Gold, GDX (NUGT) and Silver

This update of the PM's as well as miners seems to confirm the short term market price action and also points to the same bad ending for the market.

 SPY / GLD Correlation (green and red respectively) on a 60 min chart seems to be an inverse correlation, but the most important data right now is the most recent and that would be October.

A closer look since mid-September (F_O_M_C) and the trend is for both to move together to the downside with individual days having either an inverse correlation or a fairly neutral correlation.

 Longer term (that's not the best phrase, but I think you know what I mean) though, the outlook for each asset is vey different. This is Gold Futures' 1-day chart with a very positive divergence on a strong timeframe. It would seem the obvious correlation would be gold is the flight to safety during the initial stages of a market decline, it may very well go on longer than that, I think that will depend a lot on F_E_D guidance regarding expectations of the first interest rate hikes and more importantly, inflation expectations.

 If you look at GLD on a 60 min chart there's a clear positive divegrence , but not a sense of the market being at an impending (as in days away) drop, this would fit with our scenario pretty well, especially given the daily chart above.

 The 30 min chart of course has more detail and looks stronger, it appears last week's dip was a head fake move that was accumulated.

The Friday afternoon action is the opposite of the market averages' afternoon action which is not surprising as intraday or day to day there's an inverse correlation, I have a feeling this is more about both assets creating a bottom, but for two different reasons, the market for the move expected to the upside, however being temporary and gold making a base for a move to the upside that is much longer and connected with a move in the market to the downside. In this light it doesn't seem that correlations between gold and SPY have flipped, but rather are just in the same process for two very different reasons.

 The GLD 5 min chart is in line, but it does not look as if it is ready to fulfill the daily chart's implications at all, at least not yet.

I'm guessing any market upside will see what most perceive to be a break in the most recent market/gold correlation and it will look like gold is in a risk off phase as the market moves up, however I think it is just the market launching from a smaller base that we are in now for a shorter move and gold remains within a bullish base for a much larger upside move that starts at the same time the market averages start to fail and make a very serious downside move.

Longer term my play would be to consider gold as a core position, but on the long side, I don't think leverage is needed, but I personally wouldn't use much more than 2x except perhaps for any initial momentum move on a major reversal in the market/ gold.

 GDX / NUGT Gold miners

 This is the correlation on a 60 min chart between the SPY and GDX (green and red respectively), it is very similar to the gold correlation, but it is more mellow on day to day inverse moves.

 You can see that more clearly when comparing GDL to GDX (green and red respectively).

 This is a 60 min chart of GDX, note the accumulation starting at the same time as the market averages', the week of the 23rd.

The 15 min chart is much sharper and shows the 4 stages (1 base, 2 mark up, 3 distribution, 4 decline) as well as a smaller rounding/reversal process, almost as if miners want to move with the market rather than base longer with gold, this may be the case as they are stocks and not an actual precious metal, I think there has to be a distinction between the two considering where we are in the long term market cycle, stocks are a lot less likely to fare as well as precious metals and are going to be moved by very different events than precious metals, namely rates and inflation.

 GDX 5 min looks like it's getting ready to make an upside run that looks to me to be much more in line with the market than with gold and as you saw with the correlation, GDX is much closer to the market than gold is.

I suspect GDX's reason for a base is somewhere between gold and the market averages', but closer to the market averages on the whole.

NUGT 1 min or GDX or 2, 3 min charts all show the same in line movement which suggests that although the base is still in place, the tactical signal for a real launch to the upside hasn't filled in yet, these intraday charts usually go very positive before the larger divergence (say the 5 min positive) launches, but this can happen within a day.

For the reasons above, I'm more inclined to look at gold as a longer term core long position with less leverage, GDX / NUGT as a shorter term position, much more like the market. I prefer NUGT to ride the move unless very strong 1, 2, 3 min chart signals form or in other words upside timing looks imminent.

Silver...

 This is the daily chart for silver futures, leading positive in to a large base, very different from the market,

ES on the dame daily chart with the exact opposite with a leading negative divegrence at a top, I think the correlation between pms and the market NEVER flipped, they just happened to overlap as one was putting in a larger base and the other came around to put in a shorter term base. Once the market moves, the inverse correlation should be very obvious again, especially as the market moves to the downside.

 SPY vs SLV (green and red respectively) showing an inverse correlation through the last year.

The 60 min chart looks like Gold or GDX, but again I think this is not because of any real inversion of the correlation due to risk factors, but two different bases overlapping for a short period of time.

 While the daily silver chart looks very strong, the 60 min is still putting itself together, I suspect it will remain in a base-like position until the market falls apart.

The intraday SLV chart looks to have seen a head fake move and accumulation of it, there's also a decent positive divegrence. I am not as confident that silver will act the same long term as gold vs the market, I have a feeling shorter term silver will act a little more like the market, perhaps similar to GDX's difference between gold and the market.

For long term core plays, I prefer gold. For shorter term long plays I prefer NUGT (GDX, but with some leverage.) This also means I'd expect stronger near term action in GDX than in gold.

Silver I'd take on a "As it comes basis".