Avi Gilburt runs The Market Pinball Wizard. Today he discusses the metal market’s 3rd wave setup and possible melt-up (1:00), potential for multi-year rally in oil (6:25) and the bond market’s surprising length of consolidation, with a rally still expected (7:50). This is an abridged version of our recent conversation, Avi Gilburt Warns Of Potential Banking Crisis; Charts Indicate Major Disruptions.
Rena Sherbill: Happy to have Avi Gilburt back on the show discussing Elliot Wave and technical analysis. Avi runs The Market Pinball Wizard investing group here on Seeking Alpha.
Let’s start with the metals market, if you would, and what you’re seeing on the charts right now?
Avi Gilburt: Well, we are now tracking something that could provide for a major melt up across the market, and we’re on the cusp of seeing if we can develop that over the next couple of weeks, but the setup has definitely not perfected yet.
Ultimately, I think the metals are going to see a very, very sizable rally over the next year or two, but I’m waiting for the particular setup I’m looking for that’ll trigger the melt-up I want to see.
Melt-up is basically where the market just goes straight up. And from an Elliott Wave standpoint, we look for five-wave structures, and ideally, we look for a third wave to trade. Why a third wave? Because a third wave is usually the strongest segment of any market rally that you will find.
So, what we’re always looking for is trading the third waves. It usually has the strongest movement, the fastest movement. You make the most money in the shortest amount of time during a third wave. And right now, we’re trying to track a third wave set up in the metals market.
RS: And how are you looking at miners as opposed to the metals themselves?
AG: Miners are setting up pretty much the same, but when I say the miners, I’m most specifically speaking of (NYSEARCA:GDX). The individual miners really vary. And I’ll give you one example. Let me pull up my chart on Newmont (NEM). That’s probably the best example I can give you.
Back in 2015, for those that followed me over the last decade or so, you may probably know that, we called the top in the metals market for gold to hit the top, 1915 or 1916, I forgot exactly the number we called for back in 2011. And at the time, I remember everybody was freaking out, saying 2000 is not – we’re not even talking about 2000. How much farther past 2000 are we going to go was the big question. And we were saying, we think it’s going to top at 1915. Gold topped at 1921 and entered a multi-year correction.
When we started seeing that correction ending, we rolled out a mining service over at Elliott Wave Trader, our first platform, and we rolled that out in actually of September of 2015. And one of the stocks that we suggested to buy for a longer-term hold was Newmont. And I think we picked it up at maybe about $15 at the time. I think that was the price at the time. Back in April of 2022, Newmont rallied, and I had a minimum target for Newmont at about 82, 83 from a long-term perspective.
So, when we hit 83, 84 on Newmont, I told our subscribers that I’m basically selling almost all my holdings in Newmont, which was my largest holdings in the complex, individual holdings. And a number of them thought I was crazy at the time also, but as we know, I think Newmont hit a high of about 86 and then dropped down below 40. I think it spiked just a little bit below 40, which was our initial target.
The problem I have with Newmont is that I’m not sure if Newmont is even going to make a higher high above that which was struck in April of 2022. So, Newmont could double from here. It could, but I think that there are much better opportunities than Newmont, and I think Newmont may hold GDX back a bit.
So, when I’m looking at the mining complex as a whole, I really am saying, I think you have to be careful about which stocks you’re looking at in the mining world.
Now look, at the same time, if you buy Newman at 43 and we do get up towards – we approach even the prior highs, you’re close to doubling your money. I mean, that’s not so bad. Do that in a couple of years is not so bad. But I think there are better opportunities out there relative to Newmont.
RS: Gotcha. And anything to say about silver?
AG: Yeah, I love silver. Silver, I think, has potential. If we get the setup I want to see over the coming weeks, if not, it may take a little longer. But overall, I think silver could be setting up for a similar type of rally that we saw in 2010. And if you go back and you look at 2010 into 2011, you saw an almost parabolic silver rally. I think silver is setting up for something similar.
Again, if we don’t get the set up I want to see, we may get another pullback in silver, but it’ll just be a matter of time, I believe, before that set up actually develops and perfects. And then I think we have potential. Not guaranteeing it, but I see strong potential to get a similar type of rally that we saw in 2010. So, I think silver can outperform most everything else in the complex.
RS: So, switching a bit to commodities, what are you seeing in the commodities realm?
AG: Well, specifically on oil, I’m looking for a major multi-year rally to develop in the oil market. I’m not wholly convinced that the absolute bottom has been struck just yet, but there are a number of oil equity stocks that have bottomed, and a number of them that really suggest a lower low.
But even if we do get a lower low and a number of them, I think the other ones that potentially already have bottom will just get a higher low. We call it a wave two retracement. You get a wave one off below, and then you get a wave two retracement, and then that sets up your third wave higher.
What’s interesting about the commodities, whereas third waves are very strong, even in the commodities, commodities are known for their fifth waves. As strong as third waves are, their fifth waves are just sights to behold massive moves and what we’re setting up is a fifth wave in a lot of these commodities.
So, I’m expecting a sizable rally over the coming years in the various commodities, especially in oil, but as it stands right now, I’m not wholly convinced that all the charts have bottomed.
RS: Let me ask you this, is there anything coming at you on the charts that you’re surprised is happening?
AG: The one thing that surprised me right now is how long the bond market has been consolidated. I was not expecting this long of the consolidation, but I am expecting a bond rally, but I’m not sure if your question really had to do just in commodities, but that right now is probably…
RS: No. Yeah. In general, in the market.
AG: Yeah, the bond market. The length of this consolidation that we’ve seen in the bond market, I did not expect it to last this long, but I am still expecting another rally to be taking hold pretty soon in the bond market. We’re actually tracking a setup right now that could confirm a nice size rally to be seen over the coming year in the bond market.
RS: How do you look at or what’s the correlation in your eyes between the bond market and the stock market?
AG: This is something I actually wrote an article about that came out this morning. The issue I have with the term correlation is that it almost takes a more superficial view of the market. You look at one chart, it’s moving this way. You look at another chart, it’s moving in the same way.
So, people assume there’s some type of correlation there. When you take the charts apart and you look at them individually, what you do is, you look at where they are within their own structure and within their own trend. And yes, there are times that charts are going to be seemingly correlated, but all they’re doing is trading within their own specific patterns for a period of time.
I remember, and I wrote about this in the article back, this was probably the most glaring point, back in 2016, I wrote a very, very detailed update to our members about all the different seeming correlations that people have been following in the market at that point.
And I said, based upon a number of these charts, a lot of these correlations are about to break down. In early 2017 – and then we saw it happening as we went through 2016. In early 2017, one of my money manager clients sent me an article from Morgan Stanley that, it was like January of 2017 that said, we haven’t seen a breakdown of these type of correlations in decades.
So, when you’re able to take apart the chart and understand each chart on its own, not only do you not have a need for correlations, but you can even determine when those seeming correlations are going to break down. So, I do not look at one chart to identify a move for another chart. I rather be analyzing each specific chart on its own and asking, what is this specific chart telling me on its own?
I don’t take into account any other charts as well. I look at each and individual chart on their own and I analyze it as such. I don’t try to take cross analysis. I’ve seen too many people get hurt doing that.