June 4 Part 2 – The Golden Egg

This is part 2 of our weekend report, and it will focus on the Precious Metals Market.  In Last weekends report, I pointed out this very important chart.  What was I trying to draw attention to? 

 

GOLD– Using Cycles, the Intermediate Cycle Low (ICL) , a very meaningful bottom, has been arriving every 4-5 months. I pointed out that at 6 months from the Dec 3rd ICL, a very important low is due.  Gold was not plunging deeply into its low,  so many were not buying,  they are waiting for that deep pullback. Would it be that easy to get ‘low priced Miners’ again? I thought we would see the ICL in 1 or 2 weeks. Here we are, 1 week later.

 

It makes sense to me that when many missed that first run,  they would now be waiting for a deep drop to be able to buy ‘cheap’ Miners back at prices that they missed, but can we expect that kind of a gift?  When I said that I was starting to add Miners again last week, I got a few friendly emails saying that others are warning   “You must not buy until you are so afraid to buy,  someone else will have to push the button for you. Wait for a blood bath“. That type of selling could have happened,  but I wanted to just examine the facts.

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Last week I showed in my reports that I was expecting a low soon, and due to “timing” and other factors,  it could be the ICL.  I do believe we have an ICL in place now, but it will still take time for it to prove itself.  Here is a review of things that I have been watching.

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GOLD 2008 -2009 – The pullback after the initial rally was less that 50%.  You may hear that you shouldn’t buy unless the sell off is very scary and a trend line is broken.  In 2008-2009, Was the trend line broken?

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LETS ZOOM IN- 2008-2009

1. Was there a trend line break?  No, not in an entire year. 

2. Was there a 50% pullback?  No.

3.  Was the pull back so deep & scary that someone else had to pull the BUY trigger?  I dont think so.

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So I crossed those off of my list.  Many say they need to see these Miners in a blood bath phase. Is that what I saw above?  I wasn’t waiting for a blood bath phase. I see less that 50% pull back from the ICL in Oct 2008 and one year onward.

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Gold Wkly currently –  Less than a 50% pull back and a strong reversal.

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This is Gold currently and using technical analysis,  this may have been a perfect back test and reversal.

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With the Jobs report being so weak, it seems that the probability of a rate hike in June is no longer on the table. That would hurt the $USD, and that would be good for GOLD and Miners. 

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USD – This plunge is more than a normal drop in the USD.  It is also not just a break of the 50sma.  After such a solid run higher, this wiped out about 3 weeks of gains. In 1 day, it killed a few bullish indicators too.

GOLD -It’s true that Gold pushed to the 50sma and stopped. So is it just a bounce that could drop like some of the others? I don’t think so.  A break above the overhead trend line drawn would be very bullish. That would signal an ICL is in place to me.  Gold might go sideways first, however.

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I need to ask,  When was the last time you saw the GDX up over 11%? Wow. It also registered 190 million in volume.   This is at least day 6 of a DCL, but I think we have an ICL.  Now the problem will be that many wont dare to start a position because we have a huge gap. They often fill, but at times they do not. This can also go sideways and consolidate for a while.

Please note on the above chart that some gaps never filled.   If this becomes a runaway gap,  it may not fill. Notice 2008 again…

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GDX 2008 –  Some Gaps didn’t fill until last year, many years later.

 

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I posted a chart of SA from 2008 in a report earlier this week.  I did this to show that GOLD bottomed in April 2009, but some Miners ignored that and bottomed 1 month earlier. Many simply acted like Bullish Stocks in a Bull run higher, worthy of a ‘buy the dips’ approach.  Lets examine that thought here too.

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GOLD & GDX 2009 –  As we saw in the last weekend report, Gold put in its second ICL in APRIL 2009.  GDX put in its lows in March 2009, with only a 38% dip as shown.

 

This was important for me to take note of :

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SA – in 2008-2009 it just acted like a bullish stock and just rode higher with consolidations. No bloodbath.

