When The Lightning Strikes…

Can’t you hear the Thunder?  There are plenty of rumblings out there in the land of the Miners.  They have finally decided to really Join Golds sell off in earnest.  We’ll discuss that in the precious metals section after a quick market update.

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SPX – I’ve been expecting a drop in the general markets, and on day 31, closing below the 10sma, this is likely a drop into a dcl starting.

 

SQQQ –  It is hard to short a bull market, but the NASDAQ is about to break below the 10sma too,  and should also begin to drop into a dcl,  so this might make a nice short term trade.  It could be bought until a swing low forms in the NASDAQ.

 

WTIC  – Oil dropped sharply, but actually recovered into the close.  Day 39 puts it within the timing to put in a dcl , however…

 

OIH  – The Energy sector (  OIH & XLE) dropped and actually closed at the lows, so Oil may not be ready to put in the dcl yet.  The DRIP & DWT trades have benefited from this weakness.

 

UUP  –  The USD broke out higher,  but look at UUP.  This looks like it could become a top.  It is overbought, very light volume pop, and the COT & SENTIMENT for the USD are at topping levels.  A drop from here could make the USD have a false break out.

 

 

 

 

GOLD –  Yes,  Gold made a new low and there is not much that can be said other than the fact that this is an abnormal drop into an ICL, due to the length of time that this has dragged on.  We usually get 5 months from ICL to ICL  or 6 Months from ICL to ICL.  I have even seen a few 7 month distances  between 1 ICL to another ICL,  but we are on the 8th Month from the Dec ICL. Gold is due for an ICL & Conditions are very ripe for one.  1. C.O.T.  2. Sentiment 3. Timing  4. We are now seeing divergence

*It seems that GOLD may actually sync up with Miners.  Why do I say that?

 

GDX – Back in February,  you may recall that I was looking at that final crazy drop in GDX / GDXJ  to a new low  ( it broke Dec Lows)  and I was saying that That looked like the ICL for Miners.  If  THAT was the last ICL for GDX & GDXJ, then Miners are now 6 months from their Feb ICL, and due for their ICL drop. Mondays high volume drop is what a drop into an ICL often looks like, but it may or may not be finished.

 

**This is a recent thought that I have entertained.

1, Do you remember when Gold was selling down, even $20 in a day in May, and Miners went green?   Miners resisted GOLDs selling,  and I believed at that time that they acted like they would lead the way higher, as if there were no sellers.

2. Now I look at the action and I got to thinking:   Maybe  they just weren’t quite  due for their own ICL drop?  Why? May was only 3 months from the Feb ICL.  June was 4 months.  Miners would not sell off, but Gold was.   Gold was 6 & 7 months from Dec ICL lows.

3. Now Here we are 6 months after the Feb Lows, and Miners are now definitely dropping into an ICL.  Gold, by stretching out 8 months from its  Dec ICL, may now sync up with the Miners  for Both of them to have their next ICL.     They may be set to bottom together.

4.  This is VERY VERY unusual market action in the Precious Metals, but just like a hazy puzzle missing pieces, when things aren’t exactly clear, you have to put the pieces together as things unfold and try to figure it out.   It could be currency wars, political decisions, economic conditions, or something else affecting Gold & Miners, but it looks like GOLDS CYCLE has stretched, and the MINERS are lined up to put in an ICL very soon too.

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Let’s just take a look at the current set up & price action in Miners and discuss that.

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GDXJ – On AUG 7th, I drew this and pointed out then that the final drop in December was a sharp break and 2-3 day slam down … boom, boom, boom.  I was expecting  this type of slam down as a possibility.

 

GDXJ – Since then GDXJ paused, went sideways,  and is now dropping into that type of slam down.  How many days will it be? We can’t say, but it’s best not to try to catch the falling knife, wait to buy the SWING LOW after a reversal.

GDXJ –  Look at that December drop close up.  That doesn’t look scary, but if todays 1 day drop was , then this one had to be scarier.   Also look at the rally that followed.  Each 5 days/ candles is a week of trading.  That’s a nice multi week rally, so there is no major reason to feel the need to hurry in and buy the lows.  The cross of the 10sma was day 4.

 

 

GDXJ–  Let’s just point out the idea of  “what if we had  a drop similar in length to the Feb drop?”.  It could reach the same length of that drop in a day or two at this rate.

 

 

GDX – From the $21 level last December, GDX broke down into an ICL with those 2 Big sharp down days.   Notice that  it only took 2 BIG down days to reach the lows.  These moves turn even die hard Gold Bugs sour. Yesterdays already did that, based on many posts on Twitter.

 

GDX –  So this is a measured move  for GDX if this current drop was also similar to the Feb drop.  Over the last 2 weeks I have mentioned that we could stop run type drop below $20, this comes up just shy of $19.

 

 

GDXJ –  I’m hearing how horrible the sell off is in Miners has been. In all honesty, it  really has not been worse than past ICl sell offs, it has been milder so far. The Feb drop was $36 to $29.88 ( minus $6.12) , and the Peak to Lows drop of  Sept to Dec was $37.50 to $29.80 ( Minus $7.7). This drop has only been $34.36 to $30 ( Minus $4.36)  .  THIS ALSO TELLS ME that we may not be done.

 

GDXJ – This drop has been sideways & then down,  while past drops were a bit more steep and straight down.  I’m hoping that GDXJ doesn’t just go steep for a week and do the same type of drop here, but it could.   However,  remember that quick final 32-3 day drop into an ICL from the consolidation of Nov – Dec?….

However,  remember that simple 2-3 day drop into an ICL from the consolidation of Nov -December shown here ?….

HUI  – That is what we often see.   Notice the drop drop drop In 2007.   The HUI dropped Boom, Boom, Boom, done.  And then a great rally followed.

 

These types of sell offs are never easy.  They look irrational and you’ll hear many people saying,  “Something is really wrong here” or  “This just doesn’t feel right, this is nothing like past sell offs”.     As you can see from the charts above,   the selling in Miners has been less than past ICLs,  the selling in GOLD has been longer.

Hang in there, I still think that many conditions that we see now are a lot like past drops into an ICL, and with that, we should also get the same kind of rally that we have seen at past lows too.  Wait for a swing low before entering more positions.  Enjoy ( that basically could mean shut off the computer and go for a walk) your day of trading!

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~ALEX