This is a complicated asset, 1 because of the market behavior we'd expect from it, 2 because its long term correlation with gold has been flipped on its head over the last several years and 3 because its correlated to gold which is in the crosshairs almost more than any asset with the F_E_D ending extraordinary policy accommodation. this is why I have thought gold has performed so badly lately longer term (bear market) as smart money has discounted what the F_E_D is doing long ago, if I can figure it out last year and Hilsenrath is now just telling dumb money it's a possibility, than smart money knew before I did.
Yet many of you have asked, I'll show you, but also give an opinion on the trade that might surprise you.
THIS IS A MULLTI-DAY (4) of GLD, it shows confirmation of the uptrend and then distribution, to show distribution on a 4-day chart it has to be VERY HEAVY, ironically it starts right at the 2011 top, which ironically is the place I said we have either seen an intermediate or a primary top in gold, thus far I was right as gold has moved in to an intermediate downtrend, it may move to a primary bear market, I suspect it will.
*On a personal note, if I had been accumulating physical gold and silver the last several years, I'd be selling it all right now while you still can at a reasonable level and maybe keep some profits, I think gold will be back down to about half of its value today within the next year.
The yellow box is where we saw the large triangle top-triangles that large are either tops or bottoms depending on the preceding trend, 2011 is where we were going to buy some GLD, but stopped because I didn't like the change in character, we were 100% right. I told well (I'll withhold his name-many of you know him), he has his own site and a fund and is a major gold bug, back then that I thought gold topped, he dismissed me as some punk kid. Part of me hopes he's still long gold and buying the dips, I'm sorry, but arrogance in the market and thinking you know everything (I learn from our members every week) is a fast track to the bottom.
This is the 60 min counter trend rally in gold/accumulation-remember counter trend bear market rallies are some of the strongest rallies you'll see in ANY market; think ABOUT WHY?
GLD's 10 min 3C trend, remember new divergences start on earlier timeframes, I can't say 100% that this is the end of the counter trend rally or just a break in it, I do not consider this a high probability area though to enter any trade in GLD currently, it's too choppy, volatile, there's no good stop nearby, there's no "Let the trade come to you" concept in play here. You don't have to trade everything, wait for the best set ups.
GLD 2 min has an interesting short term positive divergence, because of what we see in the miners.
How many remember out "Miners Trading System"? The two trading assets were DUSt (3x short GLD) and NUGT (3x long GLD) and the system gave signals to buy or sell both.
You may be surprised to know that the rules I used in the system had nothing to do with gold, instead they had to do with two costs that miners can't control and create either higher or lower costs and that is what the system was based on-the costs miners faced and those were based on Energy they need to run operations and currencies as the value of their gold as mines are across the world, depends on whether their currency is weak or strong against the $USD which is what gold is traded in-almost everything else, labor, equipment, land leases, etc are fixed costs.
This is the Trading system that gave a short for NUGT/Long DUST and as you can see, that trade would have made significant money on a nice trend, but there's a recent cross to long NUGT, this is not based on anything other than Energy costs and currency values, but it is interesting as it fits with market concepts.
5 day chart of GDX, I always start from the longest chart because it shows me the history, what I see here is a massive, complex H&S top that has broken down and is in a bear market-before gold and this makes sense. Miners use to trade at a higher multiple than gold itself, that all changed in 2009 and miners traded at a significant discount to gold so the fact miners are down first and harder is no surprise. Longer term I expect miners/GDX to make significant lower lows, as a long term invesment, short GDX makes sense to me.
I checked volume to validate the H&S top, it validates it with my custom cumulative volume indicator.
On a 1-day chart it looks VERY much like GDX will see a counter trend rally, like some other assets recently, volume makes sense, the range makes sense, even the market behavior for H&S top shakeouts make sense, although this is a long way to go to shakeout shorts.
This is the 2-day GDX 3C chart, makes sense for a H&S top doesn't it?
However the 2 hour chart looks like a counter trend rally is the highest probability right now.
Strangely though, on the 1 min chart you can see whenever there's strength in GDX, it is sold, much like many market averages and assets, this could be part of maintaining a range to accumulate in as well, it's hard to say for sure.
NUGT which would rally "Countertrend" with GDX also has a 30 min accumulation zone after distribution and confirmation of the downtrend.
The 5 min NUGT chart shows strong accumulation, at this point it is very tempting for a swing type trade-long GDX/NUGT.
Again though a 1 min chart of NUGT s like GDX, strength is sold, that is natural when trying to accumulate in a range, you want prices low and steady, I only question it because the market is doing the same without the range conditions.
DUST, the 3x leveraged short GDX ETF shows longer term 2 hour distribution in its uptrend as GDX has moved lower, this confirms GDX and NUGT's charts.
The 60 min shows distribution at recent highs, again confirming GDX and NUGT.
The 2 min chart does the opposite of GDX and NUGT in the same timeframe, which again confirms them.
As for behavior of shaking out a major H&S top as we discussed with AAPL, it makes sense here, although the decline from the H&S is a bit deeper than usual, by the time price moves to shakeout shorts, most shorts will be at about 0% or very small losses and will see GDX as overbought and not likely to cave in easily.
The other problem is it is hard to imagine gold/GDX making a big move like that now, but the 3C signals are there supporting it, the problem is that we have seen those fail since last week the same way they failed in AAPL just before it lost nearly half of its value.
I'm going to say that despite the signals, I'm not playing GDX unless it does bounce on a counter trend move and I will use that as "Letting the trade come to me" and look for a short entry to be on the side of the primary trend-short GDX or long DUST, but that requires patience.
No comments:
Post a Comment