Sentiment Speaks: Where Can I Get A Good Pastrami Sandwich While I Wait For My Gold?

The metals have been in a consolidation for over two years.

I think there is still more frustration ahead for the metals longs.

I am looking to begin another pullback shortly, which will be a major buying opportunity.

There has been no trade more frustrating than the metals complex for the last several years. In fact, I cannot remember the last time I had to wait so long for a pullback to complete. So, while I have been waiting, I have been getting quite hungry. So, can anyone recommend a good place to get a pastrami sandwich while I wait?

If you have not gotten the point, it simply means I think it may take a bit longer before that next bullish phase really takes hold. So, while we eat our pastrami sandwich, allow me to explain how we have arrived at this juncture.

You see, as we were preparing for the bottoming in the complex back at the end of 2015, we began buying mining stocks which had exhibited clear bottoming structures in the last quarter of that year. And, that served us quite well. In fact, we caught the run in the GDX from the 13 region to the 31 region, which occurred within 8 months. When this market runs, it runs hard.

But, I was initially expecting that it could run even harder. However, when the market made it clear to me that we were entering a pullback phase, while we did miss the first 3 points off the high from 31 to 28, we did catch that next decline from 28 to 19. And, as I have said many times, while we cannot be perfect, we recognize quite well when the market is shifting below us and adjust rather quickly.

In fact, this is how we use our Fibonacci Pinball method of Elliott Wave analysis to give us early warning that our primary expectation is wrong, so that we can adjust rather quickly to make sure we are on the correct side of the market the great majority of the time.

So, within a 12-month time frame, we were able to catch 24 points of movement in the GDX within an 18 point range.

However, once we dropped down to the 19 region, the market had the makings for a strong rally set up. In fact, as we moved into 2018, I had expected that we would see a very strong showing for the metals market. Yet, I had one proviso: The GLD should not break 119 if the set up was going to hold.

As we now know, not only did the GLD break 119, it dropped down to the region I highlighted in the 105-109 region if we did break 119. But, what astounded me about market was it had a very nice set up to break out and run strongly. Yet, it was not meant to be just yet.

The one lesson many should come away from this type of experience is understanding that not only are markets not linear in nature, but we can only address them from a perspective of probabilities. The pattern presented at the end of 2017 and into the start of 2018 would normally suggest that we have higher probabilities for a break out rather than a break down. Yet, this was one of those instances where the lower probability scenario took hold. It happens, and it is why we can never say anything is certain in the market.

This is also why you have to understand the parameters of the set up quite clearly rather then simply following part of the analysis and then get angry when the market moves against you while you take no action.

In my work, I will always present the parameters of my analysis, and it is up to the investor as to how they want to incorporate that into their investment plan. But, please keep in mind that my analysis is based upon sentiment patterns we track in the various markets we follow, and they are all based upon probabilities, not certainties. And, our analysis will also outline where those probabilities will shift.

In my last article on metals on Seeking Alpha, I presented you with my parameters, and they still remain intact as of today:

Wherein Fibonacci mathematics governs much of the progression and regression we see in nature, so to in our financial markets. To that end, I see the 21.50-22.30 region in the GDX as much more important to the gold bulls than the 21 region seen as important to Mr. Hamilton.

You see, R.N. Elliott identified that markets move in 5 waves in a primary trend, and 3 waves in a corrective trend. Thus far, the GDX is evidencing a corrective 3-wave rally. The minimum target for this corrective rally is in the 21.50 region, but it can extend up to the 22.30 region. Both of these targets represent Fibonacci confluence points as calculated through our Elliott Wave analysis. As long as the market remains within that resistance region, it points back down to the 16-17 region before a major bottom is struck.

So, while the perma-bulls in the gold market may be right that the metals have finally struck their long-term bottoms and the next major rally has begun, we will need to see a move through the 22.30 region to be convinced. Until that happens, early 2019 may provide the opposite of what the last prior year's have given to metal bulls - a metals decline.

When I wrote this article over a month ago, the market was in the midst of a strong rally. And, many perma-bulls were certain it was going to be the start of the next major move. However, the GDX stopped dead in its tracks at 21.54 in that rally, and then spent the next 3 weeks in a pullback.

For now, my parameters remain the same. As long as we remain below the 22.30, with the 21.50 region still being the initial resistance point in the GDX, I think we are topping out. And, I think we are likely within a week or so (if not within days) of starting another larger degree pullback in the metals complex, especially as long as the GDX remains below its resistance region.

Housekeeping Matter

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Disclosure: I am/we are long PHYSICAL METALS AND VARIOUS MINING STOCKS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own various hedges in the complex, and am looking to add a bit more.