M+M bottoming call threat model

In this very recent post I made a bold bottoming call for metals and miners.  At this time we have not received first confirmation of this call and so I want to show you how the herd could, if it so chooses, morph the wave count to hit a lower low and still be within the EW rules.  Do I think it will happen?  No, this is not my primary count.  But yes, it is possible and so it must be discussed.

The model below tells the story.  It says that it is still possible that the recent bottom was not 5 of 5 but instead A of 5 of 5.   That would make the current rally B of 5 of 5 and then we get one more 5 wave move downward per the red model below to throw under the falling wedge as show.

We should be getting some clues about this very soon because if we are in fact breaking out then we should be near a 3rd of 3rd in the upward count.  If this is the case as I think it is, we should get a gap above the top blue rail very soon now.  A 3rd wave sometimes has a gap associated with it and a 3rd of a 3rd usually does but a 3rd of 3rd of 3rd almost always does.  So a very conservative and safe play here is to sell your metals and miners and then only buy back on the first 3 wave dip after the break out of that top rail occurs.  This will avoid any down side.  However, I think it would also risk missing 20 or even 30 percent on some of the most junior plays so this is not my personal strategy this time.

But at the end of the day, all gambling has risk and the prudent gambler knows the risks and knows then thinks are starting to go sideways on him/her.  If this doesn't begin to really sky rocket in the next couple trading sessions then we have to realize that this could just be B of 5 of 5 and act accordingly.



Odds, only odds.
Never certainties.

That's why it always pays to have a threat model.