The Real Deal?

We discussed abnormal cycles in the markets in the last 2 reports, and I want to finish that discussion in the Gold report today. First lets review the other sectors and then we’ll see whether or not the moves in Precious Metals are likely to be a few more false starts, or closer to the real deal.

My SPX chart from over 1 month ago is playing out nicely. I expected a test of the lows and a test of the break down as shown here.

SPX –  Sept 29 we got the test of the lows as expected. Now we should see a reversal higher.

SPX WKLY – We got that reversal as this week ended and I expect the SPX , DJIA, QQQ, etc to run higher.

This is what I’m expecting next…

Here is the 2007 SPX –  It topped the same way.  Drop to a double bottom in the green box, a run up to test the breakdown, and that is a low risk short. We’ll watch for that.

USD–   It has still been unable to tag that upper trend line.

WTIC–  We are still waiting for a break out from this very tight weekly close. Will it break higher?

XLE WKLY – This  reversal may be leading the move higher.

XLE DAILY – If Energy stocks are leading the way, watch for this break out this week. That was a strong reversal on Friday. See  XCO, BAS, REXX, LGCY, UPL, CRK  and other energy stocks possibly forming  set ups .

NATGAS – This is still bearish without a reversal.  It is oversold and can bounce higher, but the weekly looks bearish , so caution is warranted.

GOLD, SILVER, AND MINERS

GOLD –  Strong reversal on the weekly chart, but notice that it did not break out ( I do expect it to break out higher).  Notice the Triangle type bottom. I will discuss this triangle later.

SILVER WKLY-  You see a reversal here, closing above the 10wma.  Doesn’t look like much,right?  Check out the daily.

Silver daily – Surging up over 5% with the strongest volume in about 6 weeks.  USLV was up almost 15%  Friday. After such a big move, Silver could drop to the 10sma at $14.83 and still be O.K. , so I’m watching that.

GDX –  I posted this in last weeks report entitled “Abnormal Cycles”.  Indicating that we are squeezed at what has been the lows for years, It would be a buy.  This was a bullish set up, and  we broke out Friday with GDX up 8%.

GDX – Due to recent swings in the Miners ,  many felt uncomfortable buying that break out.  Look at this chart however. If we were trading at $18 in the near future, we’d look back at this chart and say that this looked like an easy, obvious bottom to buy.

Lets see if we drop back and back test this break out. That could offer a lower buying opportunity.I think Miners are a buy in this bottoming area anyway. I will explain further down.

I pointed out the buy signal in a similar chart last week.  After Friday it has further confirmation.

I pointed out various bullish patterns on Miners and they are still bullish.  Let me just quickly point out a couple below.

ABX –  Sept 23  $5.94

ABX – $6.57 & just breaking out .

This was NEM at $15.89 in the Friday report, unable to break above that 50sma.  Friday it closed at $17.07, above the 50sma.  It broke out and is just probably getting going. 

This Precious metals sector has been up & down and all over the place. Can it be explained reasonably? I think so.  I understand that this may seem like a long winded explanation to some when I present a lesson, but it is always designed to help you understand what you are seeing.  I would rather try to understand what I am seeing, not just keep guessing.  You can choose to skip this if you wish  🙂

Lesson for recent unnatural cycle movement

 Using technical analysis, the Mining stocks really continued to look bullish. That seemed odd with the cycle counts getting a bit late in the 2nd daily cycle. Were we running out of time for Miners to run higher? Lets take a look.

 Continuing  my theme of Abnormal cycles. There are definitely times when cycles act like clock work and are very reliable.  I have pointed out here about 6 months ago that when they form Triangles and other patterns, they can act unpredictably, breaking higher later than expected. 

Example: GOLD 2012-  This constant Up & Down action looks fine in technical analysis, it is a basing process. Now imagine riding this day by day as though you are counting cycle days or E.W.. 

The Lows were in on MAY 16 – it went sideways ALL SUMMER into August. It was pinned below the 50sma, it too would be stopping many out all through June & July. 

So Golds lows were in on May 16, 2012. 

Now look at SILVER 2012.  Whether you went Long or Short,  you’d be on a Bucking Bronco! Gold bottomed in May, and Silver broke the lows on June 28!  It went sideways for 3 months.  In June & July I’m sure you’d be hearing ” Silver failed, go short!”, and then it ran higher. It also  seemed weak, unable to break above the 50sma.  It was a strong base.

I wanted to post this to show how Miners acted. After Gold bottomed in May, notice that Miners ran to the 50sma, gained it, lost it, gained it, lost it, broke back above the 50sma and then shot down to the July lows  ALL THE WAY BACK TO THE MAY LOWS 2 months later.   I also want to point out that this took almost the same amount of time that we just spent from July lows to now  ( 2 months a few days).  Then it ran up strongly.

Let me put it this way. Abnormal Cycles can drag on & on, yet still burst higher.

     GDX was not acting correctly cycle wise either in 2012.  This chart shows GDX going 47 days while Gold formed a triangle and Silver went sideways for 3 months.  It also gained & lost the 50sma and returned to lows, who would want to buy that?  Then it ran higher July to Oct.

   I wanted to point out the abnormal cycle timing, because I know many here rely on cycles are are thinking that day 15 is too late to move higher in a 2nd daily cycle.  Currently I see more than just a few miners forming patterns that look bullish , and that has to be telling us something.  I still think we can move higher and stocks like SA, SAND, EXK , AG ,SSRI ,PAAS , AU, AEM, etc .

This is an example of how some Silver stocks look to be breaking out at this point. They have formed bases that can be viewed as triangular in a way.  Trendline breaks can also get back tested, so I expect a possibility of more non-directional trading. Only time will tell on that one. 

It looks like the sector has been in a bottoming process and can still move higher.

I will cover more miners in the next report if the set ups remain bullish.  First we need to see how Monday plays out . Often a triangle break out can back test too, offering another buying opportunity. Today I’ll be looking to see if these bottoming , triangular type patterns remain in tact.  I hope all had a nice weekend, and I hope this report helped us to understand the type of move that we may be seeing is a bottoming process. I still expect it to break higher at this point. 

~ALEX

P.S. Some here seem to only want to trade JNUG or NUGT ,  but the sideways/ bottoming process currently happening can make such  3xETFs difficult to watch.  If that is you and you now see that this could have just been a normal bottoming process,  why not try a smaller position in a couple of mining stocks on the pullbacks instead of 3xetfs?