July 20 – A Miner Dip

Wednesday we saw the Miners (GDX, GDXJ)  gap down and close near the lows on fairly high volume. What can we expect going forward? We’ll discuss that after a quick market review. 

.

SPX– The general markets broke to new highs and since there is no resistance here, they have just continued higher.  I do expect a dip soon, maybe this measured move will be close enough? 

3 reasons that I am expecting a dip…

1. We should be due for a 1/2 cycle low

2. It wouldn’t be abnormal to ‘ back test’ the break out

3. The VIX is VERY LOW, where highs usually occur. The VIX closed below 12. ( Short term top in this case)

   

WTIC – No change from what I have been expecting. This does look like a reversal candle, but the cycle count still calls for more time before a sustainable rally is likely.

.

We are going right into Precious Metals here.

EDIT: I write the reports at night and finish or proof read them at 6 a.m. the next morning. I saw Gold up $6 when I awoke, but this may just be a bounce.

.

GOLD – Sometimes you get symmetrical moves in charts. Not EXACTLY the same, but they measure out a probability.  I had drawn this Tuesday and never put it in yesterdays report.  I thought that it was interesting when gold hit $1312 and turned up, because that was roughly the measured move. 

.

You take the 1st drop from $1318.90 to $1252.80 and that was a $66 drop. Subtract that length from $1377  and you get $1311  (Personally I think Gold can drop further, so I’d be cautious if we see a bounce here).

.

GOLD – I have no doubt that the End of May was the ICL.  That is most important, because time-wise, it tells us that this is too early to roll over and break those lows like we used to see in the bear market. I expect another run higher above the recent July Highs.  This dip could tag or temporarily break the 50sma as a shake out.

.

CYCLES

.

GOLD AGAIN –  I have been counting the 40% dip in June as a short daily cycle and a DCL.  That is what I see in GDX.   IF IF IF this was really all one daily cycle out of the ICL,  that would actually be good news. Why? If this was day 35 , it would be very right translated, and due to bottom soon with the 2nd daily cycle starting soon.

Again, In Technical Analysis, this would be a normal break out and back test.  It was pointed out on July 12th here and is nothing to worry about technically.

.

GDX -This shows 2 daily cycles and their count. There are a few reasons why I have this count and not all one daily cycle for Miners, but too long to explain. I may address it in the weekend report.

Wednesdays drop looked a bit ugly, but we have seen a sharp drop in the past that had heavy volume  ( see red arrows). 5 days later the low was in , and 3 of those days ended higher.  Again, the 50sma was the support area, so maybe we should watch that area this time too.  That drop would fill the last 2 gaps, one already being filled on Wednesday.

GDX – This shows the move from the ICL as all one daily cycle. This would be day 38  ( kind of unheard of for the miners.  A 2 month daily cycle?). I see that Gold Futures are up pre-mkt. Notice that the 2 other big drops (Arrows)  on this chart had a green day next, but selling continued.

.

The Cycle count and E.W. seem a bit confusing or unclear, with a possible 38 day cycle so far? So I wanted to go to the touchstone. What did the bull market rally out of the 2008 bear market sell off act like?

.

GDX 2008-2009 –  Look at the first 6 months coming out of the bear market sell off.  Jittery & confusing really.  Was that a 1/2 cycle low in Nov that almost tagged the ICL?  Then we saw a burst higher for 5 days followed by a drop for 5 days to a dcl in Dec?  I cant tell what was definitely a DCL, ( and even in hindsight the Elliot wave count looked too tough to call real time). The dips were a bit scary and designed to shake out people still rattled from the constant break downs of the 2008 bear mkt.  Once an ICL was in place, it was not broken in the bull market however.

SO for now, the markets are shaking us around, but thankfully we can be sure that the ICL was put in place in late May, and time is on our side. This Intermediate Cycle should not have topped yet, we expect another run higher after a low is put in place. We look for a move back above the 10sma and an overhead trend line break out.

.

Lets look at a couple of the Miners on our radar and see if they are acting normally so far.

.

AUMN–  SO FAR , this looks like a normal back test of the break out on an inverse H&S. This was only at 2:30, so the volume increased a bit, but it remained light. 

AUMN also remains above the 10sma so far.

TRX is the same.

.

GSS –  I posted in the comments section Wednesday that I sold GSS simply because this is most often a temporary topping candle.   ESPECIALLY when price gaps higher and reverses, and then gaps down from there like we see here. A simple back test may occur.

.

SO I’m expecting a mild pullback in the general markets,  Oil should continue to be weak, and the selling on Miners was a quick  rather unexpected gap down and was pretty strong volume wise.   EDIT: It may have some follow through even though I see GOLD up $6 as I awoke. We’ll have to see how this all plays out Thursday and even Friday, and the weekend report will cover the big picture developments. 

.

~ALEX

Side note: I used to follow several smaller tech companies and as they sold off hard with the general markets, I still tracked them to see of they could recover in time. For example,  Many know that I’ve followed  OTIV, NETE, TASR, FIT, GPRO, DANG,  MOBI, RENN, DGLY, DDD, VJET, GRPN, KNDI, etc etc . Companies that I wondered if they could become a good growing company under the right conditions.  I still watch them from time to time  ( Mobi looks to be putting in a nice base on a 1 yr weekly too).

.

This is OTIV and it has acted so bullishly after dropping down to $0.32 that I wanted to point it out for peoples watchlist if they have one.  It looks like this may make a full recovery over time.  It was a $16 stock at one time.   It has never done any reverse splits though it faced possible de-listing for trading below $1.00   It ran higher, Bull Flagged and topped above $1.10 and then consolidated for 4 months.  Recently it broke out with the general markets, even before the Nasdaq has.  The upside target conservatively is $1.58 from this new base and may be a buy if it back tests this consolidation with a general market back test.

This is a 2 yr weekly chart of OTIV, and this is a nice set up for a recovery.  With this nice orderly set up / base, I would put this on your watchlist and maybe watch the fundamentals to see if they are improving.  It could be a nice recovery story over time, and a buy the dips candidate.