Where Are We Going?
This is a LONG report, and I do not have time to proof read it, please excuse any typos. I’m tired and there could be many.
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Earlier this week I used this picture below to show how the General Markets Bulls were running and falling off the edge of a cliff. It was time to step back and let the sell off into an ICL follow through. Up until now, The Precious Metals Markets seemed to be ok. And along with that…
If you were just watching Gold today, you probably felt that everything was fine there too. Even in the morning, many miners were pulling back into what should be the anticipated DCL. This was Gold at the close, looking fine and maybe even forming a cup? So this chart of Gold is after the market closed Thursday.
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THERE IS NO WAY TO SUGAR COAT THIS: The bad news is that by the end of the day, Miners did not hold up like Gold. They really started to accelerate in their selling into the close. Now you will see that Thursdays selling is EXTREMELY close to the prior daily cycle low, which if broken, would cause a failed daily cycle. let’s look at a few charts of the miners.
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GDX – This was our measured move and this was a bullish set up as of the 24th ( Monday) . A mild pull back to a dcl was likely due, it was day 27.
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GDXJ THURSDAY MORNING – That selling looked great here after the first hour of trading. I have been waiting for a dcl and this break of the 10 sma was necessary. A Bounce & reversal off of the 50sma & trend line would be a bullish start to forming a dcl, so I drew a circle there.
GDX MIDDAY – Here I was comparing the slice through the 10sma with the last dcl, and so far I just thought that this could be mimicking that decline ( see the green boxes). We had a big SLICE then too, and then 4 small candles formed the dcl in that box. As of Midday, this was fine.
GDX – So I gathered this one too, looking at possible support at the 50 sma.
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UP UNTIL THIS POINT MIDDAY, EVERYTHING WAS FINE. IN FACT GOLD WAS STILL GREEN, GLD WAS LOOKING BULLISH AT 2:22 P.M. ( The timestamps are in the upper left corner). Were Miners bouncing back at 2:30 since GLD was green? Let’s take a look.
NOT BOUNCING BACK GDXJ 2:34 p.m. – This was a now becoming a DEEP drop. A bit concerning with GLD green, but this was at cross area of support, so I was watching the charts closely all day ( GDX, GDXJ, SILJ, and various miners). I started to see various miners breaking down too and not finding buyers. I posted this in the live area and basically said that I wanted to buy it, but I was afraid to, seeing Miners selling off more & more…
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GDXJ – 1 hour later, We lost the triangle, so this was NOT just a back test. That $39.60 is a dangerous area for GDXJ, because that is our last daily cycle. THIS WEEK just gave back our daily cycle gains. IF THAT $39.60 breaks, this becomes a failed daily cycle. We would still eventually bounce with a dcl, but that next daily cycle would be likely to fail & start the drop into an ICL. There is NO sugar-coating this, THIS NEEDS TO BOUNCE FRIDAY. 🙁
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Let’s look at Miners a bit further. This ‘change’ happened rather quickly Thursday and I will mention what I think MIGHT POSSIBLY be causing it.
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JUST YESTERDAY MIDDAY AUY was fine bouncing off of the 10sma . Normal bullish action in this multi week bullish climb.
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BTG was fine too, reversing strongly off of the 10sma yesterday.
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EGO – JUST YESTERDAY I WAS LOOKING FOR WAYS TO BUY THIS IF WE GET A GOOD ENOUGH DIP. EGO WAS AT THE HIGHS, I WONDERED IF WE’D JUST SEE
1. A BULL FLAG? OR
2. MORE OF A DROP TO THE 10 SMA? …
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EGO – Well what a difference 1 day made. EGO , screaming higher from the good earnings report, dropped 13% Thursday. It was near $10 at 1 p.m., and kept selling off into the close.
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AUY picked up on the selling into the close too. Yes, it is still above support, but do you ‘wait & see” if it breaks down? or is it best to “sell while you can and then ‘wait & see’?”.
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This selling picked up and could suddenly break support if this continues too.
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ELYGF – 3 days ago this was trying to form a bull flag near the highs, but this shows the damage that a day or 2 can do if you get caught in a landslide. THIS IS WHY it may be best to sell even the good ones before they get caught up in some selling.
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I am thinking that Miners were being accumulated recently, and that trade was obviously paying off. Miners were trending higher and looking bullish. What may have happened? Think of The FUND Managers with much of their holdings in the General Market. They were also likely buying the dips all the way up & even on the way down early in this week. Suddenly buying the dip went very bad in the general markets, and They are caught in a slaughter. Check this out…
The DOW basically lost an entire year of gains (Blue Box) just – this – week!
The Dow, supposedly a bit safer place to put your funds, dropped from 29,500 to 25,700 in days. 1,000 / day at times. Panic selling takes over as everyone heads for the exits at once.
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Notice that 4 months of gains & 3 daily cycles were gone in 1 week for the S&P 500 too!! MANY ARE TRAPPED. WHAT CAN THEY DO? Sell the winners with the losers to offset the pain? Maybe they decided to sell their Miners. There are also Margin Calls, and cash must be raised to pay the piper. 4 months of gains -gone. 401Ks will look ugly after this quarter. IT BURNS ME that ‘a close under the 13 sma’ was my trigger for a market sell down, but I was going to watch the initial drop & short the bounce. I should have went short Friday night. What a short this was.