IAG 2008 –  IAG bottomed in March when Gold bottomed in April.  It was in an uptrend and just acted like a healthy stock in a bull market. This may have been tough to ride with the volatility, but it ran from $2 to $20+ over time.

RANDGOLD 2008 lows –  Not always an easy ride, but a bull run higher despite Golds ICL. This one bottomed when Gold did in April, but then took off like a rocket,  $38 to $70.

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So I was trying to point out that I am also seeing that bullishness now in many Miners.

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 Let’s look at some Miners currently, after our recent  Gold & Silver  consolidation.

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SSRI Currently-  What do you see here?  New 2 Year Highs as of Friday! You see a strong run from January lows, a consolidation, a strong run, and a consolidation.

RGLD–  Not even close to 38% pull back, also almost at new highs too. Yes, a sideways gap fill is possible or it could just continue higher.

 

AG –  $2 to $12 and still near $12.

 

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SO a big problem is that everything Gapped open in a big way Friday.  Could the gaps fill and then they move higher? Yes, but they also do not have to.  Maybe one could take a partial position now and add if they do? You can see how these gaps did fill in IAG recently. It often happened a few days later.

 

IAG – Gaps got filled in the next few days

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In conclusion,  after looking at many many chart past and present, I am seeing signs of an ICL in place.  Follow through will be the proof, a break out above the overhead trend line.  That swing low occurred only a couple of days ago, and the sign of strength was Friday.  THAT would mean that you haven’t ‘Missed the move”.  These I-Cycles can run higher for 5-6 months. Picture the run higher out of the lows in January for Miners.  Months of gains were accumulated, it wasnt all in one day by any means. The hardest part now will be comfortable entry points.

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So in last weekends report, I was getting a bit more than a ‘Gut Feel’ that it was time to focus on Miners again. I tried to start conditioning the thinking of readers here that a buying opportunity would be arriving, and I also mentioned that I was buying based on what I was seeing.   I got emails from readers with a friendly and kind warning that others were saying not to buy until you were so afraid you couldn’t pull the trigger, so I tried to show from last weeks reports that 2008 was not like that.  I hope to have added a bit more confidence to that here in this weekend report too.  I shared some of my research here. If I did not have any position, would I wait for a gap fill?  I personally wouldn’t. I would probably only take a small starter position in case we did get a gap fill, and also just in case we didn’t get one.  🙂

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One last set of charts.  Again, this is  GDX  2009.  Notice that power gap higher just after the low on March 10, 2009 on day 6. It slowly drifted higher until day 12, and then rolled over into the next dcl day 27.  We could see a lack luster move from here too, or volatility, we really dont know.

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GOLD has Popped in the past and just drifted or dropped after expending all of that energy in a day or two.  As mentioned in last weekends report though, timing wise, we are due for an ICL. This could have immediate follow through for a bit, but then it also may need to rebuild energy.

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So I started acquiring more positions last weekend, but that was not a low risk entry. I couldn’t pound the table on it, saying it was the safest move, but I wanted to share those ideas here to build confidence of a coming change.  Our commodity stocks started looking good again too, with STEEL and ALUMINUM being highlighted.  If Oil gets its pullback into a DCL, I still expect a further run up to the $60 area. That has been another opportunity to trade and I’ll be looking at that too.  We certainly could have still had a steep sell off in Miners going into the ICL, so there was risk involved with those set ups. Now it seems like Miners are all the rave. Everyone wants them, and they are being accumulated, some at back at their 2016 highs again.  We need to see what happens this week in this sector. If we do get a sideways move or pull back for a few days,  then I will be able to see if we get some low risk set ups. If you buy individual Miners,  you may want to search for some that ran nicely from January, and look to have consolidated those gains.  Start small, there are always pullbacks and always another trade. Even if this is the ICL and we get further follow through, you have not missed the move. 

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~ALEX

 

In the month of June we have interest rate decisions, Brexit votes, more jobs reports, etc etc. The ups and downs of volatility should remain going forward, but the trend for Gold does seem to be higher.  🙂