We Were Not Caught Off Guard

If you have been here for a few months, then you know that this is what we have been waiting for.  Lets review.

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GDX –  Way back in August I started to ready us for a deeper pull back than many at that time would think is likely. You may recall that I kept saying that a solid target was $22-$24 and I said to look for that steep drop at the end of September or beginning of October.

This chart from Aug 22 is an example of me preparing us for a coming buying opportunity. I expected a bounce first, then a steep drop.

My Weekly chart showed GDX broke the weekly uptrend line. A wkly trend line break for an 8 month trend is ‘ugly’, and indicates that a yearly cycle low is coming.  That magenta box became the likely target after that bounce at $22-$24 shown  in Sept/ Oct.   We would monitor things a little closer when we got there.  

We are there, time to monitor things a bit more closely. 🙂

Lets just review some thoughts

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GOLD CHART FROM SEPT 16 –  Target $1250 possible?  Tuesday Gold hit $1269.

GOLD –  First I want to show this. Yes,we had a huge 1 day drop Tuesday.  It looks as though Gold is about to drop off a cliff, and many have possibly been emboldened to “go short the break down”.  I do not recommend that, this can be capitulation / panic type exhaustion selling.  That 1 day drop does not always mean that we have entered a waterfall sell off where the next few days are deep sell offs, it can quickly lead to exhaustion of sellers.  Look at this chart for example.  In this bull market many 1 day slams had reversals in a day or two.  The selling into the May ICL wasn’t even a good short after the 1 day slam.  The selling slowed up and lasted 4 more days of bottoming action.

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The timing on this Mid September chart was pretty good.   This showed the early October slam that we got Tuesday.  Now what do we look for?

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GDX–  This chart shows that we are on day 22,  and that is good enough for an ICL in a bull market.  That is also capitulation type panic selling, it can lead to lows quickly.  I am pointing out the May ICL though, to show how price didn’t immediately take off higher after the strong drop. 5 days later the lows were in, so patience may be needed to wait for a reversal and a break higher before buying. It is safer to wait for the reversal  ( Swing low) and confirmation of the turn.

SIDENOTE:   I am always asked about buying a ‘starter position’ during these sell offs.  “Should I just buy on the way down now?”  In a bull market, buying here will be recovered soon and yes, these dips should recover soon.   The problem is that many do not enjoy watching the draw down, it actually makes them sick to see that they could have bought the same stock lower.   Lets Look at the May ICL box. If you bought 4 days before the lows at the green arrow, 2 months later price was much higher, but could you stomach the 4 or 5 days after the buy?  That is 1 week of trading.

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GDX– This weekly chart just shows the Fib retracements, and $22 is still a reasonable target area, it could dip to $21.   With that in mind, most of us here have a ‘core position’ from the spring.  If I DID NOT own any miners, I personally would nibble a bit during this sell off,  knowing that the bull market can correct an early entry. Let me show a couple of different types of lows on the next chart.

GDX – 2 different types of lows shown here, maybe we get one of these now.

1. Red Arrow in May – High volume slam like yesterday and then dances around for a couple of days into a sightly new low ( not a lot lower). 

2. Blue Circles in July – Slam down July 19th, 2 neutral days, then a final slam (Not a lot lower). I drew this type in for us this week. This would bottom on the Friday jobs report.  That is not a prediction, just an idea so that you can visualize possible lows.

 I own TRX as part of one of my core holdings, and if I was in front of the screen today, I may have added on this dip to possible support and divergence. I will be watching it and a few others to see how they act on Wednesday.

TRX, NAK, and a few others did put in reversals, but they may or may not hold. They could bounce and drop again and be accumulated while Gold bottoms.

SO we have started possible capitulation type selling on day 22, we can see a low form at anytime.  I have mentioned that this sell off was coming for the last 2 months, so that when it gets here, we will not be afraid to look for entries. Further patients may pay off, but I think that we are close to bottoming.  A swing low is when you get a low price point and then that candles highest point is taken out.  This is an example of what a swing looks like  ( This one was a weekly swing).

You look for the price of the candle with the lowest price, to have its highs taken out.  

We are within the timing for a swing low to present itself, so we will be looking for a SWING LOW to form in the days ahead. You do not need to worry if you miss THE EXACT LOWS, once an ICL is in place, they tend to run higher for 3 months.  They also can meander around at the bottom, and individual stocks all act differently.   I will point out some good low risk set ups in the future reports.   At each ICL, we have plenty of time to enter low risk set ups in Miners. 

If your core is sore, that is understandable during an ICL sell off, but in a bull market you should see higher prices in the coming weeks to ease the pain.  The CORE is the Buy & Hold method that pays off nicely when we get surprises to the upside and are riding an uptrend, but can be difficult to ride out during corrections. We should see much higher prices going into the end of 2016.   🙂

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~ALEX

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P.S.   Those that use the  comments /chat section know that I am usually there regularly daily.  This week I was asked to do some house sitting / pet sitting and my laptop usually automatically connects to the wifi there. This week, even with the password, my laptop states that it cannot connect to that network.   I dont know if a security update with windows 10 or my antivirus is preventing it, but I ran the wifi trouble shooter and tried several different things to manually connect  – all to no avail.   Yesterday I only had my phone to watch the sell off and for those of you working away from your screen-   OH MAN DO I FEEL YOUR PAIN.  I LOVE watching the markets during these times, so I am going to try to drive back to my place by 9:30 Eastern and watch the action today from home for a few hours.

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If anyone has any additional advice on how I might try to override this problem, I’m open to suggestions.  Like I said, my laptop used to connect to this wifi set up this past spring, today it refuses.  I tried the password on my phone and it did connect.  🙂 You can write alex@bigleaguefinance.com or comment here. Thanks!  ( Yes, I may try a starbucks wifi for Thursday or Friday if I cannot fix it to see if the laptop will connect there, but today I’m coming home).