[ABX] update - expecting a significant to serious bottom in metals and miners next week.

In the backlink I showed the model seen below.  It showed the potential for a short stroke 5th (the blue model but also the real possibility of a bounce and then falling off the cliff into 3 of 5.



This is all you really should be focused on right now.   That horizontal triangle is guaranteed to be a 4th wave thus penultimate.  After it happened we had to expect 5 waves down and now, by God, here it is.  At the rate this is collapsing I do not think it will take much longer to bottom but wave green 5 will be the same dollar magnitude as green 1 at about $7.50.

Note I said something important here: dollar magnitude.  The percent breakdown of green 5 is already much greater than that of green 1 as you can see on the log scale chart at left.  So don't take it as gospel that ABX is required to drop another buck before it bottoms.  For all I know, the bottom is already in!  Look at the slope of that selling!  It's like people are panicking out of metals right at the bottom, right when sentiment about gold is already in the toilet. 

And why is this happening???  Well, of course, that is essentially a fundamental of the current market and thus unknown and unknowable with any level of certainty.  Still, let me offer a working theory for people who like stories.  I think that margin debt is getting harder to come by.  Everyone knows the stock market is overvalued and in order to protect themselves they are being more careful about loaning money for the purpose of buying stocks.  So what's a gambler to do but to try to game the system?  Since gold is a very liquid market, I think they are borrowing gold (which is treated differently than borrowing cash), selling it, taking the cash and then running to the stock market to play it long.  This has been helping to fuel the buying binge.

If I'm right about this, when the market finally tires and reverses, this gold shorting is going to snap back like a rubber band into the eyes of the shorts.  They will scramble to buy the gold back in order to settle the margin debt which cannot be settled in cash.  Thus, I expect the next surge in metals and miners to be somewhat disorderly.  In other words, rapid and with panic observed.


Folks, even if Prechter / EWI is correct in their wave count, the expected bounce for ABX (a conservative large miner) is somewhere between $22 (level of prior 4th) and $26 (38.2 fib).  In other words, an easy triple.  Anyone who thinks gold mining is dead is an idiot.  Even Greenspan has been telling people that gold is the only real store of value over the long run and that it will be "measurably higher" in the future.  Now, Greenspan is not a day trader or a market timer so he's just talking structurally.  He's telling us that gold is not a barbarous relic that is just a commodity like any other.  He knows that gold is money when other money dies of its own corruptness.

I've said it before, I will say it again: if you are not a market timer you should be buying something "golden" (gold, silver, miners, etc.) for the long term hold.

If you ARE a market timer I'm going to say something you rarely hear me say: if you jump into something gold and go underwater, don't panic sell because the action right now is so volatile that as soon as you do it will be up 20% in an eyeblink.  It's time for even day traders to average into something golden over the next few days or weeks and not let the volatility chase you out because even if gold will eventually find a lower, "EWI" low, it will not go straight down there.  It has to retrace first and for even something big and stodgy like ABX that amounts to a triple.  For GDXJ it should be more like a quad.  And that is assuming that Avi is dead wrong about the decade+gold bull.

For the record, GDXJ is $21 as of this writing.  I have mentioned many times that these often collapse by 90% before bottoming and that would be $18.  I think any purchase at current prices is going to turn out to be a very, very profitable trade for the patient gambler.  Barrick gold (ABX) is now trading at 1991 prices.  This is a great depression in metals and miners.  HUI is down a full 80% from its peak!  Remember, the DJIA went down 89% during the great depression.  So these collapses are in the same ball park from a historical perspective.

At this time, trying to call the exact bottom is now just for sport (just as it was for PBR in this post).  It's like seeing the wildebeests lined up on the banks and then speculating about when the first one will take the plunge into the crocodile infested waters.  But I'm a sporting guy so below is a zoom in model of this 5th wave of ABX with my count applied.  In short, we should see a bottom early next week that will either bounce to $10.20 and then do one more lower low into August (blue model) or just take off from here.  If blue then it should be a-b-c.  If it is red then the first move up until the first good sized pullback should be 5 waves.

Other more bearish short term counts are possible but as of today these are my top two.  I do note that GLD has not hit Avi's window of 95-105 yet.  I also see that HUI at $128 is still above his range.  But I also noted many times that Avi's windows were not quite hit - investors reversed just shy of them like M+M are right now.