Aug 22 – Upside Surprises

After a pretty solid reversal candle on Friday, the Precious metals sector gave us a little surprise to the upside on Monday. We’ll discuss that and a few other things in this report…

SPX – 6 days ago I warned about buying the reversal in the General Market, because the ‘timing’ was not quite right and some of the internals did not look healthy.  The reversal on Monday is within the expected timing for a dcl, though some internals are still weak. This one may be the dcl if we get a swing low in place.

USD – The USD looks to be back testing its recent break out on day 12. It should reverse higher from here  (What will that do to Gold?).

WTIC –  Recently I called for a dcl in WTIC, because day 39 aw a reversal at the 50sma. Monday Oil dropped sharply, let’s see if that 50sma hold price again. Anyone long would want a stop in that area ( Or maybe some raised stops for a small gain & will watch from here).

NATGAS- On day 11 Natgas moved higher above the 50sma and looks bullish. UNG, BOIL, UGAZ all look similar and that is a good looking set up. I almost took the trade Monday after Siva asked about it in the comments, but it has gone sideways in a similar manner for 2 months, so I held off for now personally, but this is a fairly low risk set up.

GOLD – Most likely GOLD DAY 9.  ( I have received emails that others do not agree, they think the dcl is ahead.  I already discussed that if this is day 30, the downside should be minimal, both cases are bullish to me). GOLD s reversal candle on Friday was ignored Monday as buying prevailed over selling. They say in a Bull Market, surprises come to the upside and this may be what we are seeing. If day 21 was NOT a dcl, this would now be a bullish day 29 peak, but it looks more and more like a dcl took place.

SILVER-  “Why is Silver lagging?”, I am asked.  Silver is pushing against the 200sma, but this is a  bullish looking sideways consolidation at this point. If Silver breaks, it could really run.

GDX- Ignoring cycle count due to the triangle pattern, Notice that the moving averages are still tightly gathering together, and this often precedes a strong run.

GDX- I was hoping that GDX would close at the highs, because it would reestablish follow through to a break out and move to negate that reversal candle. More than 1/2 of that reversal candle was undone on Monday.

GDXJ– This is a long sideways consolidation, and they usually build up strong energy for a longer run in one direction or the other. GDXJ has higher lows since May.  I am still long Miners, but I will admit that with that reversal candle, I closed 40% of my leveraged position that I took at the possible dcl.

The USD looks ready to Rally and Gold put in a reversal candle, so I see MANY reports that the Precious metals are now ready to sell off sharply, as though everything should be sold off.   I tend to disagree.  Most here know that I like to look at as much as possible to get an idea or a ‘feel’  for what we are dealing with.  As we do this here,  you should get the feeling that even if Gold does pullback, it ‘feels’ like a bull market that wants to go higher.  Even that GDXJ chart above looks like a sideways consolidation that wants to break out and run higher to me.  That is why I have, over the past several weeks now, been showing BIG PICTURE CHARTS of many many Miners.   It should be building confidence in us that things look better in the precious metals market as time goes forward.    Let’s take a look at …

GFI– I showed this chart in the weekend report.  It moved higher on Monday and a pullback may eventually only back test the break out shown.

KL- Just look at the chart of KL.  Notice that in this bull run, the pull backs have been sideways and less of a deep dip, so some Miners should not be over traded and losing position could make it hard to re-enter.  I have mentioned this before with RGLD and IAG.  The set ups are very bullish.

IAG –  I have mentioned the bullish set up in IAG for a while.  Itis actually up almost 70% since the May lows. I admit, it was a bit of a nervous week with earnings in Miners recently, and that sideways consolidation would not have been an easy ‘buy & hold’ , but at this point I feel that IAG does not have to be sold if it was bought near the 50sma. It could dip & back test, but that is a buy.

EGI-  I have been pointing out this set up too.  It remains a low risk entry with a loose stop under recent support.

PAAS – PAAS popped at earnings and is one of the bigger holdings in GDXJ. If this is a bull flag, I would expect a move higher soon.

