WEEKEND REPORT – Solving Puzzles

Welcome to the weekend report after a semi puzzling week.  We saw higher Gold & Silver prices, and lack luster GDX GDXJ performance.  Let’s get right into the weekend report…

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SPX – I have a target for this move, but on Feb 22 I thought we could get a multi-day pullback to the 10sma before moving higher. This would be similar to what we saw in December.

SPX – We have had a 4 day sideways move to the 10sma, stronger than that dec drop,  and another reversal higher Friday.  Will we reach 2427 on this run? At this point in our timing, I would expect a dcl before getting that high, and then a continuation higher. The markets have been strong in this area of new highs ( no resistance) so time will tell. As recommended, a trailing stop would have worked very well.

 

USD – We still have a day 9 peak and I’d like for this to remain that way. Gold broke to new highs with this sideways ( possibly toppy) action. The dollar had a reversal day on Friday. Next week will say a lot if it breaks above day 9, or if it is rejected lower than that day 9 peak , so we’ll monitor the USD closely.

 

WTIC – A tight B.B. Squeeze should lead to a strong directional move when this breaks out.  This is what we saw in the General markets ( SPX, DJIA, NASDAQ, etc).

NATGAS – The H&S has satisfied my expectations, but this bounce is questionable. I like the volume at this swing low, so now we need to see a break above the 10sma.  If you went long, honor your stop at the swing low, we do have overhead resistance.

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GOLD, SILVER, & MINERS

 

Obviously, this is where the puzzle lies.  I have been trying to dig a bit deeper on this and figure out what is going on with Gold , Silver, and Miners.  I have some solid ideas, but this is one of those situations that comes along that time answers our questions thoroughly. I will share my ideas below.

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FOR STARTERS – DO NOT THINK THAT THIS CONSOLIDATION WAS EASY IN REAL TIME. People seem watch Investments tick by tick and day by day in the consolidation phases, and discussions become panicky & non-productive. The below consolidation was long, boring, and I’m sure that many were reading ‘this’ and ‘that’ and scaring themselves.   For that reason I just want to start by saying that right now we are currently in a bullish set up as you will see.   This consolidation below paid off in spades after it went sideways & dropped, but many likely missed it listening to “this” and “that”.

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GOLD –  I drew this up on Feb 23 and now I want to use a mix of charts here to tell a story in Precious Metals.  THIS shows us that Gold has resistance at the overhead 200sma at $1264. WOULD GOLD PEAK ON DAY 20 at $1264?  Possibly.

 

GOLD FEB 23 – MAYBE THIS IS WHY THE MINERS ARE NOT RESPONDING ?  Is GOLD about to top & drop into a dcl, and Miners are taking the lead? The timing is not unrealistic, we used to get plenty of 23 day daily cycles in the bull market of old. THIS would make GOLD a R.T. 2nd daily cycle, the way I am seeing it.

 

GOLD CURRENTLY –  And again, this could explain why the Miners are lagging.  They may find their DCL sooner than GOLD and then lead the way higher again. This could just look like a normal consolidation later in time. On Friday, Gold hit $1261.20 and backed up a it.

GOLD COT –  The COT levels are interesting. They are still pretty much at the levels that they were at at the December ICL.  Still much lower than the May 2016 Peak  OR THE MAY ICL.   Open interest is rising again after the dcl at the end of January, smart money shorting really isn’t rising quickly. This should be saying that Gold can run much higher and this COT looks very bullish.

GDX:GOLD –  When Miners drop and Gold rises, obviously this will drop.  I see that at DCLs, it is no big deal. DO you see how many times this occurred after the MAY 2016 ICL? It happens at DCLs often.  I don’t view this as a warning at this point. GDX:GOLD ebbs and flows in up trends too.

SILVER – Silver broke above the 200sma with conviction.  Notice that it had a mild 6 or 7 day drop into a DCL in January, and a similar mild drop into a dcl soon could simply be a tag of the 200sma.  A Back test.  Just a thought, since most are expecting some heavy sell off soon.

SILVER WEEKLY –  This is a bullish chart that shows Silver breaking above a down trend line.

GDX – Ignore what Gold is doing right now ( breaking higher).  Simply looking at GDX and see how bullish this chart is.  We see that it has had a strong run higher from Dec through 2 weeks ago. The past 2 weeks has been mostly sideways and hasn’t dropped even 38%.   IT CAN DROP 38 % to the 50sma and remain very bullish.  I will share an idea that I have with Gold VS Miners later in the report. For now this is a bullish chart.

