waves!).  With EW to guide re-entry, one should be able to capture most of the subsequent bounce.  That is a huge percentage gain just for playing SLV with zero leverage.  The next step of leverage is USLV, the next step up in leverage is GDX and then GJXJ and finally the ridiculous leverage of JNUG.

I hope that they run SLV down to $12!

Why would I say this?  I am on record as having my entire retirement savings in gold and silver bullion coins.  Why would I want silver to go down?

Simply because I do not price my wealth in dollars. I price it in troy ounces of precious metals.  If silver hits $12, oil will hit $20; deflation will not pick on the metals!  It will spread itself around the economy.   Also, as a trader, one more big move down (made up of waves 3,4, and 5 of 5) would be a clear and unambiguous 5 wave EW count that virtually guarantees a massive percentage bounce from the bottom.  Armed with such odds, the use of high leverage is much safer.

While the Ponzi plate remains spinning I will play the game.  When the music stops and everyone rushes for a chair, I already have mine in hand and it is a small throne made up of gold and silver coins.   That's what I call diversification.