October 13 2014
Often you will hear the expression “Dont try to catch a falling knife” when a sector or stock is relentlessly selling off. In the past few years , we have seen it repeatedly happen in the Precious Metals sector, and most of you are ware that we had some significant lows in place on June 2013, Dec 2013, May 2014. I have been saying that I think we are at another significant low (If you follow Cycles, you know it as an ICL) . Is it possible that we could go lower, instead of trading off the current lows put in after last weeks FED MINUTES? Of course, but are there ways to look at – actually look INTO – the markets, and try to gain some insights as to what may be currently happening. I want to show you what I look at in times like these…it is by no means guess work. Starting with SILVER
Starting with SILVERS break down, most see it as a “Continuation” pattern (And it may be).
Sometimes a move like that can just “Run the stops” set at those levels to “Shake out” weak hands. If THAT was the case, you would expect SILVER to do more than just “Back test” that broken floor. Look at my next chart of Silver Below…
I developed an indicator that I use to ‘indicate’ when it is “Safe” to buy Silver and a rally is likely. It has worked in the Bear mkt sell offs, but you do miss the beginning of each rally. You can see below that that indicator has not tripped here yet. If we get a simple 1 week “Back test”…I doubt it will cross up, it should stay imbedded below 20, thus a backtest would not trigger a “Buy”.
I have mentioned this in prior reports , however, and I want to mention it again. SILVER STOCKS got toasted in the recent bear mkt sell offs.
Silver dropped .20 and Silver stocks were down 10% / Day – THIS is what I see AFTER SILVER just broke to 4 yr lows.
NOT what I would expect if Silver was about to crash to $10-$13, so I ask, “Is Smart Money Accumulating?”
Last week I pointed out RIC and other GOLD Stocks at support / charts still apply
Many are afraid & even warning me that Miners can drop FAST ( I Dont blame them) , many want more proof… “ARE WE AT LOWS”?
Sentiment is extreme hatred or fear of Miners & Metals ( by the way, I LOVE that as a contrarian )
Lets dig DEEPER.
The C.O.T. is now where MAY LOWS came in. (Click to enlarge)
For the sake of time, I have 10 more charts, but am only going to include a couple more. These charts are going to be a bit “Heavy” – a bit Deeper than surface stuff and you may need to really think about them, so I want to get this report out by 8:30 Eastern time. Let me explain…
I started trading Miners in 2001. A Technical Analyst that I followed and later became my teacher called the bottom and recommended my first purchases, which were HL at 90 cents and a company called BGO (later bought out by GoldCorp I think). I only had a small amount to invest, so I wanted to make the most of it and trade it successfully. Timing was everything! I felt that if I could learn to take profits near tops and re-enter on the pullbacks my money would grow faster. I really studied the Gold Market for years and began to develop / Tweek / re-invent indicators that would help me in this regard. (They worked EXCEPTIONALLY WELL in the bull years. If we ever get those Bull Mkt runs again, I will be REALLY HAPPY) Now that GOLD/SILVER and MINERS topped and began selling off deeply, I have worked to re-Tweek those indicators to help me , if possible, identify a “Safe place” to enter at what is possibly the lows that come before a strong rally. They are not fool proof, but I will share some charts with you and as you should be able to see- they have worked very well in the past.
First let me point out something important. Using the methods that I have mentioned above, I was able to get in at the lows in June 2013, Dec 2013 and May 2014…BUT THAT doesnt mean that everything turns up THAT DAY and RUNS HARD. Its a scary buy, and everyone is usually calling for a drop. Since I wrote my last Gold Update, I get emails saying that the current weakness in miners means they have no buyers, they are going to slam down.
Let me show you as a reminder, how those lows played out . Each day sideways was another day of fear and “apparent weakness’.
The POP in June 28, 2013 looked similar to last week. Notice that it dropped for over a week after that.
Dec lows were extremely difficult to hold. I got whip sawed and stopped out a couple of times (just like last week)
May lows were not a 1 day event either. It looked like a bear flag
Once MAY LOWS took off though, I heard many say they wont chase, they’d wait for a pullback to enter (It never came)
So again…If the bottom can look like a Bear Flag and can look “Weak” going sideways, HOW CAN ONE GET AN EDGE?
I will start with GDX WEEKLY- Below the chart is the explanation.
1. The bottom indicator in the lower window with purple circles. I developed this to trigger a “safe Buy” when it dips BELOW 20 in a DEEP sell off and then turns back up & crosses ABOVE 20.When the lows go sideways like June and Dec 2013- it crosses the 20 right as the rally starts.
Notice that it Never triggered in the early 2013 sell off – purple arrows.
2. Inside the Price window we see the chart of price within a cloud. You see a sell indication when the top of the cloud is hit in a rally, and you could buy a tag of the bottom of the cloud IF THE DAILY triggers. (This cloud didnt produce rallies during bear sell offs) . So This weekly alerts you to the idea that the sell off is extreme.
Now we also need to look at the daily GDX .
GDX DAILY – explanation below
1. The RSI 10 on a daily is pushed below 30 at ICL lows, but that alone is not enough
2. The CLOUD here is not enough (It could be tweaked, but I like this setting) .
3. I developed the bottom 2 indicators to try to help me “eliminate” the sideways movement. The fluff. Instead of buying and getting stopped out, you can buy the CROSS Above -100, it occurs as the rally starts after a sideways move. The middle indicator you only buy the blue line crossing above the red. It too will not allow you in on a sideways move
Most reading this know that I bought last week. Why ? The Bottom 2 indicators havent triggered quite yet, and I may have to endure sideways chop . I could get stopped out too, but I have a few more indicators that catch extremes and I bought the reversal on the Fed Minutes using those. They are not as “Safe”…they are riskier and you can get stopped out, but that sharp reversal Wed had strong volume. I was watching it in a way (intra-day) that can be monitored differently and as a trader I took that trade.
Below is how that set up currently looks.
GDX on a daily as of Thursday, not much has changed (So Far).
Is it THE LOWS? Its too early to say, but you can see from my charts that had specific indicators developed to try to help me identify lower risk buy points, we appear to be an an area that has been overdone and is due for possibly a substantial rally. I’m not here to try to convince anyone that “THE LOWS ARE IN, LOAD THE BOAT”….No – Use caution and do your own research, but look at my research too and weigh that in with your own style and risk factors. I am not the type of trader that is “Guessing” a lot, I really do the homework too.
For some, patience and waiting for further verification / confirmation has allowed them to keep their powder dry and ready to deploy as things unfold.
As a sidenote….Also Friday I had to sell my LAKE and APT due to their great moves.
I moved that money into IBIO…the set up was the same. It looked like this as I purchased Friday. It broke from a triangle, if it pulls back i will buy more…this also has the same set up as LAKE and APT .
I need to get this posted, so I will post and THEN proof read, so please overlook any errors in spelling or wording. Best to you all, thanks for reading along here!