RISK

This weekends report talked about “Drops”,  because many markets like the  Shanghai and even our own markets recently encountered them. I mentioned that after a drop, their often comes a great opportunity and now the equity markets were rallying.  Gold has entered its cycle timing to put in a low after it finishes its current drop too.  What does that mean?  It means we should discuss RISK, as we approach what I think is going to be an excellent  buying opportunity in the precious metals area.  First lets review the markets…

 

NASDAQ – We have rallied nicely out of the ICL as expected. We are outside the Bollinger Bands (not shown) and we could get a pause here sideways, or even a pullback. Notice that eventually all break outs get tested.

Interesting thing about the chart of the SPX…

 

The July lows recently put in are a great example of what we “Might”,  “Maybe” ,   “Could Possibly” see in the Gold sell off.  For Gold it would be the lows Sunday night , being undercut as a stop run this week.

We are all bullish and everyone is dancing in the streets again, but I am seeing a couple of things that need to be noted if you are long.  Its just cautionary matters so that you will have and honor stops.

1st   –  the VIX is down near 12 again  ( temporary highs come in there).

 

2nd  – Trannies –  They are not joining the party and have not recovered from their break down. Still below the 50sma & 200 sma, in a down trend.

 

3rd –  Even the SEMI-CONDUCTORS are not looking healthy yet.  They usually lead healthy markets higher.  Are we just enjoying a short covering rally in the tech sector and SPX? Watch that 200sma…  STAY ALERT / STAY FROSTY  .

USD – I have been targeting 98, and I think this is ready to pull back.  I wrote spinning top,  I’m sorry, I meant Doji

WTIC    –  no change , still bearish looking to me.

NATGAS –  this is still fine,  I want to see it hold the 50sma.  It hasnt been a good trade for UGAZ, because it continues to move sideways .

 .

 

GOLD, SILVER, MINERS

 

SO MUCH TO SAY….I want to try to keep it simple.

GOLD

That BIG DROP may be it for now. We hit the 50% retrace of the entire bull move near $1089 and bounced back above $1100. We could “Linger” at lows, but on day 31…time is here for a low.

As mentioned , the lows could look like the SPX lows in the above chart, with a slam down, and then a “test” or even an “undercut” of those lows.  Silver also did something like that , and currently has that type of low.  We’ll see if GOLD does this, the lows in Silver may be in

  1. SLAM DOWN  2. BOUNCE  3.  UNDERCUT 

GOLD – also could repeat this drift lower as seen in October after a large candle, but less likely since we are at the 50% retrace. We could just recover from this stop run.

 

 This chart of GDX was supposed to go in my weekend report, and I missed it.

  I was showing how an ICL could form a bit lower.  RED ARROW was Fridays sell, it looks like prior ICL sell offs.   Then there was follow through to the ICL   (Blue circles. we saw that yesterday).

 

 

GDX today – these selling frenzies can cascade even  lower tomorrow as seen at prior lows , but I got a full blown buy at the end of the day using various indicators.   (In Nov we bounced for a day and dropped to undercut and it was over.)   I AM NOT TELLING YOU TO BUY, we will discus risk at the end.

 

GDXJ – Both these charts of GDX & GDXJ will have people saying Miners are “DONE” .  ‘Dangerous! They are all going bankrupt, too much debt . Dont touch with a 10 ft pole!!”  , etc.  This actually became a buy too.  A snap back rally should occur soon, but we MAY linger at the bottom for a day or so (I’ll explain).

 

When I have received this above BUY signal in GDX in the past I always took it, even knowing that I may get 1 more down day.   I took JNUG once and it dropped another 10+ % , but then it reversed and went much higher in the coming weeks.  That initial buy was a little concerning, because it feels wrong to buy when stocks are dropping.

 

I want to release this by 8 a.m., but I also wanted to discuss BUYING.  Please check back in a 1/2 hr or so ,  and I will add some thoughts on buying.  Cycle-wise, we are at a time when bottoms form.  Today would be day 31 for Gold.  We should discuss risk.  

 

I WILL ADD MORE over the next 1/2 HR

 

~ALEX

 

 

SO lets discuss RISK.  Why risk the additional losses & emotions ( fear, dread, concern, panic, etc) when we have seen prior ICLs take off and turn back down before really getting going to the upside.  A buy above the 10sma is safer, but at this drop, that could take a while.   GOLD is on day 30 cycle wise…Lows often come in by now, so we know we are close.  Miners often turn up first, so a swing in the Miners may be a safer entry than trying to catch the bottom during a sell off. 

 

A swing low  is when you are selling off and finally the following day rises higher than the prior days highs. If it comes late in the timing for a low, it usually sticks as the low.

