July 17 Yes, I am looking for follow through, but it may NOT be immediate. IN my last report I showed how GDX had a HUGE Buy On Weakness (B.O.W.) number – That big of a number usually shows the ‘sell off’ could turn up shortly. It is Not a perfect timing tool, but those HUGE numbers usually indicate a change could happen shortly. Well, Today Gold / Miners did what I was again looking for (See last report), but GDX also had a Large Sell On Strength ( S.O.S.) Number today. I’m thinking that We may dip into OPEX tomorrow, so I’ll be watching how that possible dip “looks”, and see if we DO get some follow through later that day or Next week.
Lets review some charts… First- I Mentioned that I think some people think that these 2 “PEAKS” are similar & thus a strong sell off was expected. Note the Triangle, POP & DROP.
I want to point out the difference between “Peaks” 1 & 2, which is why I am expecting a run Higher & not a similar sell off. Notice what I am seeing “time-wise on the following chart ….
Back in my MAY GOLD REPORT, I kept mentioning that I was expecting Meaningful Low – an ICL (for cycle followers), and I expected at least 2 strong legs up , something similar to DEC ‘s ICL & June 2013’s ICL.
Well – Please notice – The JUNE 2013 & DEC 2013 ICL’s had 2 legs up that lasted “Roughly” 3-4 months.
– The FIRST leg up was roughly 1.5 months (Or say 6 weeks)
– Both legs combined were 3 – 4 months long ( See chart below from DEC Lows to MARCH highs).
In my report Yesterday , while GOLD sold off HARD for 2 days and many were jumping in JDST & DUST & Shorting …I mentioned here again that I am expecting (Time -wise) The 2nd leg up to start. I believe we have now finished the 1st Leg Up & lows are in. I would Not be shorting here, unless that 2nd leg FAILS. As you can see from the chart below, we have only had enough ‘time’ for the 1st leg and since it started at a higher point than DEC, its “Peak” should be much higher too, if it remains bullish.
Today DOES qualify as the start of the 2nd leg up. Can it “Fail” – yes, anything can happen, but the first run up has been so powerful and the pullbacks were so healthy that I feel that that is unlikely at this point. Let me show you what I mean by that.
Look at GOLD . It had a 50% pullback straight to the 50sma, then turned up & re-gained the RSI 50 today. THAT is healthy (So far)
$SILVER – Was & is Very Strong! It may have just done a “Shake out” & Recovery.
Again – Tomorrow could dip a little since today was such a strong blast upward. Friday is OPEX & that high S.O.S number could indicate over zealousness for now, but I dont feel that this 2nd Leg is going to Fail here. That being the case, I want to give you another way of looking at what I “GUESS” the Bigger Picture would look like – yes, I said “guess” because its really just a plausible guess.. A likely possibility based on past movement in these cycles and current conditions (So Far).
Can YOU picture GDX like this? Leg one at 1.5 months , then Leg two? Notice RSI 50% , etc THIS is why I remained BUllish as GOLD sold off. I will see it this way, UNTIL it plays out or “Fails”.
GDXJ can be viewed this way . Did you see that Volume today!! RSI 50% safe.
(Remember that “wave 5” could just be a double top if this plays out too )
And the “BASIC” pattern, the Basic “Cup & Handle” view (Drawn this morning & Tweeted out, so this wasnt a complete day)
So let me just repeat these important words of wisdom :
Nothing is 100% sure in these markets. I’ve learned to take things Step by step . Avoid marrying a position or bias – it it starts doing something that does not fit what you expected….Just cut it loose . I look for signs of reliable “Set ups” and have studied charts for well over a decade . From this I also have learned that Charts can change! They can “morph” into something else completely as time plays out, so we do our best to keep an eye on things . That being said, The truth of the matter is this… You have to enter a position somewhere, right?? Studying charts and current market conditions can give you an edge. IF you wait until a stock has already been running up, even a healthy pullback can stop you out. We want to try to enter a position near lows and turning points, and hopefully as price rises , we wont have to worry as much about getting stopped out or jumping in & out with the wiggles.
If we get a small gap down tomorrow, or a pullback on light selling , I am not concerned. It may re-set some sentiment. It could even drop down & then start to turn back up – and since I am thinking that we are near the lows of the 2nd leg up… It may be worth taking a position in one of your favorite Miners? Thats up to you.
Thats all for now, thanks for reading along!! Have a great weekend!