Do you like metals? [SLV]

Investing (gambling/competing) and charting have been a passion of mine for a long time now - like a couple decades.  But sometimes you don't need to know very much more than who to listen to in this game.  While I always do my own charts independently in order to avoid being contaminated by someone else's views, I also look around the web on a regular basis for the views of others who have developed a track record for spotting the wave count.  Avi Gilburt is one whose opinions I seek out.

Right now, two of the best wave counters on the web - Elliott Wave International and Avi Gilburt - are in the unusual position of having long term views which are nearly polar opposites.  Avi thinks that the S+P 500 is near the end of a massive 3rd wave up which will eventually retrace to 1800 ish before powering up to new highs.  He also thinks gold and silver are very, very near a 2nd wave bottom which, when reversed, will be one of if not the greatest moves up in precious metals in the history of man.  EWI on the other hand, believes that the coming market peak will be the top of a massive B wave which will then collapse into a C wave that, believe it or not, has high odds of taking the DJIA down sub 1000.

For the near term, their views are aligning: both believe that gold is bottoming and that the next big move up will be 5 waves in nature (and thus move with good speed upward).  Also, very soon they both expect the S+P to begin a decline.  In this one, however, EWI  sees 5 waves down whereas Avi believes it will be just 3 waves (corrective).

For me the jury is still out on the broader markets even though I do agree that it is time for a significant and probably rapid pullback.  But for metals and miners, I am siding with Avi and have been doing so for quite some time now.  This is mainly because GDXJ has gone down 90% since 2011 and if all we get is a small a-b-c to $1350 gold to form EWI's B wave then wave C is going to take GDXJ down to zero and I just don't see that happening.  Besides the wave count says so.

So, for the record, I believe that a monster 3rd wave up is about to take metals and miners to incredible new heights, probably because of loss of confidence in fake paper money and in those who issue it around the world. But I digress because statements like that are only true over the very long run.  Over the short term, sentiment drives relative valuations and sentiment is still quite strong for the fake money.

As another proof point of this as well as the power of Elliott waves in tracking this sentiment, please check out this Seeking Alpha ("SA") post from Avi.  If you don't have a SA account, just sign up.  It's free and they don't appear to spam you too badly.  The title of the post was:

Silver Should Rally, But Can Then Drop As Low As $14

In it, Avi uses current events to show that the supposedly tried and true relationships between current events and metals prices is just more bullshit Wall St. lore.  By having an explanation for everything, the Wall St. salesmen can sell their financial "products" to people who naturally want to know why right now is the time to buy.  After all, isn't that the most asked question of ANY salesman?  Why now?  Why not tomorrow?  Why not a year from now?  And won't EVERY salesman ALWAYS tell you there is never going to be a better time than now?

So, yeah.  Tying exogenous events to price movements is really no different than creating fake valuation metrics like PE, PS, PB, etc.  It's a sales tool for use in selling you something.  They do this because whether you win or lose, they always win.  They get a commission.

One interesting observation of the truth of this belief is in how financial pundits come and go.  Remember Abby Joseph Cohen from years ago?  She made a great market timing call and for quite some time she was the grand dame of Wall St.  They trotted her useless ass out on CNBC on many occasions to fill the vacuum between the ears of Maria, Joe, and the rest of the financial entertainment crew working there.  Of course, eventually she made a string of bad calls based on her view of "the fundamentals" and was eventually sent off to work in a salt mine or something.  JK about that of course but she lost all credibility with the viewers and so they just stopped having Abby on TV.  And then for a while it was Meridith Whitney, the female superstar who correctly called the banks down by applying all of her numbers based research.  And no, it didn't hurt her viewership that she was pretty.  Her 15 minutes of fame lasted about 12 months and then she decided to start her own hedge fund which eventually collapsed into shame and embarrassment.

Do you think she just stopped working so hard?  Perhaps all of her data was false?  Perhaps she just can't do math all of a sudden?  Or perhaps the waves just happened to be going in the same direction as her data was pointing when she hit it big and then she started to believe that the markets are data driven over short or even medium periods of time when in fact they are driven by emotion!  When the waves went against her, she stuck to her data until it sunk her and threw her ass out of the hedge fund biz in shame.  It's happened to many many big name guys too.  They appear to win for awhile and then they get creamed.

So let's go back to Avi's article which completely ignores any so called fundamental and predicts the future of things based on nothing more than his Elliott Wave count.  His article was published on March 30, 2014.  That is pointed to by the red arrow on the chart below.  Keep in mind the title of the article was "Silver Should Rally, But Can Then Drop As Low As $14".  And while it didn't begin rallying immediately, it eventually did rally hard into red 4.  After that, it (spot silver which is what Avi was referring to) did in fact fall to $14.55.  SLV ETF went a bit lower as shown below.  Avi called it right more than a year in advance and it had nothing to do with "fundamentals".  From all of this the intelligent casual observer has no choice but to conclude that people who believe in fundamentals believe in fairy tales!  Fairy tales and marketing stories.

In any case, I applied my wave count as shown in the two following SLV charts and my view, as stated below, is that the most likely thing to be true at this point is that silver has bottomed into wave 2.  There are always other possibilities but I'm watching this like a hawk for signs of a changing count but right now, this silver count looks golden.  If it does turn out to be wrong it won't be by very much or for very long. because 5 waves down are very nearly in and this is something that the herd just has no control of because it is not aware, at the herd level, that it is happening.

Below is the zoom in of just blue 5 showing how I get 5 waves down.  So we now have a nice double bottom here to work upward off of.  For the record, there is no way to be sure the herd will stop here.  Blue 5 could extend down another dollar if it wanted to.  Additionally, we could be forming a 4th wave triangle here in SLV.  I know these are possibilities.  I know it could happen.  Still, no guts no glory right?