June 2- Patiently Waiting

Many readers here like to trade daily, attempting to scalp some short term gains or trying to grab a small run.  Others may be patiently waiting in cash for a longer term run, like we saw in Miners from Mid January through April? Like the Bear in the theme picture patiently waiting for a salmon run,  they soon should be rewarded.  After a market review, let’s discuss what is involved in that waiting period.

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SPX– We still see our bullish set up and even got a reversal Wednesday after an early sell off.

USD –  The USD has peaked on day 20 so far.  That is a bullish R.T. set up, so even though I do expect a pullback into a DCL soon,  I then expect a run higher to follow.

$WTIC – Oil is due for a DCL, but it refuses to have a sustained drop  (so far) . It is on day 40 of its daily cycle, so a DCL is expected soon.  We could get that from a drop to the 50sma, or even a sideways move for days over to the trend lines shown. The reversal on Wednesday looked bullish with good volume, so we’ll have to see if we pop and drop or just move into a dcl from here. Oil remains strong.  Look at OAS, ETE, WG, LPI, etc.  After tripling – these have hardly pulled back.

XLE – The XLE  has a weakening MACD and though it also looks to have had a bullish reversal, I have to say that I would expect a drop soon,  not a rally.

$CRB – We saw a reversal in the CRB Wednesday too, but this pattern could actually pop or drop.

NATTY –  In the weekend report I said that I expected a break out, and we have a break out and beautiful follow through here. A back test of the 200sma in the future would offer a good entry if you missed this one. Day 8.

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GOLD – Gold is oversold and has a swing low in place, but it could be a fake out and could continue downward.  In my weekend report I mentioned that I would like to see GOLD continue to drop into a deeper ICL and not just a DCL. Time will tell.

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GDX – GDX is meandering here for the past 5 or 6 days. Is it a weak swing low, unable to break above the 10sma? It looks too weak at a glance, but I think it could break out higher,  above that 10sma.  Time will tell here too.

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If you read the weekend report,  you have  read Part 1 of my Gold focus, discussing ‘Timing’ of an ICL.   Part 2 was in the last report, and I said that I wanted to mention something interesting about Miners.   Before I do I feel the need to WARN everyone of a few things.

1. MINERS bottomed 1 whole month after Gold this year. Gold bottomed DEC 2015, Miners bottomed 1 month later in January of 2016. So it IS possible that Miners bottom after Gold again  ( This goes against what I am about to mention ) 🙂

2.  As a reader here, please Know yourself as a trader. If you cannot take a little draw down,  this part of the report means NOTHING to you…ignore it and wait for a safe set up.

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I am going to show why I am thinking of adding to core positions, Just a little.   For one thing, we know that if we have re-entered a bull market,  the Bull will correct a little draw down now in time. My original purchase price on ‘core’ positions is much lower, so this is just normal adding on a pull back,  but not everyone can handle draw down. Why  am I thinking of adding now?  Timing.

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Lets go back to my Gold chart from yesterdays report

Please notice that GOLDS 2nd ICL came in APRIL 2009. We’ll say it again, in 2009 GOLDS ICL came in APRIL with a double bottom.

GDX 2009 –  GDX bottomed with a triple bottom, when? In MARCH.    GDX did not bottom in APRIL when Gold did,  it bottomed 1 month ahead of Gold. Then it rallied and then dropped back to a slightly higher low in April.

NOTE: THAT WAS NOT AN EASY BOTTOM TO RIDE.  In March alone, it bottomed, bounced, did a stop run, bounced, dropped again.

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 Now let me show you something else that I would think could happen now, if the Bull Market in Miners has returned.

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SA – Seabridge Gold in 2008.   Do you see the drop in March when GDX bottomed?  And look at the drop in April when GDX made a higher low and Gold actually bottomed? Where is the big scary drop that some are saying you must see before you can buy any Miners?  SA simply acted correctly in a bull market and tagged the 50sma .  Yes, there were others that acted this way too.

Again, GDX bottomed in March, Gold put in an ICL in April 2009, look at SA below.

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    Take another look at GDX 2009 here. The drop from the top of the initial run was 38.2% .  As a side note: I also want you to notice how difficult GDX was to ride in 2009, even after the March lows. THAT is a volatile time period throughout 2009 if you didn’t lock in gains during each run higher. People tend to think Miners run straight up in a bull run, but look at this chart.

    Now notice that that 38.2% drop in 2009 was not much different from what we are seeing now on the GDX. There is a gap near $20, between the 38 % and 50% retrace.

 CAN GDX SELL OFF DEEPLY FROM HERE?  Sure, with 1 more complete daily cycle into an ICL.  Does it absolutely have to drop a lot more? Not based on history.  That sell off in March was 38%, but volatility was evident. So I want to be open to what I have stated in the last few reports, yet still remain somewhat cautious.  This does not mean that you need to buy now, I’m just saying that maybe we should be looking at Miners again.  I may even add a bit to some core positions, feeling that they have pulled back enough.  I will be watching things unfold going forward.  Some of your favorite Miners may simply consolidate and resist the drop that Gold and GDX make, like SA did in 2009.

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 Conclusion: Patiently waiting for Miners to finish their corrections should be rewarding once they start the next run. I am not saying that you need to buy now, the move out of such lows in the past was not a straight up rocket ship in many miners. You can see from charts of their 2008 to 2012 move higher, there will be plenty of time to make gains in the precious metals markets. I also just needed to point out what I am seeing and thinking, because I get emails asking me “Why not buy Dust and ride the drop lower to the ICL?”  My answer is that by looking at 2009,  the drop was complete at 38.2% in GDX.  I hedged my core with DUST as mentioned weeks ago, but that position was closed for a gain.  Also, please notice that volatility!  GDX in 2009 looks a lot like VALE, CLF, X, FCX recently, and some traders cannot stomach that without practice.  It may not be as easy to trade as some think.  In the weekend report I may discuss this just a little more.  Have a great Thursday, and I will have a small Friday report, possibly just containing a couple of bullish set ups that may appear. I am currently trying to focus on Miners.

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~ALEX