October 26th – Gold Sure Looks Good, Huh?
So we were expecting that the Miners could possibly drop to do a ‘back test’ of the 50 sma. In fact, I mentioned that in almost every report for weeks. I must admit though, I did not expect it to happen all in one day, but that is pretty much what happened Thursday. Let’s take a look…
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This is my GDX Oct 15th chart, showing that that possibility exists for that back test. I wanted us to be prepared for a drop like that, but like I said, I expected it to be more of a normal gradual dip lower.
Just 1 hr into trading, the drop in GDX & GDXJ looked like this, and it closed even lower at $19, just above that 50sma.
On top of THAT, this was Gold and it hardly dropped?
Can we make sense of this? Is this still just the back test of the 50sma for GDX & GDXJ? Did earnings of GG & NEM destroy all hope for Miners? Well, I do have a few ideas that will give us clues to watch for as this continues to play out. This will be a longer Friday report than normal, so let’s get right into it…
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I will start with the Bullish continuation Viewpoint:
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First observation : We had a Spike higher & that wasn’t our rally. We now we have a spike lower, maybe that’s all we get here too, as we drop to a dcl. See the chart.
So – When we smooth out the ‘days’ by getting rid of the candles, we see what looks to be our surge higher, and now that surge lower is a possible back test. This would remain bullish for Miners.
OBSERVATION #2 for the Bullish Side: I want to turn to Cycle counts. I’m sure that You do recall that GOLD BOTTOMED FIRST IN AUGUST, MINERS IN SEPTEMBER. SO we should have different cycle counts, right?
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GOLD – could have its dcl at the 30+ day mark, and therefore has started the 2nd daily cycle, and DID NOT DIP for that reason. I have drawn a theoretical break higher and then Golds drop. Read the chart…
Meanwhile, Miners are NOW in the 30+ day range if day 21 was not a dcl. I have stated all long that it seemed a tad early for a day 21 dcl…
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GDX CYCLE COUNTS WITH A GAP FILL – Day 30 peak and day 33 would be Friday. Could we get the break of the 50sma, shake out to fill the gap & break the trend line for a dcl? See the chart.
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Please understand that these are just various ways that I can see this still playing out for a bullish resolution, but today’s drop in Miners with Gold Not dropping cannot just easily be dismissed without a warning. Sometimes I feel like I am GDX’s Big Brother, trying to defend him on the playground while he acts like an idiot. 🙂 Well, I am defending the Bull side, only because I did expect that 50sma tag and we are almost there. HOWEVER- With a 1 day slam down as Gold hangs at the highs, I am a bit more cautious.
So I expected a dip, not ‘a slam down with Gold holding highs’, but I also don’t want to go to total cash & watch this break higher and find it hard to get back in. Let’s continue our discussion of observations…
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By now most know that GG & NEM released earnings and disappointed, and the sell off in those 2 Miners was DEEP. Is it the end of all Bullishness? No, we have seen Miners in the past get slammed down and then recover, so let’s take a different look of GG and NEM. Not a Micro view, but a Macro view.
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GG – This could be a major capitulation ‘shake out’ of the 2016 lows for GG. That’s right, GG is back in the single digits, but it has been there before. This could be triggering stops on the LONG TIME BULLS holding from 2016 lows. If this recovers soon, that is great news. Many people ‘short’ these break downs, so if Big Buyers scoop up GG as a bargain at $8, then shorts could be forced to cover.
NEM – And NEM could be a shake out of the late 2016 lows. This would be a double bottom if it recovers and also good news for GDX. So there is hope, but it depends on Buyers & maybe short cover. People like to short break downs, they’d be forced to cover if Buyers show up.
CAN GDX break below the 50 sma and still be ‘O.K.’? – I mentioned in this chart that GDX would fill the gap , by breaking the 50 sma. Is that ok?
HUI – Yes. In fact, that Magenta Box looks a bit like our current formation out of the lows in Miners as it dropped to the 50sma, but notice that later it broke right through the 50 sma for days (weeks) and recovered. So we could see that , it is not unprecedented.
GDXJ BIG PICTURE BULLISHNESS – The Month closes Next week. September would still be a ‘shake out’ on a Monthly basis, if October closes next week in bullish territory, BUT IT DOES NEED TO RECOVER SOON. Read the chart.
FINALLY for the Bullish View –
1. This should be an Inverse H&S break out / back test.
2. Also a back test of the 50 sma
3. And this looks VERY right translated, with a day 30 high! A day 30 peak is very bullish.
SO HOW CAN I MAKE THIS BEARISH?
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MAYBE LIKE THIS – THIS WOULD HAVE A DAY 21 DCL & NOW A PEAK ON DAY 9. WE WOULD HAVE A L.T. CYCLE & A ROLL OVER ( BUT IT STILL WOULDN’T MATCH GOLD, THE COT, AND OTHER BULLISH FACTORS) . Read the chart:
The above idea has to be less likely, because of all of the other factors for Gold such as the COT, an ICL in place, etc, etc, etc. That doesn’t mean that Miners won’t become choppy and difficult, we’ll have to watch & see.
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Another Bearish look is that the USD looks so bullish, though Gold isn’t really reacting to it. The USD has looked bullish to me for weeks now, and I have mentioned it, but GOLD has ignored it so far.
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So wouldn’t you agree that this is a very MIXED set up?
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The USD is bullish, Gold held up very well, Miners crashed down out of nowhere, instead of a nice slow pull back as expected. Some Miners also still do not look bearish, as you will see.
We just need to take it step by step at this point, and see how this unfolds. Here is a view of some Miners…
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GSS – GSS actually crashed below the 200 sma & then did a bullish reversal, so there is hope 🙂
AUMN – This is normal so far, a light volume dip to the 50sma.
PLG – PLG crashed below the 50 sma and recovered too. I got stopped out , but decided to jump back in buying higher than where I got out. Why? A run to the 200 sma is a great % gainer and I have no emotions when it comes to being stopped out & trying to get back in if it looks bullish. This does look bullish, so I will try again. Read the chart.
GORO – I own Goro & this circle is the area that it should find support. I did not expect a 1 day drop like this ( this was as of 11 a.m.), but that BASE really should prove to be solid support.
I SOLD MY AG FOR 1 REASON- I saw too many Silver stocks ( see FSM, EXK, CDE) crashing down, so I will get back in on a reversal if things look good.
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AG #1 – This is normal market action and I captured this at 11:14. Read the chart.
AG #2 – I drew this at 11:14, to show that it might crash below that 50 sma as a shake out. Looking at charts this morning, I noticed EXK, PAAS, FSM, CDE breaking down below their supports, so I sold my AG for that reason alone, and will re-enter when I see a bullish reversal.
AG #3 – End of the day. This could be all we get for downside, but I sold after looking at the other Silver Miners.
Lets take a look at CDE – I captured this Midday, and it closed a tad higher at $5.04. This looks like CDE may be finding support too, and that would be bullish (Selling drying up). This is a reversal on a trend line. I would love to buy CDE at $5, you know, for next year when its $20 – But I don’t dare to right now 🙂
So all I can say is that things are playing out as expected, but the speed of the drop all in 1 day got a bit uncomfortable. I need a little more time to see what this really wants to do. Use & Honor stops, but hopefully you will not need them.
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As a sidenote:
WTIC – Oil is looking for a DCL, but each bear flag breaks down. Let this break out & prove itself if you are thinking of a long OIL position.
I will have the weekend report out to discuss the bigger picture after we see what Friday delivers to us.
Enjoy your Friday trading & have a great weekend and thanks for being here at Chartfreak!
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