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November 26, 2005

Elliott Wave on Gold and Silver: Important Juncture is Near
by Dan Stinson

Short Term Forecast

After the lows in the late summer, Gold and Silver broke out of triangles to the upside in the fall. We have been bullish on the metals as we have traced out these waves to the upside and now an important juncture is near.

Silver is playing out in a diagonal pattern and a move higher to at least the $8.30 trendline level is expected, but we will likely see a throw over to the $8.50 area. (see the second Silver chart.) The first Silver chart indicates that Silver is pulling back in wave 4 of wave (5) of wave c up, so it is getting close.

If we consider seasonality for price movements, we know that the metals topped out in early December last year, but February is is the norm for the highs. For the previous years that February was the high, we would normally see downside in October and November with a rally through December to February. We have not seen this normal seasonality pattern for the last two years and a high in December is expected again.

We also have not seen full participation with many Gold or Silver stocks in this rally. Many of the stocks have even pulled back violently, but are setting up for the next wave up after we see the next pullback in the metals. We are following a few Silver stocks, but we have one that has broken out of a perfect triangle pattern and indicates that further upside is expected as well.

The Gold chart below also supports the Silver count as they are both close to completion. We can see that Gold broke out of the wave (IV) triangle pattern and is also very close to completing the rally at the top trendline in wave (V) as well. Gold is currently in wave 4 down of wave (5) up, which is the same count as the Silver short term chart.

When we see the price action for Silver break above the top trendline on the second chart, the next move below the top and bottom trendlines will be bearish.

These charts are only a guide so that you can follow the action and watch for the expected topping action. The action could play out exactly as illustrated or it may need adjustments as we follow it through.

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Dan Stinson
Elliott Wave Chart Site
ewavecharts.com

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