 

GDX WEEKLY – The Miners broke their downtrend line many weeks ago and this is considered bullish. As mentioned before, some Miners are getting hit with earnings reports, others are acting very well.  Looking at GDX and GDXJ in this chart – are they acting ‘horrible’ right now?  I hate to say this, but a 50% pullback is not even horrible, and that could back test the red line.

 

Some miners have been strong.  BTG actually hit a new highs on Friday, and then reversed lower.

VGZ – Broke from a base and looks to be back testing. So far it has pulled back 38%, so some are acting strong like BTG, others may be rather normal in a bullish sector, like VGZ.  Yet others…

 …as I mentioned before, Other Miners like CDE, PAAS, AUY, etc are not fairing well. It is best to have a hand picked basket to spread things out, or just trade the ETFs if one prefers. This chart of AUY shows weakness and sickness for now.

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Allow me to share a story of what I see could be happening, and this is just one of a few possibilities, but it makes sense.

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1. Miners have been running very strong, 8 weeks higher and now 2 weeks lower. Miners are not looking horrible, they are resting, consolidating, regrouping,  after a huge run.  Again,  GDX has 8 weeks higher, 2 weeks lower.

2. Is Gold playing catch up, or finishing up on that run? Gold had 4 weeks higher, a rest, and then 4 weeks higher.

GOLD is likely going to be R.T. , so if it dips here, we can expect a higher high on the next run up.

So again, Gold Might stall here, yet Miners are already stalling and may be leading the way lower after 8 straight weeks higher.

 

GDX Cycle count vs GLD & SILVER Cycle count –

I toyed with the idea that GOLD & SILVER may have put in short daily cycles, while Miners have only put in 1 long daily cycle.   I think that the idea COULD be reasonable for a few reasons. Miners are often stronger out of the gate.  When the metals dipped down, Miners may not even follow.  Let me show you what I am saying…

 

GOLD – GOLD made an OBVIOUS drop in January, and broke the special ICHI setting here, indicating that a dcl occurred with a tag of the 50sma. That would be a normal 28 day cycle. I see an obvious dip.

SILVER – Silver broke the ICHI cloud too and tagged the 50sma at the same time that Gold did. Silver dipped down to Day 25.

GDX –   GDX did NOT dip down to tag the 50sma, did it?  It did not break below the ICHI cloud, did it? So could this be one Long bullish daily cycle, about to find it’s 1st  DCL, while Gold put in 2 shorter daily cycles?

GDXJ did break through ICHI for one day only, yet that is NOT a dip to a lower low.  January was making higher lows and higher highs, not dipping to a dcl.  It did not drop to tag the 50sma like Gold and Silver either. Are Miners so bullishly strong  ( not horribly weak like I keep hearing lately), that they stretched out 1 huge daily cycle in the time that GOLD & SILVER put in 2 normal average 26 day cycles?  That would answer the question, “Why are Miners dipping now when Gold is breaking higher?”

GDX – So this might be a 44 day daily cycle in Miners-  or even starting at day 2 of a second daily cycle with day 42 as the dcl. Seems hard to believe when looking at cycles alone, but please read on.

That above statement implies that we possibly saw One HUGE daily cycle in Miners.   I had a hard time thinking that we could be seeing that too, but in extreme bullish & Bearish cases the sentiment and momentum often gets crazy in Miners, and they do stretch to extremes. Please read on…

 

I wanted to look at it from a different View, so ignoring Daily cycles and getting caught up in rules of counting or other methods of calculation and so on,  let’s just look at the charts.  Erase the rules of calculating  moves day by day for a minute and just View these charts as though they may be telling you a story.  Maybe the story of a bull move out of the December lows can be told this way…

 

GOLD – Dipped and took a rest in late January. It needed a rest after that 1 month run,  so it took a good rest in January. See the chart, see how it rested down on the 50sma after 1 month.

SILVER – Silver had a strong run too, and needed to take a rest too. It went sideways and dropped down in late January and took a rest at the 50sma too. See the chart, it needed a rest.

GDXJ –  GDXJ had a great run too, but  instead of a dip down to rest on the 50sma, it went sideways well above the 50sma and  then began to power higher again.  GDXJ barely dropped below the 10sma in January. Rather extended in February, it is taking a well deserved rest right now, but it sure looks like it will go higher again, doesn’t it?

 

GDX – GDX had a strong run higher Dec through Jan, and did not rest at ll by the end of January. It barely broke below the 10 sma, and has just pushed higher from Dec into February, so it is resting now.

