It’s Better Than It Appears

June 26, 2014     As I start writing this at 8 a.m. EST, Gold has dropped to $1305  – This is what I’m hearing now ,  “Horrible GDP numbers and Gold dropped? Man that’s weak!”  or   “War in Iraq, unrest in the Ukraine, Why is Gold Dropping? Time to go short people!!”   I’m just here to say that, like that picture above, everything you see isn’t what it appears to be unless viewed in the right light. This GOLD DIP was expected. The lows in June 2013, Dec 2013, and May 2014 were expected.  So WHAT is expected with this current dip? Time to short? Or buy the dip?   -Charts-

Gold on June 20 – I pointed out 2 possible targets of support (this WAS in my last report, the pullback WAS expected)

But again, Go short or buy the dips? …

I expect the dip to be reasonable, and I am NOT shorting because surprises should be to the upside. Another LOW target for GOLD could be viewed this way. Note the trend line & 20 Sma. It DOES NOT have to drop here, it may Bull Flag.

In  ICL’s  (which again are meaningful ‘timely’ lows) in GDX,  you have an initial leg up likely made up of mostly short covering. There is a pause near 20days and at that point you should expect a dip. THEN another rally takes place as more people go short, but BUYERS step in.

I expect that here, as seen below in the 1,2,3 patterns

So I buy the dips. Some have asked me where I get back in?  There is a dilemma…

I noticed that due to excessive FEAR after the prolonged Bear Mkt in Gold (People getting burned over & over buying the rallies) the possible Bear Mkt Lows in June 2013 had a run up & then a DEEP dip (chart above , see the #2) .  The DEC lows had a nice rally and then a sideways, stronger acting correction, minimal dip.  Strength was evident.  NOW May ICL, we have a STEEP rally, will this correction be strong too? The dip may be light…. If so, you need to come up with a plan to re-enter at various levels. 

This weekly chart shows the basic pattern that we are expecting. Since it is a weekly chart, note that the sideways/dips here lasted only 1 week or 2, and last Dec’s was basically sideways for 2 weeks (See red lines on the chart) . SO FAR, the sideways move we are experiencing now is ALREADY about 1 week old.

This daily is a reasonable idea. The DEC pullback dropped to the Fib correction of 38.2% off of the top & then went sideways. That was THE low. If that was to repeat, here is the 38.2% target and it fills that gap. Click the chart to enlarge. The number is $24.70ish.  It does NOT have to go there if this move is stronger than the move out of the Dec ICL, which was stronger than the move out of the June ICL.

JUNE 24 – I Tweeted GDXJ $40 possible target earlier this week. We actually hit that yesterday, so I added to position. We may still go lower.

This chart of JNUG is also a couple of days old, again what I am pointing out here is NOT an exact target.  I am showing that the dip is expected, but also another leg up IS EXPECTED.  as a side point   JNUG hit its 20sma in the last ICL run & then went sideways, notice how I extend the 20sma now with a dotted red line? That is almost where price went yesterday too.

So basically I am here just to reiterate that (see prior reports) we expected a meaningful low that a buy & hold type rally would come out of.   It is trade-able if you recognize that somewhere around 20 days,  they pause , pullback, and throw people off & draw in shorts before proceeding higher.   I hear people now saying  “Iraq war & Gold cant Rally? Weak sauce here, shorting it for a big drop!”   The dips are doing their job  I.M.H.O. —  I am buying the dips !

Best wishes, have a back up plan at all times, which means Mental stops or know your exit points  & Risk reward.

Thanks for reading !!   ~ALEX

Someone wrote to me that we are ‘way overbought” –  see below