Feb 28th 2017 Report

The Weekend report covers the general markets and Natgas , etc just fine, so todays report has to focus mostly on the action in Gold , Silver, and Miners. Let’s get right to it…

USD – The dollar has peaked on day 9, Monday was day 15.  A break to a new high would indicate that the USD wants to go a lot higher. Staying below day 9 should indicate that the USD is breaking down as expected.

OIL remained the same, but I just thought that I would throw in an XLE chart. It has been in a downtrend and I was expecting it to tag the 200sma, but now it has a higher low and some volume coming in on the buy side. I’m not trading this at the time, just noteworthy for now.

GOLD & MINERS

I was in front of the screen Monday morning and miners were riding higher with Gold & Silver. Last week I added a small hedge ( JDST)  simply to take the edge off of the selling in Miners, so I removed that hedge as Miners went higher. I had to leave during the afternoon and when I returned many Miners  ( GDX & GDXJ too) were selling off rapidly , while Gold & Silver lingered at highs. I felt the selling Monday.

The difference between Precious Metals and Miners right now seems irrational. Gold is still at 3 month highs and miners are getting smoked to the downside?   I just had to start digging in again and look for more clues. The unfortunate thing is that we seem to find ourselves right in the middle of no mans land.  I see examples of how Miners could be at support and settle down, but I also saw some things that were more concerning than that  ( I will show that here too).  I will say that it is ‘difficult’, because it seems like irrational and unpredictable behavior in a bull market, and that is what we see right now.

Let’s go ahead and just take a look at the good, the bad, and the ugly.

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GOLD – In the weekend report I mentioned that the early selling that we see in the Miners could indicate that GOLD is about to get stopped in it’s tracks at $1264, possibly followed by a dip into a dcl.   Gold did stop  at $1264 on Monday. Gold seems to be acting correctly. To put in a dcl, this actually could just crawl along the 200sma and dip slightly lower, but the action in the Miners makes it seem like it will tag the 50sma too.

While GOLD and SILVER are still at 3 month highs, many Miners got roasted.  Trying to understand what is happening is difficult, because the Metals and the Miners are pretty much acting exactly opposite from each other recently. It is rather rare to see it happen to this degree.

Please Note this: Last week the Miners were fine on weekly charts, so I was fine with it too. Mondays  action alone turned the weekly charts more bearish, and that is concerning to me. Let me explain…

GDX WEEKLY –  I am seeing things in the weekly charts (This is only 1 of a few things)  that usually does not happen on normal pullbacks to a dcl, and definitely do not happen 2 months out of an ICL. This needs to repair itself very quickly in my opinion. It looks like the MAY 2016 ICL. This HAS happened in the past, but it can lead to those long consolidations that I have pointed out before.

I have to explain what I am looking at in each chart, and you will hear bullish thoughts, and you will hear and see bearish implications. That is the difficult part, because the Miners are acting very unpredictably. I have seen this in the past during a Bull Run, but it can become the dreaded  unpredictable sideways chop. I will show that too.

GDX –  This chart is not so bad.  The blue arrows do show that at times a solid slam down day exhausts into a low . With GDX landing on the 50sma and the red line 400ema that was supportive in October, we could say that this may be a slam into a final low.  Maybe we get a 50% pull back?   SO what if gold pulls back from $1264?  GDX could ‘bottom’ out at the 50% area, like it did after the slam in October  ( like the blue arrow on the left).  THIS would indicate that selling could be finishing up for now. Stochastics is near oversold.

GDX in 2016 – I looked for 1 day slam downs in the 2016 Miners run up and yes, we did endure a few at that time too. It did not happen as EARLY in the run though, like we see now, but I wanted to see what happens in the days following a slam down.  Here we see that price still drifted a bit lower to a dcl, then took off higher.

GG – GG looked fine when I looked at it this weekend. Monday it broke with volume and closed below the 200sma. It was actually very bullish looking this weekend, climbing straight up and still holding near the highs, but now it broke the 200sma.  Maybe we’ll see just a quick drop to the 50sma? Mondays action isn’t too bad here, but let’s look at one that’s a bit more ugly.

NEM – NEM  looked weaker and yet it tagging the 50 sma and bouncing along. This got ugly Monday. So far, NEM lost the 200 and 50 sma. Where is support? Is this a Shake out or break down? Now I would say that this is UGLY with Gold at 3 month highs.

BTG – I used BTG in the weekend report as a strong Miner and  it looked quite Bullish at the highs, right?