END RESULT – When I simply look at the charts of GOLD, SILVER, GDX, and GDXJ individually, without counting days and calculating a path that it ‘Must follow’, I see a bullish move out of the December lows and finally a pull back in Miners that hasn’t even reached 38%.  As Gold went higher on Thursday and Friday, I certainly expected Miners to join in!  Yes , I did.  I wrote the report about the need to “Stick the landing” to give us short term hope. They didn’t stick the landing Friday either. Now for many, perceptions changed from hope to real fear. I hear how horrible things are going to get.  I guess I can understand that, but the bigger picture is still very healthy.  Again, Gold is breaking out to new highs, Miners are dropping, and that seems bad. I’ve had people now writing to me and saying they either believe or have heard that  Miners are saying that the entire bull run is done, it was a bear market rally , and they’ll both crash.  They are completely out and now even very short.  I am asked if that is what I see.   Well,  Anything can happen and this could be a bear rally, but that I not what I am seeing at this point.

  As stated above in this report, At this point, I’m seeing that GOLD, SILVER, & the MINERS have all Rallied very strongly from the Dec lows to now.  They have all broken above their down trend lines and Miners haven’t even dropped 38% yet.  GDX ran 8 weeks up, and now 2 down.   The many charts above are how I am viewing things at this moment.  Is it possible that the Metals and Miners are just going about a bull run in their own timing periods?  After becoming over-extended, are the miners now resting while Gold & Silver finish their run and then drop too?

 Honestly, I have always seen consolidations and ‘unexplained sideways moves’ in bull markets, and emotions of traders can get jumpy. That is why I put this first chart below as the 1st chart in this reports Gold section, and I have already used it in past reports too. Long consolidations can happen, and they often build energy to break out.

  Look at JUNE through September, not just the blue box in the above chart.  We see 12 – 16 weeks of Up & Down selling.  Currently we just saw a 2 weeks in GDX.  We have seen Miners run higher for 8 weeks and sell off for 2 weeks.  In the chart above Gold was all over the place for Several weeks.   What were traders thinking real time as they were trading it?  If they needed an answer each and every day, and rely on what everyone else is saying, they probably became afraid to trade and missed that nice run from August to December. If the big picture charts are showing that we are still in a Bull market at this point, we can lighten up & wait for the next rally higher.  I expect for us to make money on another run higher.

In conclusion:  I do not want to sound unsympathetic or condescending in any way.  I understand that when we trade and make good money ( like Dec -Feb)  we hate to see it fade away in a pullback.  Some fear that the highs are in and we will never get back there, but we are still early in the ( possibly 6 month) entire cycle.  It is rather impossible to consistently sell the tops of every run, but we should make  good profits from that run.  Sometimes buying & holding early in the first couple of daily cycles, maybe doing a little trading toward the end of one or just waiting for the next ICL. There will be more  🙂 .   I hope that these reports can at least offer some counterweight to offset any fear or dread that I tend to see in the comments section.   The Big picture remains bullish, and if you sell on pullbacks to lock in gains, that is fine too.   The main point is not to get too emotional, because that usually has a bad effect on our trading.  We need to try to keep things balanced if we are gong to trade unemotionally. I’ve used the big picture to try to help with that in weekend reports, and daily reports adjust for the day to day action.  If this is a bull run in Precious metals, and I see it that way, then I want us to be able to continue to make good gains with a tad more confidence. There will always be pullbacks and sideways moves, that’s what a bull does to buck riders off.  It is not easy, but it can be very rewarding.

If you have time, please try to review the charts in this report a few times to let it sink in.  There is a lot of work in this report, many many charts, because I wanted to try to show that the big picture remains bullish and healthy at this time.  Enjoy your weekend!

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~ALEX

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1. In other words,  this up & down action that has turned many quite bearish… 

2.  COULD TURN INTO THIS, you never know. Do not let the overly emotional traders affect your outlook.

 

 

Are these charts broken? I do not think so. In fact, they have rallied strongly and pulled back sharply in the past too.  let’s take a look.

 

CNAB has a sell off similar to the Dec sell off. Above the 50 sma, it can continue to climb higher.

NWGFF – It almost sold off to the 50sma ( this chart was early in the day) , and then bounced up to the 20sma and closed there.

 

GBLX – This got rocked and then bounced back too. We’ll have to see how this plays out, but look at the drops and swings in November.  I don’t think that these stocks are broken, but they are volatile and fragile in their new environment.  Investors are shaky investing in a new arena, and the news from the Trump administration was concerning for any companies here that do not have medicinal products.  For now,  I think that they can recover over time, we’ll see.