 

Examples:    (LESSONS)

  These are 6  prior ICL lows– what I want you to notice is that these prices lingered at the lows and gave opportunity to enter, so as Gold rises this a.m. and is Green, Miners likely will too.   We all want to catch THE LOWS , this I know, I feel the same way.    Yesterday did you think it would ever end??    Now Do you feel like you are missing the move off of the lows?   Maybe missed the buy?  I want to show you something.  Prices often rise and drop back down , not really getting going higher right away (Except when we see super oversold sell offs, the Short cover Rally can v-bottom).  I wanted to SHOW you this, since seeing this may help one to be less inclined to feel they “missed” the buy.

 

 2008 – THE LOWS , where great %-Gains were made in months , but notice that they did not rocket straight up. Obviously we dont want to wait 2 weeks, but prices in the 1st  box were near lows for  4 days

 

2012 has a spectacular bear mkt rally higher.  Price was at lows for a bit

 

GDX 2013 – remember those JUNE 2013 lows? We thought that may be THE lows for a while the rally was so strong.  Look at those lows , price popped higher for 3 days and fell back again for a week!

 

Last summers ICL  – 2014 –  I was writing the Chartfreak reports and called THE LOW on May 28 , using the same indicators that just triggered GDX BUY yesterday.   look how long you had to buy.   I remember people writing to me and saying  , ” Its a bear flag, its going to drop!”   It was too late in cycle timing to drop much more.    SO looking back, Did it hurt to miss THE day that the sell off ended and price went higher?  Was it important to catch THE LOWS ?  Not really.  4 days after May 28 , price was the same.

 

If you were reading chartfreak last Nov, you know how frustrating those lows actually were.  We ‘expected’ those lows using various methods like right now (Cycles, T/A, indicators, etc).  You may remember I called the lows on Nov 5th and bought .   Notice that price did bounce around down there too  –  you could have bought early too, like OCT 30 or Nov 2 .  Price  even returned a month later  🙁

 

Finally,  Last March we had an ICL.  It was NOT a long steep drop, but it was steep.   It was harder to detect because it came early , but again ,  no one missed THE LOWS by buying a couple of days later.   Price lingered at the lows for a week

 

 

SO what am I saying, dont buy?  No – I always buy at the lows , but there are 2 lessons here and I have learned them from Emails I often get at lows.

#1.   If you didnt buy THE lows,   like the signal that I got yesterday , dont worry.  Price at THE LOWS is often there for another day or so anyways.     If prices often linger a bit at lows as we have seen , you can buy a safer entry.  Some wait for a swing  ( A higher high than the day of the lowest low in the sell off)     Some even wait for a rise above the 10sma.

 

#2.  IF one buys the lows , the emails that I get when the above charts play out and price lingers at the lows?  I hear ,  “ This is a bear Flag”  or “ This is weak, it cant even get going”  ” Are you sure we should be buying , this looks like it wants to drop“.   

 

 

  You will still read that Gold is bear flagging , going to drop to $900, So some should only buy when they feel comfortable.   Is that above the 10sma? Is that only after a pop higher?  RISK includes position size.  Position size affects your emotions!

Maybe some should start small until things get going to the upside?

CONCLUSION:    I got the STRONG BUY SIGNAL YESTERDAY for GDX using various indicators , Cycle timing for Gold is good, etc.   I didnt want everyone to feel they will “Miss the move” , since price may bounce around for a couple of days too.   A  V-Bottom will be obvious if we start to ramp higher quickly  ( I’d post intraday if it ramps up & looks real) .  Start a small position if you wish, wait for confirmation  ( a swing? A move above the 10sma, etc) for safer buys.      CAN IT GO LOWER AFTER A BOUNCE?  Yes.   Gold may drop to undercut the Monday lows  .    Does it have to?  NO.  This is an example of how this  ‘MIGHT’ , ‘POSSIBLY’  ‘Could’   play out if we dont get a V-Bottom  ‘short covering rally’. 

THIS IS GOLD RIGHT NOW –  We need to understand that It can drop, it can POP , but I think most of the selling should be done .   On DAY 31 ,  can it drop to day 34?  yes , so you need to understand your risk tolerance if you think lows may be in and want to buy.   START SMALL if you are unsure.

I will have more tomorrow as things play out, they will get clearer.   The IDEAL scenario would have been a slightly lower low, and a small candle, so that tomorrow puts that swing in.  Right now we may not get that. I will explain “swings” better in tomorrows report for those that may not know what that is..  We wont likely get a swing today with that huge candle in Gold and Miners.