Confirmation, Time, and Targets

I have good news and bad, but the bad news isn’t really all that bad either. The good news is that we have done a great job of pinpointing and navigating the lows of what appears to be an ICL ( a deep meaningful low) in the precious metals market. The bad news is that we now have to navigate the upside and as you will see, its a bit trickier than many may expect.  Lets quickly review the markets first.

SPX– This has been no picnic for investors either. The SPX is basically flat for the entire year. Strong sell off and reversal yesterday, but can it break to new highs? It needs to be monitored. A break below the July lows in the next few weeks would be very bearish in my opinion.

The USD looks toppy at this point. Good for commodities.

WTIC – I still believe OIL is about to bottom & run higher , based on MANY Energy/Oil stocks  and this chart posted yesterday. (See Tuesdays report)

NATGAS– this actually looks like it wants to finally break upside too. 

Sidenote: I want to point out how NATGAS in the above chart ran up along the Bollingerband from April lows into May.  Note how this can happen because Gold & Miners will be approaching their B.B. now.   I always hear  people say that’s a sell signal. Is it?  Was it worth it here?

GOLD, SILVER, and MINERS

(Some skim my charts and dont always read what I write.  My advice here is that you want to read the below lengthy explanation)

Did you notice the opening Theme Picture? I have received many requests asking me something to the affect of , ” You got us in at the lows, how will you navigate us through the rally?”  Or  ” How can we trade this, I dont want to lose any gains.”   I understand.   Especially depending on when you chose to get in ( last Friday? Monday? Tuesday? Wednesday?) the first down day in Gold may affect people emotionally. Lets be serious. There will be pullbacks and surges higher and no one really has the ability to announce ahead of time where these “Wiggles” will show up.

We can all do some guessing ( fairly accurate in some cases) based on moving averages, prior resistance, 1-2-3-4-5 / a-b-c/ 1-2-3-4-5/ a-b-c / 1-2-3-4-5 /  Fibonacci points,  etc.  It works and I do at times use those in my own trading, but please understand that I am not here to try to help everyone day trade their positions.  The main picture that I chose for this theme is to show you that basically, the target now is a “Time period” for precious metals to run higher.  Remember that “All Bottoms Look Different”?    All rallies can too.  The target becomes “Time”.   I will explain.

GOLD WKLY – These square boxes are a few of the ICL’s from the past 2 yrs. They go from lows to peak in ‘roughly’ 2 or 2+ months. lets say 8 weeks.  NOT STRAIGHT UP by any means, but ICL to PEAK is 2 months.

1. Notice that some ran higher week after week after week.

2. Some ran up and then went sideways or had ‘wiggles’ along the way

3. again noteworthy that from low to Peak, 2+ months was the ride, except May-July 2014. Straight up 6 weeks, no wkly  pullback.

LESSON:

Can you tell me what kind of rally is about to unfold?   We have extreme C.O.T. readings, readings not seen since 2001 lows?  What if I “Guess” and tell you that we are near the Bollinger band, sell today  & buy a pullback.  THEN we get this type of short covering like 2014?  That “Down day ” on June 16 was only down pennies.  No one could get back in without feeling like they were chasing & buying a top, but it ran on & on & on.  We’d be at the Blue arrow now.

Lesson 2:

GDX Daily Cycles –  They are roughly 20ish to 30ish days in length now. Its hard to judge when the Middle of the cycle will occur, but that might be the ‘peak’ of the 1st daily cycle.   Some tell me that want to sell there and re-enter at the daily cycle low.  Why?  They remember last NOV to DEC 1st daily cycle  (see below magenta arrow).  It ran up & dipped right back down. That is your choice, and it might work out if we get a daily cycle like last November.  Also please note however, that was really tough to trade successfully.

1.  GDX did run higher for 14 days.

2.  It tagged the 50sma & dropped from there

3.  Actually rallied higher to the 50sma again ( would you have re-bought then?).

4.  GDX then Fell back to the real dcl. “Shake out” style.

5. IF YOU SIMPLY HELD for 2+ months, you caught lows to the peak (Magenta box). The second daily cycle was explosive.  SIMPLY HOLDING DID NOT WORK FOR JNUG !

6. The ICL in June- Aug 2014  ( Blue Box) is the example of selling the first daily cycle NOT working out at all.

Did you notice on the above chart that the 3 ICL’s and Cycles shown are all different? One screams higher, the 2nd one bounces in the 1st daily cycle and then screams higher, The 3rd meanders higher, shaky & rather untrade-able. But they ALL go from ICL to peak in about 2=Months.   The TARGET is TIME.

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 So back to GOLD–    Gold is on day 13 (?).  I question this because in the past I have counted a move out of a triangle formation differently, and this may apply.  Miners are on day 5 if you use GDX.  So basically …

1. We could hit resistance and drop or go sideways and break through later  (purple arrow).

2.  Strongly burst through and maybe back test later (Green Arrow).

GDXJ– Some thought we should ‘sell at the gap ‘, but GDXJ extended higher. It is at resistance, it may pause, pullback, or surge higher.

GDX – also extended into the close. Short covering could carry the rally further.  GDX appears to only be on day 5, but…

GDXJ is at resistance with the 50sma and the Bollinger Band break, and appears to be on day 13?  I possibly would have told you to sell yesterday if I was teaching a day trading course,  but I am not doing that here. We may not drop very much.

If I was teaching a day trading course,  I may have pointed this out on a 4 hr chart as a sell also, but for now we could still go sideways or higher too.

GDXJ 4 hr.  Strong move

Conclusion:

 SO I hope everyone understands what I am saying here.   We got in near the lows.  The target from here is really a time frame.   We should rally for the next 6-8 weeks or so, and the second daily cycle may be the top.  You may trade as you like, but I am looking at a time frame. (  Leveraged positions should be traded however, and if you are using them, you need to research them & understand how the decay works).   There is a possibility that we just nailed THE BOTTOM of the bear market ,  but we wont know that until later.  I will be watching various things as we move forward to identify where we might be at that time.    Not only do all bottoms look different,  the rallies moving out of them are all different too.  I have shown you various styles and some are very difficult to trade or micromanage, I am not here to teach a day trading course. THERE WILL BE PULLBACKS.  I know that we have experienced traders here and you can trade this daily cycle as you see fit  🙂 

It is also important to remember that various Miners all move at their own rate.  Look at SA right now, a little rocket ship!  Remember when GDX ran up in NOV 2014 for 14 days and then dropped right back down to the lows?  CDE did NOT drop back down to lows, in fact it doubled from the Nov Lows, so selling that miner in the 1st daily cycle would not have worked.

 I also see that OIL & possibly NATGAS look ready to move higher, and some may be looking at OIL stock too. We’ve already seen some big moves out of the Energy lows. I will try to just offer some good trade opportunities or entries when these set ups arise. During this run, some of the Miners will likely sell off,  so we will look for set ups to get in at the lower prices too.

THIS WILL NOT BE AN EASY RIDE,  it never is when money and emotions are involved, but this really should be a time when we can make some nice profits. I look forward to the next few weeks!

~ALEX

I should mention that some here are using options.  If you know how options work, some have nailed some good profits fast.  Should you sell or hold for more possible upside? I always say lock in some of those gains.  At least take your principle back and that way you are riding a free trade. Playing with the house money as they say.  Keep this saying in your mind at all times when using options…

Options are like dead fish.  The longer you hold them, the  more they are likely to stink.