Our Hands Are Tied

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That’s what I heard from the Fed. 

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SPX – This needs to move higher soon. It is starting to show internal signs of weakness, even though it doesn’t look like much of a pullback. The VIX looks like a bull flag may be forming.

WTIC –  This is very close to a DCL.  Energy stocks could become a good opportunity again.  I am looking for some that “Hold up” despite the selling in Oil. I mentioned a few in yesterdays report, I will keep an eye on this area going forward.

For now I want to discuss the precious metals and our low interest rate situation. Commodities, Metals, and Miners looked to have a bullish reaction today.  FCX, X, HBM, CENX, AKS, and others showed signs of life after the fed Decision was released.   I have been saying that I believed the ICL was in place for Gold, and it has now run up $100 from the $1205 lows. I do expect it to continue running.  How things will play out going forward should be a bit different than the first move out of lows in Mid January to April however. The reason was touched on in yesterdays report. 

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When stocks get extended well above the 200sma  ( I use 100% as a guide)  it is difficult for them to continue higher . It is not impossible, because they can stair step higher and the 200sma can climb slowly too.  Again, this was mentioned in yesterdays report. Lets look at this sector and touch on that a bit again. 

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GOLD – Gold has actually consolidated sideways for months now. That means that we can see another leg higher (As shown in green).  Gold has been in this price range since February. We are now pushing the highs with an ICL in place. Gold is also in a huge base. This should break out and make another run higher sooner or later.  If Gold runs, I expect higher prices in Miners.

GDX – The Miners have been consolidating gains for about 6 weeks. We have seen some miners  ( MUX, ASM, VGZ) break out and run very quickly higher. It would make sense that others could now follow.

XAU–  These consolidations allow the overbought conditions to relax, they allow sentiment to neutralize, they allow the moving averages to catch up. They can prepare the way for another leg higher.

I showed this chart of SA 2009 in a prior report.  I wanted to show how the miners can move in a bull market. They run, get extended, and pull back. A normal stairway higher.

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SA in 2008 to 2009. Please notice that the ICL was in OCT. The next one was about 5 months later for Gold in April.  The run up was strong, and then the pull back was too.  It is still a bullish run, higher lows and higher highs, but the daily cycle lows do seem to increase the profit taking as time goes on.

If Golds ICL was in late April 2009, notice what SA did.  1. It ran to prior March highs, then formed a mini handle. 2.  Broke out and completed an A-B-C up. 3. Dropped all the way back.

So we are seeing some great moves in MUX, VGX, ASM, etc,  but I sell a partial as soon as the a-b-c is complete. I want to be able to watch how these moves unfold, with out giving my gains all back. I also feel that Miners that did not get too extended above the 200sma may move higher more easily.  We will have to wait and see. Lets look at Miners .

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Can Miners get crazy extended above the 200sma?  More than 100%?  Yes, but it is rare. From yesterdays report, notice the 2 AG charts.

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AG – This is almost 300% above the 200sma and looks like it does still want to go higher.  I wrote on the chart that maybe by the time AG hits $22, the 200sma would be at $11.  Then you could get a pull back.

For traders that would like to trade some set ups in Miners, why dont we just look at charts of Miners that do look set up to run, but are not even 100% above their 200sma.

BTG –  VGZ and MUX both moved toward their former highs on increasing volume, and then just exploded.  BTG looks like that now.

BTG WKLY – This looks possible, especially if Gold runs strongly above $1300. Break out, back test, and run.

TAHO –  Nice reversal on the 50sma with good volume. For this to run 100% above the 200sma, it could go to the $18-$20 area.

TAHO WKLY – TAHO has been working through a large resistance zone, but a run to $20 could happen if Gold runs to $1400+.

SAND – If Gold runs strongly above $1300,  SAND should break out & run. The 200sma is at $3, so 100% above would be $6.00 or more

SAND WKLY –  Sand has been working through resistance and looks ready to succeed

IAG – IAG  is not over extended above its 200sma yet either.  As price rises, the 200sma slowly rises, so I would think that this can run higher too.