SSRM– This one also popped higher with the earnings release. It has back tested that break out and is consolidating under the 200sma.

GSS-  This looks like it also wants higher prices.

GSV– Running along the lows, notice that GSV did not DIP when Gold dropped on day 21.  This may indicate that Miners are stable and resisting Gold when it sells off.

KLDX– This looks like a small attempt to break out, but the 50sma held it back.  It is still a good set up with the downside risk smaller than upside potential.

ALO–  Formerly TGD, this one ran well in April to May. Here I see a shake out below the 200sma and a bounce to the 50sma that sent it back below that 200sma.  Now it is attempting to regain it ( and a little pop in volume yesterday as it pushed through the 200sma).  This could be bought with a stop below the recent lows.

MUX- McEwen Mining was discussed in the comments yesterday, so I pointed out that you would want price to stop here and hold as shown.  It later closed at break even,  so far so good at a possible recovery of that earnings sell off.

So the above miners are placed here in this report along with many many others that I have been posting, to show the overall bigger picture of an improving sector in precious metals.  Even if we say that Gold could be on day 29 and ready to drop into a dcl, how far will these drop?  Several didn’t drop on day 21, so we are seeing a bullish environment and with earnings behind us, I have been holding a few miners for weeks now.

Thoughts about Selling

I’ve had some thoughts about selling Miners, and in some cases during a bull run, it just might be hard to sell and get back in.  Let me point out a couple of charts that are not miners, but they are bullish set ups very similar to Miners.  This will help to show what I am trying to say here…

GMO – If Miners have a fairly mild pull back into the next dcl, couldn’t some look similar to the sell off in  GMO recently?  Some already do. GMO basically had a sideways drop to the 50sma.  By the time the price popped higher again yesterday, it is almost back at the July highs.  With that in mind…

Go back to the chart of IAG.  Look at the last drop to the 50sma after peaking at $5.60.  Most would sell on the sharp drop, and may not buy that tag at the 50sma until it moves higher.  1 or 2 days after the tag of the 50sma  it was back above the peak. IF you did NOT buy at the 50sma,then you would likely buy above where you sold it.

What if our Miners hang in there like TGB.   I sold this expecting a handle to form toward the 50sma.  Immediately after I sold it, it had 1 slam down day and that was it.  I sold it just under $1.60 and now it popped to $1.69 and could be on its way higher. In Bull markets, surprises come to the upside and can leave us behind if we get too cute.  I got a little too cute with my TGB position.

WRN – I just wanted to point out the reversal in WRN at the 50sma yesterday.  Copper stocks are doing excellent.  See TGB  (Above) and HBM, FCX, etc.   This could be a low risk buy here with a tight stop, or buy if you see it pop above the 200sma.

So I just wanted to point out my thinking here.  When I am trading or investing in my personal account, I do not just think in terms of cycles when we are in a bull market.  I personally go through many charts and look for a common theme or try to get a ‘feel’ for how things are playing out.  You will often here me say, ” We are due for a dcl, but let’s see how things play out over the next few days”.  If GOLD dips down, and Miners move higher,  it is a bullish surprise.  Do you remember me pointing out several miners that moved higher last Monday & Tuesday, while Gold dropped $10 Monday and $10 Tuesday? I am not in a hurry to sell my Miners when they act bullishly as individual trades despite Gold dropping.

Like I have been repeatedly saying, when the Triangles are broken and this gives way to buying & higher prices, I believe that we will see sustained moves higher in the miners, and some Miners like RGLD, IAG, FNV, etc are leading the way now. I also see others like PAAS, SSRM, etc that are  showing nice signs of life after the earnings season. Even if you have not purchased one position yet, the future still looks very bright going into the end of the year.

~ALEX

1 more thing to watch today.  I captured this as I started to finish the report this morning.  Could this lead to another surprise to the upside? Remember that SILVER is trying to break out above the 200sma at 17.08.