Below is the updated chart. The big gut kick that happened in metals and miners this week moved HUI down to as low as the $112 range so that it just kissed the lower rail. Who (besides EW chartists) could ever even have come close to predicting that this had a high probability of happening?
The H+S breakdown target guideline is shown in red below but note that this is just a guideline. If this does turn out to be a falling wedge, the first real candidate for a bottom will be in when 5 full waves from that double top @$185 are in.
Right now Avi believes that this must go lower, something like the high 90s. He is looking for 5 wave down from red 4 (and that is a very normal thing for EW counters to think). By that thinking we have only had 3 down. But nobody and I mean nobody is considering that perhaps what is marked as blue a of red 4 above will in fact turn out to be red 4. They have all dismissed this because the early 2015 bounce went above blue b. In other words, blue b cannot be wave 1 of 5, blue c cannot be 2, etc. Which means that in their minds, the current wave cannot be 5 down.
But look at my original model at the top. To me this was looking like a falling wedge some time ago. And now the falling wedge is complete and I mean a perfect kiss of the lower rail. So I hope you can see from this that the herd knew that the lower rail was there and was attracted to it by some force. I hope that says something about asset price valuation: it has nothing to do with fundamentals. It is all controlled by herd think. We are now in the nervous panic phase of the stampede and that means the herd is getting exhausted.
Be aware that these things like to throw under and that HUI 100 would be a perfect looking throw under. But a throw under is not a requirement. Again, traders should be wary of one last smackdown while at the same time beginning to worry as much or possibly even more about missing out on the big recovery bounce that is certainly right around the corner. Don't let the madness of crowds affect your calm. Don't think for a second that some new normal has arrived and that gold and miners are no longer valued by society. That run to the lower rail in almost exact accordance with my model PLUS the knowledge that the models are based on herding behavior ought to give anyone with a brain the confidence to at least begin buying while there is blood in the streets because after falling this far this fast the recovery bounce, when it arrives, will be crazy strong.
Look at how badly the senior miners have gotten sold off since 2011. What once sold for $600 now goes for $115. That's well over 80%!! Even just a normal bounce to the 38.2% fib gets us to $306 which is darned near a triple from here. This profit is already built in to the charts. It WILL do at least that. So tell me, who needs to be afraid? Those long the miners or those short or who have given up on this sector because of fear that government controls everything? THEY DON'T. The market has shown this time and again.
The only longs that need to be fearful are those playing the super leveraged, options based things like JNUG because those funds are for traders, not buy and holders. Normal people should just be accumulating GDXJ at sub $20 prices and then stop worrying about it.
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