IAG WEEKLY – When we discuss that the Gold Bull is back, it means many of these Miners will eventually return to former highs and more.

GORO – GORO is not over-extended either. This set up looks bullish.

GORO WKLY – $4 to $8 short term?

NGD – NDG made a $3 run from the January ICL to May highs. It is still near the 200sma, so if Gold runs higher over the next 2 months, NGD  should be able to move higher before becoming over extended.

GPL – GPL has had a large consolidation.  GPL IS about 100% above the 200sma, but notice that it was already 350% above the 200sma in late April!  In late April the 200sma was at $0.60 and price was at $2.20! Wow. If GPL simply returns to $2.20, it is still a nice move, but it could probably break the April highs and run a bit too.

EXK – EXK broke below the 50sma in June and then again 2 days ago. I actually bought it below the 50sma as a back test of the break out and because I thought that the ICL timing was due.  I sold it 2 days ago, and this now looks set up to run.  This looks like a nice set up with another long consolidation like the one in March.  EXK did not extend too far from the 200sma.

So I see many Miners that can and should run higher with GOLDS ICL in place and having 2-3 Months of higher price ahead. If they get crazy strong like MUX, VGX, ASM,  I sell partials to lock in gains. Below is a chart from yesterdays report, I said that I had a $1.14 target, so if my position was heavy, I would lighten up there. Longer term…

VGZ WKLY – You can see why I dont want to sell my entire positions. If we are in a Bull Market, buy & hold begins to work again and VGZ could rise hundreds of % over time.

SO MARIA asked me in the comments section shortly after the Fed Decision   -What Do You Think…?   It is easier for me to copy the answer here.

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  So GDX broke out and back tested,  I am thinking that GOLD may do that too. Often we see a break out and people start ‘buying the break out’, and it reverses lower to back test.  Gold may or may not do that.

 Let me tell you one additional thing that I think.  Someone told me that they heard that Miners are so extended, they probably wont give you any bang for your buck, they want to wait for Energy stocks to bottom again.  That is fine.  For me, I would view it this way.  If GOLD & SILVER run higher out of this ICL for the next several weeks , and  Gold gets back above $1400+ and  possibly even $1500,  I dont think Miners will just sit still or pullback.    Though some seem extended above the 200sma, the 200sma has turned up on many and can slowly rise also.  Many Miners may not double, triple, quadruple like the run out of THE LOWS, but they really ought to get some upside action if Gold runs from $1200 2 weeks ago to $1400+.   MUX, VGZ, ASM, may have been the  sound of the starting gun, and the gains have been terrific already.

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 I personally have bought and would hold at least some Miners when Gold is coming out of an ICL.  The set ups shown above were bullish reversals after the Fed yesterday. Many were bullish reversals in early June at the 50sma too.  We are seeing volatility, but low interest rates are Bullish for Gold.  Best wishes!

~ALEX

EDIT:  6:30 a.m. Thursday morning. I wrote most of this report Wednesday late at night when Gold was up $7 at $1298.  I woke up to proof read and add some comments to the set ups on individual Miners charts and I see Gold ran to $1315 and is now still up $13 at $1304.  I have been saying for the past couple of weeks that I felt the ICL was due, and in place. I also said to just take a position to have some skin in the game.  I hope many here already bought or added – we may be seeing another gap open higher & possibly another lock out type move. 

In the first ICL for Miners in Mid January, I discussed  “Just take a position, even if it is small and buy the dips, because those waiting for a pullback may get locked out if we get a slow melt up.”  This is what many Miners did, offering no clear pull back to buy.

 There is no way to tell what kind of a run we are looking at ahead, but I do think that it could get very tricky. I do not think we will just melt up higher week after week like we did Jan – April this time.  As discussed, we are extended above the 200sma quite a bit on some miners at this point.  I do think that Miners could do an A-B-C up higher and THEN pull back.  Anyone buying days from now  and not selling could get caught in a good size dip.  If Miners do run up quickly, then move sideways, and then up, the big pull back could get hard to hold. Buy & Hold does work in a bull market, but you have to get in fairly early and be willing to ride a rough ride.  We will likely see volatility going forward.