GDX/GLD Update & Surprisingly, TLT

For now I'm going to try to keep this brief as GLD and GDX recently, have been some of the most difficult assets to get good confirmation in as it seems correlations are shifting all over the place, especially the $USD which I have suspected for about 2 weeks is reverting back to its historical legacy Arb. correlation, not seen since the Bernanke put/QE and the carry trades which cause a rising $USD to be bullish, although that recently changed as well, last week and definitely this week as seen in numerous posts including this morning's, A.M. Update.

I've had (and still do) an expected shorter term swing NUGT trade open as a hedge against a longer term GDX pullback that has been expected since the day we closed out out NUGT long at a +40 and +50% gain as it broke out of GDX's base, but with poor signals on July 9th. It seems the DUST position is now hedging the NUGT position.

From July 30th, 

On July 30th, I was looking at a small speculative call position in GDX, Trade Idea (Speculative Very Short Term) GDX Calls, while leaving the longer term GDX pullback trade in place, DUST. GDX had been expected since early July to pullback leading to the July 18th, Trade Idea: (Swing Trade) DUST Long which is still open. 

Below is an excerpt from the July 30th, Trade Idea (Speculative Very Short Term) GDX Calls

"This is the DUST position entered for a GDX pullback, I'll leave that in place..."

The DUST (3x short Gold Miners) position is still in place currently looking like this as it was never closed.

Here are some of the most recent charts that suggest something may be going on with Gold, GDX and of course NUGT and DUST as a result. I'm not ready to take action on anything yet, although I'm close to considering closing the DUST long if we get continued signals and better confirmation. I'll likely break out the old miners trading system and see if there are any good correlations, strong signals from the past and see if there's anything showing up now as this was written before the $USD correlation changed with the carry trades which is why I put the system away for a while as the Cary trades dominated.

As for Gold...

 Gold futures are showing positive divergences starting up, this is actually a 60 min chart so it's a pretty strong signal, however it does look like it needs more of a "U" shaped reversal process rather than a "V" shape which it would have on any upside right now.

 This is the Legacy Arbitrage correlation between Gold futures (candlesticks) and the $USD, a correlation we haven't seen as a dependable on in years.

 There have been some signals in $USDX that have been negative divergences and this 5 min chart is one of a few, possibly sending the $USD lower.

This is where it gets confusing, AS YOU MAY RECALL I'VE LONG SAID, "WHOEVER FIGURES OUT THE NEW MARKET DYNAMICS, WINS"  as I believe there are huge opportunities no one alive has seen or huge trouble if you are not on the right side of the market.

We are already seeing those dynamics change and they are changing fast as the F_E_D keeps changing multi-year guidance in a bat of an eye in market terms, such as holding assets bought in QE through maturity which has been the message for years to shirking the balance sheet which is a new development.

The reason TLT is in this post is because as I showed multiple times and again as recently as this morning in the A.M. Update, the new correlation replacing USD/JPY and ES seems to be USD/JPY and yields. Remember yields move opposite treasuries. So yesterday I saw some initial signs that TLT's pullback may be ending which would mean yields would fall in the long end, IF THE USD/JPY CORRELATION HELD, THEN EXPECT THE USD TO ALSO LOSE GROUND.

IF THE NEW LEGACY ARB. CORRELATION HOLDS, THAT WOULD SEND GOLD, OIL, AND $USD DENOMINATED ASSETS HIGHER. Normally I'd include stocks, but the correlation there is clearly inverse.

So TLT...

 The 15 min TLT positive divegrence continues suggesting TLT may end it's pullback that we called late last month, the 26th.

The shorter term 5 min is also leading strongly, also pointing to a probable TLT reversal of what we always expected to be a pullback correction in TLT rather than an outright reversal.

The key here is the new correlations, TLT rises and yields fall in the long end which have been correlated to USD/JPY. Which means we'd expect the $USD to lose ground. Gold has been inversely correlated with USD/JPY back to the old legacy correlation in which the two move opposite each other. These are new correlations, it's difficult to call them trends, but we can't ignore them.

The implication of all of this (assuming all correlations hold) would be gold and GDX making a move higher. This would be pretty close to in line with our original July expectations of a Gold/GDX pullback, not reversal, but pullback in which I wanted to re-enter NUGT/GDX longs. I think it's too early to take action at the moment, but here are some of the charts for GDX and the 3x leveraged long NUGT and short DUSt which often give earlier signals than GDX, presumably because of the added risk of their leverage.

 NUGT long was entered near the June lows and exited on the first breakout above the red trendline, from there we expected a pullback below the trendline which we now have and a set-up for a new NUGT long or GDX (or Gold) long position with a move much higher.

 Here's the NUGT 60 min chart showing a CLEAR positive divegrence which is where we bought NUGT long and in red is the breakout for GDX/NUGT and where we sold NUGT long/ This is the chart that caused me to believe we'd see a pullback in Gold, GDX and NUGT which I wanted to use to re-enter any of the 3 assets on a new long for a breakout move that has legs.

It seems our highest probability and original expectations have played out, although taking months longer than expected.

 NUGT's 10 min chart is showing a leading positive divegrence, I think it would still need more basing activity and stronger divergences, but this "MAY" be the longer term primary trend trade entry we were looking for since last exiting a core long position in NUGT.

 The inverse ETF, DUST (3x short GDX) is confirming on the 10 min chart with a leading negative divegrence.

 DUST 5 min is also confirming...

And NUGT's 1 min is leading positive.

There are about 8 assets we use to confirm here, the most complicated asset we trade and probably the most manipulated via gold, however when we have strong signals, they have paid well.

Just something to keep on the radar.

I may close the older DUSt trade soon and hold on to the NUGT swing position , if there are continuing signals, I'd certainly add to NUGT long.