Our plan for gold stocks has been to make a new high above the 2020 highs. That has been accomplished with HUI taking out 373 (current: 396 after making a high of 415).
The next part of the plan is for a 5th wave of the bull market to register target (HUI 500+/-). That is still open. I am not an EW analyst, but the 5 waves in the bull market are clear to me.
While a 5th wave can get impulsive to the upside, it is also the concluding move to a bull market cycle. Please be aware that the target is just a logical look at resistance. Huey could go higher or fall short. But the 5th wave is well in progress.
I was doing a little reading of people who do EW for a living (while also noting that I believe Hammer, who does use EW along with time cycles, sees this as a final upside move as well, at least for a multi-month stretch). Hammer, if you read this feel free to weigh in in the comments below.
I checked out Elliott Wave Forecast. I do not overly value EW, so that is my disclaimer. But I also want to see what a 5th bull market leg is about in the opinion of those who do value EW.
Wave 5: In Elliott Wave Theory, wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during 2000 were received).
The wave 5 lacks huge enthusiasm and strength found in the wave 3 rally. Wave 5 advance is caused by a small group of traders.Although the prices make a new high above the top of wave 3, the rate of power or strength inside wave 5 advance is very small when compared to wave 3 advance.
As to the above, on the contrarian positive side, everyone is NOT bullish on gold stocks. If anything, the sector is only on the verge of over-bullishness. So there is much potential sentiment fuel left, in my opinion. What could drive a new surge? How about inflationists piling in if we get the commodity trade we’ve been discussing? That would be fundamentally corrosive, but why let that stop the MOMOs?
Using GDX for volume analysis, volume is definitely more modest on leg 5 than 3. Indeed, the “launch” back in 2016 had the best volume. Wave 5’s volume is ramping up, however, so there could be a final push to the upside on volume. That volume would be the FOMOs and MOMOs coming in too late. They will very likely need to be sold to, in my opinion.
As for negative momentum divergences on HUI and GDX, that does not appear to be in play, as monthly RSI and MACD are at or near the levels of the wave 3 top. We may be able to see some of that on shorter-term charts as we move forward. But divergences are just one aspect to be considered. They all too often fail to mean much. So I will probably subordinate that aspect behind macro funda, support/resistance and targeting.
The bottom line is that where ever this cycle ends, it is likely to stop the bull for a while. Maybe a long while. What could bring on a halt to the bull? How about a top in broad markets, including prospective commodity trades (that have barely gotten going)?
Many people believe that a new inflationary cycle is dead ahead. But I am giving at least as much respect to the prospect of a broad liquidation, which could take gold stocks with it, while potentially preceding a fundamentally positive (disinflationary) macro for gold stocks later on. My gut says that could come after whatever commodity related rotation that may be ahead, terminates.
There are several fundamental options that are viable. But technically, the view appears to be one of a final bull market leg in progress, as we have been anticipating, before a long interruption.
Let’s enjoy the ride, but remain aware of possibilities. We do not want to be dumb money, which will surely be entering into whatever top may be ahead.
Hi Gary,
What about silver now ?
It’s still lurking constructively. Waiting for it to potentially lead gold. That would actually work well with the scenario noted in the update. A final blaze of glory.
“I was doing a little reading of people who do EW for a living (while also noting that I believe Hammer, who does use EW along with time cycles, sees this as a final upside move as well, at least for a multi-month stretch). Hammer, if you read this feel free to weigh in in the comments below.”
I will point out repeatedly that I have studied EW, I ‘use’ it as one tool of a few, but I am NOT an Elliottician and I don’t follow all the rules and regulations. I like a few aspects to it. I love the descriptive words used in EW Theory about what people are feeling and saying at each of the waves. It’s a great way to ‘count’ or measure sentiment. In tandem with my own work on the gold miner timing cycle, I have found it helpful but not foolproof to keep track of where we might be. And, yes, it ‘fails’ a lot and the ‘alternative’ counts do come into play, much to the dismay and chagrin of fans and critics alike.
My interpretation via time cycles is that a long term bull was engaged Mar/Apr 2024 and since then we’ve had a series of waves up and down in shorter cycle durations (I’m most keen on one month and 7 week cycles). My belief is that these shorter cycle puzzle pieces fit together in some order to make the longer term cycle puzzle come together. I’ve long held a view of a Memorial Day Meltup potential setup, and in that view it takes the form of a one month cycle corridor that affords room for me to be right (or wrong as it happens often). Ergo, we are in high energy ‘window’ as I call it where short term cycles meet long term cycles and to me I picture them as a bunch of sine waves of different sizes colliding into each other to culminate in some fashion. My interpretation is that this collision will take the form of a HIGH, which would be corrected shortly thereafter to some degree, likely via a one month and/or 7 week cycle variety in time. As for price, one can use fibonacci or prior resistance becomes support or symmetrical ‘abc’ type measurements. I trade ‘time’ first and take ‘price’ secondarily.
In EW parlance, my opinion is we could be embarking on a wave 3 of wave 5 of wave 5 of a wave 1 of some degree. This is a bunch of mumble jumble word salad and it is likely to be wrong in some/many ways. Regardless, if a final thrust upward is achieved in the late May – late June 2025 window, it is my expectation that would mark the end of this part of the cycle. I don’t think ends the ‘bull’ market, but frankly when I’m trading in one month and week chunks, I don’t have to be married to gold is going to $5K and silver is going to $100. Further, I don’t have to be correct on degree necessarily. I have to construct a view, assign some probability to that view and decide if and how I want to trade it.
As this is nearing expiration in time, this LONG trade construction as I see it has risk in that ‘time is running out’ at least how I count it. That said, I subscribe to the view that some of the best moves come right at the end just as other participants’ have tired out, taken chips off the table, etc. I am aggressively positioned but expect to be out of all speculative trades leading up to 6/20 before assessing my next trade for a pullback (how long, how deep, worth playing, etc.).
A few charts here:
https://x.com/joe_hammer_gb/status/1927763827287871576
https://x.com/joe_hammer_gb/status/1927782290010132715