Last month, we posted charts that showed a bullish scenario for gold. In that view, precious metals should make a low sometime near or after the middle of 2016 and then should embark on a sizable rally that could take gold to new highs over the course of several years. However, there is another way to count the Elliott wave form in precious metals that is somewhat less ambitious while still being bullish into 2017. Here we explore that slightly more modest possibility in the context of silver futures.
Viewing the entire decline from silver's 2011 high as corrective, we note that the most recent stage of the pattern - i.e. the period since the middle of 2014 - showed a persistent decline with overlapping waves. In Elliott wave terms, the pattern appears to have been an ending diagonal. Also, since its upper boundary has recently been breached, we conclude that the pattern is probably complete.
If we consider that silver's decline since 2011 might represent merely the first part of an even larger correction, then we would expect the next stage of the pattern to form a lengthy consolidation that might drift somewhat upward in coming years. The path drawn on the monthly chart shows how the first parts of that move might look when they are fitted to the dominant 40-week price cycle (not shown). The initial step of the consolidation - small wave (a) of [a] of 'B' - should involve an upward move. That step is probably already complete or nearly so. Soon we should see a downward move into supports that lasts until around the middle of 2016. Then price should rally in the third sub-wave of [a] into late 2016 or early 2017.
Since this forecast is for a corrective pattern to develop, the low that we expect for the middle of 2016 could venture beneath the late-2015 low, although it does not have to. Possible support targets include 14.30, 14.00, 13.00 and 12.70 based on measurements from our weekly chart (not shown).
Going forward from 2017, we would expect additional swings to keep silver within the range from the nearby lows to approximately 27.40. The next several years should offer a good trading environment for those who are willing to trade in both directions.
Alert readers will notice that our count for silver does not match the count for gold that we posted last month. We expect the patterns for the two metals to diverge in coming years, and our April newsletter will go into more detail about why that might be and how the longer-term patterns might develop. Click here to request your copy!