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Unfortunately, Fund selling may be what we see happening here. Losses piling up in their accounts, some of the bigger players may be starting to liquidate their gains in Miners. REMEMBER : GOLD DIDN’T DROP, why should the Miners? It seems that the Miners were being cashed in to help cover losses & pay margin calls.
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EVENTUALLY, I do think that that money may find its way back into the safe haven of miners, and they may rally very strongly with bigger chunks of money trying to find its way back into this sector later this year, but for right now? I AM GUESSING THAT THEY STARTED TO LIQUIDATE SOME MINERS . The last daily Cycle needs to hold or we are starting a break down of the bullishness & will dip into an ICL. It could get ugly if this keeps up. LET ME SHOW YOU 1 MORE THING…
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GDX WEEKLY – THIS IS A VERY BULLISH SET UP AS OF JUST MONDAY OF THIS WEEK. EVEN THE WEEKLY MACD HAD A BULLISH CROSS. I loved this chart. HOWEVER…
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HOWEVER just 3 days later and we have a bearish engulfing candle on a weekly chart, and the MACD Weekly now trying to cross under? That is fast damage, and most of it came just today. If we bounce Friday, it may not end as engulfing, but if the liquidation continues, this will be one of the ugliest weekly candles that I’ve seen in a while for Miners. The MONTHLY CANDLES END FRIDAY TOO.
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GDX WEEKLY THE BIG PICTURE – The bigger picture is not damaged at this point, but it certainly will be disappointing if we fail our current daily cycle. It could mean weeks & weeks of choppiness and sideways selling into our next ICL rather than the break out that we were rightly expecting. At this point, we have to be resolved to try to be patient and see how this plays out going forward.
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The GDX WEEKLY was bullishly climbing that 30 week ma too, and even that is being threatened by the sudden increased selling.
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How do I end this report, with this sudden change swiftly handed to us? There really aren’t many choices. I see MANY on Twitter saying this is the biggest gift of ‘Buy The Dip for the Bull Market in Miners’. They claim ‘Manipulation is driving it down to scare bulls out before a massive explosion higher’. We’ll see. I have to be a look at things a bit safer than that and I can always jump in quickly, but I will mention what I feel are 2 possibilities.
1. If this Thursday slam down reverses and really rockets higher tomorrow, then maybe that saves the day and this was just a shake down to get people to lose position & a dcl is formed. After all, Gold did remain green.
2. If the lows are broken Friday? – This could become a liquidation event by the Big Boys trying to save their quarterly gains. I wouldn’t want to be the last one out the door. I always say that stops are very important to any traders funds.
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A Few Readers have written. This is their thinking:
– Some have already or will just bail out & watch from the sidelines. ( This is a good idea: For better or for worse, you’d Lock in current price whether we are going to bounce or drop, and just see how it shapes up. Then go forward from there with less stress). CASH IS KING.
– Some have already been stopped out of some or all of their positions on the way down. Trend lines are broken, moving averages are broken, etc. and stops may have been set there. ( I am in this category. I sold leverage and my extended Miners with the Monday black candles reversal, but I also bought a couple of new smaller positions, so it got tricky. I was stopped out of FSM & USAS, and sold AKG willingly Thursday, though it really still looks ok to me. I wont be in front of the computer Friday morning).
– Others may have already bailed out or sold some Miners with the black candle reversals Monday night, since we should get lower prices, and they could re-enter at the dcl. ( I fall in this category too)
– Finally, there are some that have said that they want to ride it out and just see how things play out Friday, because we are very close to the last dcl (lows). If we bounce & those lows hold, they’ll ride the bounce. If the lows break, they’ll sell. If that bounce comes Friday and the lows aren’t broken, a dcl may even form Friday. Then Traders can sell the bounce out of the dcl in a few days or at least keep an eye on it.
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One thing that I can say for sure is that if the selling picks up, it could be big boys continuing to liquidate their positions, and they may have heavy positions that they can only unload in small quantity day by day. You want to beat them to the doors. I would not want to be holding heavily positioned into an ICL drop.
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This was a very unfortunate situation, when you look at that weekly set up of GDX just 3 days ago. THIS was a perfect cup & handle set up, which makes it a perfect example of why I always encourage placing stops at a place where you do not want to lose money. you can always get back in if it takes off higher.
To put the selling in perspective, SPX 2.5 month chart shows how quickly Big Selling can wipe out gains. Do NOT let liquidation hapen to you with your Miners. If we don’t get that bounce Friday, we could get this next week in miners.
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Note: I have a doctors appointment at 10 a.m. Friday to go over the results of the lab work done Thursday morning. UGH! These appointments were made over a month ago, and I certainly didn’t picture this volatility when I made them. For that reason, I just had to lighten up a lot yesterday. I won’t be in front of the screen Friday morning. The only Full Position that I kept was PLG. It lost the 50 sma & recovered, so I am treating it as a shake out for now. I will be back in the live trading area by midday. I will also be there pre-market. Friday should tell us a lot with price so close to the dcl. Enjoy your Friday trading??
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~ALEX
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Copper has a higher low with all of this selling? That is interesting, maybe it formed an ICL in that straight down drop.
I looked at Platinum, since PLG dropped and did bounce back over the 50sma.
Then I noticed how much Platinum started to remind me of GOLD with a May ICL and a NOV ICL, but PLATINUM did drop below the Feb DCL. Is this a hint of what Gold will do? Platinum DID break the dcl of February ( green arrow) . Just a thought.
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SPX B.B.-A break of the Bollinger Band is supposed to snap back rather quickly. This is EXTREME!
