Friday Jan 20th- Think About This

I wanted to start the Friday report by looking at the HUI in the year 2000, as it began to rise out of the bear market lows.  We will also discuss a few other things pertaining to the Mining sector, including GDX and its current run higher.

HUI 2000 – This run higher was so smooth and predictable. Notice how it found support and resistance repeatedly around the 50 & 200sma. This was a very smooth run.

Now I want to direct your attention to Gold at that time…

GOLD 2000 –  This was actually a bit of a mess while the Miners moved smoothly higher. Gold even broke to new lows in March and April while the Miners were finding support at the 50 & 200sma, as seen when comparing the above chart with this one below.

I AM ONLY POINTING THAT OUT TO SHOW THAT EVEN WHEN GOLD DROPS, MINERS CAN REMAIN HEALTHY, SUPPORTED BY THE MOVING AVERAGES.  IF WE EXPECT A DCL IN GOLD, OUR MINERS MAY FIND SUPPORT AT THE 50SMA.

BACK to HUI 2000 – We are going to break it down and compare this move to what we have currently in the GDX. Let’s zoom in…

THIS IS THE ABOVE HUI ZOOMED IN–

1. Back then the daily cycles were peaking near day 15, 21 and 21

2. The first 2 daily cycles were short, so they peaked and dropped briefly.

3. So notice that there were 1 or 2 day RED days before the peaks, but that was not the top. Again, best not to get too cute selling on each red day back then too.

HUI 2000 again–  Also notice that the first 2 daily cycles found their DCL  at about a 50% pull back at that time.

GDX NOW ON DAY 19 – So let’s just say that a peak here ( or day 21 )  and then a drop to the 50% mark would be right around the 50sma.

THE ABOVE COMPARED GDX RIGHT NOW TO THE BEAR MARKET LOWS OF 2000.  NOW LET’S LOOK AT TODAYS GDX COMPARED TO JAN 2016 LOWS.

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GDX JANUARY 2016 – This is very different from the 50% pull backs and short daily cycles of the 2000 lows. GDX barley dipped and closed below the 10sma.  It just kept trying to sell off, but buyers overwhelmed selling.  With this scenario you could buy at the dips to the 10sma, but it was a tad risky. Are we seeing that now?

GDX NOW ON DAY 19– This run higher is also dropping below the 10sma and recovering repeatedly. It also looks like it is being bought at the 10sma. So will we dip down 50% or keep on moving higher?

BACK  TO LAST JANUARY – All the way to day 25, it just didn’t really pull back and barely closed below the 10sma. Even after day 29 the move did not allow buyers to re-enter at lower prices.

Here is the point: If we get a dip from here and eventually put in a dcl lower, I will identify it and it will be the next low risk buy. Right now, we cannot tell what kind of DCL we are going to get at the end of this first daily cycle, and that is why I have repeatedly stated, ” Do not get too cute and sell all of your Miners, this may keep chugging higher. You do not want to be locked out if we just continue higher.”

Here is the problem: Each time GDX dips for even 1 day like Thursday, I get a few emails asking, “Is this a safe place to buy today?”  Can you buy dips to the 10sma? Sure, but you can see also that it MIGHT dip lower too.  The choice is yours within this framework.

 Again, does anyone really know if  GDX is going to just continue higher off of the 10sma, or if it will drop 50% to the 50sma now at this point on day 22? I do think that we will be higher at the 2nd daily cycle high, but Nothing has changed in my analyses with a 1 day drop, my reports remain consistent and you should still be at least partially invested.

Conclusion: So my recommendation has consistently been “Do not sell out of all of your Miners, because if the Miners continue to move higher like last Jan 2016, you could get left behind.”   If we get late in a daily cycle ( day 23 now) and you want to lock in some gains on a bounce, cut leverage, lighten up a bit, that makes sense. If we get a meaningful dip now I will point out the next low risk buy set up.  For now, we’ve been riding our positions in this sideways consolidation. Some laggers may play catch up in the 2nd daily cycle.  Look at what EGI is doing 🙂 Enjoy the ride, enjoy your weekend!

~ALEX

GOLD Chart #1– Day 22 and you cannot tell if this is dropping into a dcl or just a pause along the way to the highs. Watch the 10sma for now as stated in yesterdays report.

GOLD EXAMPLE #1 – Back to the highs.  Don’t get too cute by selling all of your miners.

GOLD EXAMPLE #2 – A normal dcl and an opportunity to buy if you have some cash.

WILL THE GENERAL MARKETS RALLY OR DROP WITH THE US INAUGURATION?

TMQ –  I bought TMQ and MTL as trades recently.  MTL dropped to the 10sma and reversed, looking like it wants to run higher now.  TMQ  dropped to a possible support area, but this is where my stop is.  If I get stopped out, I may ( MIGHT) Add that position to my MTL.  IF the markets sell off fast, I’ll get stopped out,stay out, and look for a Miner.

MTL –