Even BTG got smacked down out of nowhere on Monday. The MACD is ugly and it lost 3 days of gains in 1 day.

BTG was not only at the 3 month highs as of Friday…

BTG was at 3 year highs last week! It was looking ready to break out to new highs and added to my confidence that Miners wanted higher price. If GOLD broke above 1264, I thought that this would rip higher too.  Monday it got slammed down with the rest of them.

So I can say that the above charts add a bit more concern to the recent selling, because Monday accelerated and even took down the winners.

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So with our big slam down day, I quickly thought about what I saw last week.  Many of the  ‘Metals’ stocks had a sharp slam down day last week too. The good news is that the selling exhausted and was pretty much complete.  Will Miners act like this?   See the following charts. The only thing that we don’t know yet , since it happened last week, is …”Was  this part of an A-B-C correction or is it a 1 day exhaustion sell off that has completed?”

CLF – Big slam just like our Miners last week, but that selling ended with a gap down reversal.

STLD –  Ditto and STLD lost the 50sma, but has now recovered it.

X-  1 day slam and the selling ended so far.

So even though the above charts offer hope that Miners may just have a flash crash and then bottom out, they need to try to recover quickly to repair the weekly charts  ( and nothing says whether they will or not).  After Monday I am seeing weekly charts experience damage that is happening too early in an intermediate cycle.  To be clear, I am concerned because we are on month 2 of this possible 5-6 month run, and the weekly GDX & GDXJ charts broke below the 10MA already?

  With the sharp Monday sell off, and the affect on the weekly charts, I now have concerns that this is too sharp too early in an intermediate cycle.  Also with this Sharp drop on the weekly chart and Gold and Silver still at 3 month highs, it gets concerning because we have 2 these possible scenarios…

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1. Gold breaks out higher above that 1264 and the USD drops , and maybe Miners just put in a DCL. They will put in a 1/2 cycle low when Gold finally drops to it’s dcl.

2. Gold resistance at the 1264 stops the Gold rally here, and Miners have been selling off ahead of Golds coming sell off, so it could get even worse for miners?

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Conclusion:  The weekly charts are of concern. We have to honor stops, and if you are already stopped out, that gives you an opportunity to watch how this plays out.   In my opinion, Miners really need to recover quickly ( for the weekly charts sake).  I won’t recommend trying to catch this bottom in Miners without confirmation of a swing low, and I do not recommend leverage long or short unless you are a fast trader in front of your screen. As always, honor stops and do what you need to do to remain unemotional whether it sells off further or rallies out of the recent slam down.   There is always time to make a good decision as the trade plays out.   As I mentioned, I did sell some of my weaker miners hanging at the lows a week ago or so, like PLG, TRX, etc.   I was actually going to add to VGZ after showing it in the weekend report, and it still held up Monday, but I wont add to it  yet-  I will watch it and I may even close the trade until I see whats going on.

I really still want to dig deeper into this situation and tomorrows report will include more thoughts on  what may be happening, and what this disconnect in Gold Silver & Miners lead to.  This early in an intermediate cycle, we should see strong healthy charts coming out of the lows. In the past, when we didnt, we were in for longer consolidations and deeper swings. Things are not quite clear yet with Gold at the recent highs and Miners sharply dropping, but Tuesday might help to clear things up.  I personally will be doing less trading and more chart research during the day Tuesday. Thanks for being here,  and don’t give up hope that this difficult trading too will pass.  It always does, and there is always another trade.

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~ALEX

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I’m showing this chart again, because during this time, the movement was rather unpredictable. This consolidation also has sharp drops and surges higher.

And this  HUI 2008-2009 close up shows how difficult the Miners were to ride with that wild swinging action in 2009. It was still overall an uphill run, with new higher highs along the way, but it looks like leverage would have been boom to bust over and over again. Your account value would have looked like this chart day to day. Gains, drop, gains, drop, gains, drop.

With that crazy ridein the above chart, please notice that HUI went from roughly 170 to 500 in 1 year.  HUGE gains, but day to day tough to ride.

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NAK – This was just a chart of a possibility that I drew up for NAK. When a chart ‘breaks’, you can get a V-Bottom with rapid short covering, or at other times it needs time to repair, build investor confidence, attract buyers, and so on.  This was an idea of a possible buy area for NAK.

Also some of those Medical Marijuana stocks had a slam down and I thought that they may still be fine. I was pointing out in the weekend report that the CNAB slam down looked quite similar to the one in December. If so, that would end the selling.

CNAB – We got a reversal on Monday.

CNAB s weekly chart is also still healthy